Maybe we can all agree that it will be painful

It might be helpful if both parties admit fully to the public what will be true in reducing both the deficit and the debt. There will be significant pain. Notice that the first panel of the comic does not simply have the USA, but has several countries. First, we need to admit to ourselves that our problem is not just our problem. Various countries throughout the world are in financial difficulties. The 1980’s set the world up for an orgy of overspending. In the USA, with the exception of the presidency of Bill Clinton, no President or Congress, whether Democrat or Republican, ran a balanced budget in the next nearly 30 years. The burgeoning new products of the stock market, such as derivatives, and the increasing use of computers to make instant buy or sell decisions allowed various companies to supposedly increase their profits. The problem of course was that there was no solid production behind those profits, they were ephemeral. Finally, the housing market went out of all control. Not only did housing prices go above all reasonable levels, particularly in some states, but inadvisable loans were made. During that time, no one wanted to hear that there should be regulations to prevent that much unsecured money in inadvisable loans being lent out by the banks.

In one sense the advocates of an uncontrolled free market are correct. Eventually there came a correction to the housing market that shattered companies–that are now defunct–, shattered banks, and shattered the economy. More than that, the “free lunch” spending of the Congress and Presidential administrations of those nearly 30 years–with the President Clinton exception–slowly built up a debt and deficit that are truly astounding.  Add to that the utter lack of national loyalty of the multinationals, who simply took businesses where they could get the best deal regardless of the effect on the very First World countries that made their existence possible., and you end up with various First World nations that no longer have a strong manufacturing sector that might help pull them out of the hole. But, those very multinationals who hate centralized control of the economy have made China–a strongly socialist country–the economic powerhouse that it is today. Quite an irony!

Regardless of the ultimate economic analysis, neither party in the USA is really doing a good job in pointing out how much pain will be needed to solve both our problems and the world problems. I mention them both because our economy is tied to the world economy and to China. We cannot fully recover until the world economy also recovers. That is what globalization means. While both parties have given lip service to the necessity of sacrifice, both parties have given the impression that the pain will be more like that of getting a flu shot, or that only the people with which their party disagrees (or the programs with which they disagree) will be the ones who will have to pay the piper. The reality is that if we wish our children to have a good future that means that each and every one of us is going to have to take a solid hit in our personal economies. There is no free lunch. There was no free lunch back then, and there will be no miracle nearly painless economic solution that will give us a nearly free lunch now.

I like the cartoon above because it points out that regardless of which economic theory wins the votes in various national economies around the world, the pain will be high. As has been pointed out more than once, it is just like your home economy. If you are in debt, you have three choices: bring in more money, lower your expenses, or do both. No matter what choice a country takes there will be pain, just like in your home economy when you get into debt over your head.