The Economy Needs a Painful Period of Adjustment

The Economy Needs a Painful Period of Adjustment

By Jack Kelly - December 22, 2008

Our government now owes more money than all of us in the country put together possess.

As of Sep. 30, federal financial statements showed approximately $56.4 trillion in debts, liabilities, and unfunded promises for Medicare and Social Security, the Peter G. Peterson Foundation reported. The Federal Reserve estimated total household net worth at that time at $56.5 trillion.

Since then the stock market has crashed, tens of billions of dollars of personal wealth have evaporated, and the government has committed $700 million to bail out financial institutions.

A government which long has been morally and intellectually bankrupt is now financially bankrupt too.

An example of moral and intellectual bankruptcy is the $1 trillion "stimulus" package Congress is contemplating to encourage us to continue the behaviors that got us into this mess in the first place.

We've been living beyond our means on money borrowed mostly from the Chinese. Like Bernie Madoff's Ponzi scheme, this had to end at some point, and could only end badly.

The stock market crash has sobered many of us up. We're saving as much as we can to guard against the rainy days that appear likely in our future.

But tens of thousands of Americans make their living selling us things we don't need and can't afford. If we live within our means, their jobs are in jeopardy, and the recession could deepen.

The theory behind the stimulus package is that we can spend our way out of the recession. As former Sen. Fred Thompson put it, this is like telling a fat guy the way to lose weight is to eat more.

The stimulus package Congress passed last Spring didn't work, and this one probably won't, either. But it will delay necessary reforms, and could make the inevitable crash more painful.

We're like alcoholics who've been on a 30-year bender. We can't quit cold turkey without a painful period of adjustment. But if we don't go through that period of adjustment, we can't ever get well. America can't in the long run be prosperous unless we make things other people want to buy, and finance most of our investments through our own savings.

Democrats will run things for the next four years, so the recession should last at least that long. That's because the economic philosophy of the Democratic Party is to subsidize failure and punish success. Bailing out auto companies that couldn't make money in good times, and raising taxes on those job creators who are still making money may be good for gathering votes, but not for growing an economy.

I used to infuriate my English teacher in high school by declaring that all anyone needed to know about life could be found in the works of Rudyard Kipling. (She was not a fan of the bard of the barrack-room.) But the more I see of the world, the more sure I am that this is so. My favorite Kipling poem is "The Gods of the Copybook Headings":

"We were living in trees when they met us. They showed each of us in turn, that water would certainly wet us, as fire would certainly burn. But we found them lacking in Vision, Uplift, and Breadth of Mind, so we left them to teach the gorillas, while we followed the March of Mankind...

"With the hopes that our world was built on, they were utterly out of touch. They denied that the moon was Stilton; they denied she was even Dutch; they denied that wishes were horses, they denied that a pig had wings; so we worshipped the gods of the Market, who promised these beautiful things....

"In the Carboniferous Epoch, we were promised abundance for all, by robbing selected Peter, to pay for collective Paul. But though we had plenty of money, there was nothing our money could buy, and the Gods of the Copybook Headings said: 'If you don't work, you die.'

"...And after this is accomplished, and the Brave New World begins, When all men are paid for existing, and no man must pay for his sins, as surely as water will wet us, as surely as fire will burn, the Gods of the Copybook Headings, with terror and slaughter return."

Jack Kelly is a columnist for the Pittsburgh Post-Gazette and The Blade of Toledo, Ohio.

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