Historians like to classify generations of Americans from different time periods in rather large buckets, painting an entire generation with the brush of genius or triumph based on the challenges of their time. There’s the generation of Americans who grew up in the Depression era, known for their ability to persevere and succeed in the most trying of financial times. Then, there’s “The Greatest Generation”, who were drawn into the largest war the world has ever seen and with the help of global allies, bested the largest forces of evil and destruction the world had ever seen. Of course, this same “Greatest Generation” is sometimes criticized for being the generation that for the most part, did not contribute anything to Social Security, yet reaped its benefits in retirement. At the same time, hoards of senior citizens flock to local board meetings to vote down school budgets and are a true force for frugality and self-preservation. But are they? Is it reasonable to expect that taxes, health care expenses and educational costs should grow at 2-3 times inflation while municipalities and states still run a deficit? The successes in World War II and the unarguable fact that they literally saved the world tends to win out in a chorus of few critics.
What About Our Generation?
How will historians view our generation? By all accounts, our generation was set up for total success. The following phenomena occurred during the few past decades that should have catapulted America even further onto the pinnacle of the world state and set up future generations for success and frankly, complete domination in virtually every measurable aspect of success:
- The advancement of the internet into a full-fledged force for business, free speech, innovation and productivity. Virtually all early gains from the internet from global investment in venture capital, to patents and inventions, to new business startups, resided in the United States. We saw our equities markets rally to the point of “irrational exuberance”.
- The decline and fall of the world last formidable force of evil in the world: The collapse of the Soviet Union, rendered a mere cold war relic. The Russian military had fallen into such shambles that they could barely pay or feed their soldiers. Russia moved from an equally formidable war power to a hobbled has-been on the global stage. America outspent them in the cold war. The genetically engineered biological weapons and nuclear arsenals uncovered following their collapse was bone-chilling.
- Globalization turned the world upside-down. American multinationals were now able to sell their wares to billions upon billions of consumers that were once unreachable. Low skill, low paying jobs shifted from the shores of America to other countries that were willing to work that Americans were no longer willing to given other opportunities for higher paying, higher skilled roles as well as a shift to an Intellectual Property/Knowledge economy. This was the theory of comparative advantage put to its test.
- Our universities continued to be unparalleled in terms of quality output, ROI and any other measure to the point that the best and the brightest the world over sought to gain entries into our universities.
Future Generations; Our Children…Will Hate Us
What did we do with all these accoutrements? These gifts our generation was blessed with? We squandered probably the best opportunity any generation has ever been presented with. Just during the past decade, we’ve seen our country decline in virtually every category of import, with no end to the decline in sight.
- From a diplomatic standpoint, we initially recovered from a horrific attack on our shores and gained new allies and sympathy to some degree from countries that were initially indifferent or misaligned with our interests. Within 3 years, we completely obliterated any goodwill that remained in the world and drove an invasion of Iraq in a moderately stable region, forcing it into complete chaos. We “misunderestimated” what we were doing there, went in light trying to save a dime, misread what the true experts were telling our leaders about cultural, regional and religious factors that they couldn’t comprehend, and along the way, we’ve again created a generation of noble and well-meaning soldiers who fought a war that the country and the world wasn’t totally behind. This takes a toll on a population of soldiers, one that we haven’t yet begun to understand.
- Iran and North Korea became emboldened by our folly in Iraq and Russia reemerged on the global stage, wielding enough power with their natural gas supplies and oil revenues to threaten US interests, intimidate allies and once again command respect.
- We continued to spend like there was no tomorrow. Individual, national and local debt soared to heights that were unsustainable. We did this without blinking. By all measures, some sort of reversion to the mean should have been forced to occur, but no, we continued to spend unabated.
- We lulled ourselves into the belief that home prices could continue upward forever at a rate several times the rate of inflation (even though the long term trend going back to the 1800s shows that home prices appreciate roughly in line with inflation).
- In the heat of euphoria and sheer greed, politicians pandered to constituents calling for more lax lending regulations so everyone could own a home, even though we’ve subsequently learned that perhaps not everyone is capable, responsible enough or otherwise, to actually own a home.
- Lenders readily complied, going so far as to award massive mortgages to people with no discernable income or personal holdings. The jobless and risk-taking masses could waltz into a lender and walk out with a $500,000 waterfront condo in Miami ready for the flip the very same day. Wall street, in turn created exotic instruments that not even they ultimately understood to “diversify risk” and peddled them to investors the world wide while collecting exorbitant fees on their misunderstood and poorly conceptualized products.
- Our country’s financial institutions exported our toxic waste mortgage assets to virtually every global financial institution on earth due to our perceived credibility. We have inexorably damaged our credibility on the world stage forever.
- In order to bail ourselves out, our leaders passed bailout after bailout in frenzied fashion, all the while, paying million dollar retention bonuses to retain the same inept bankers that got us into this mess and rewarding the mortgage brokers with new business on reworking mortgages and refinancing deals – the same ones that falsified records and sold irresponsible loans to people that didn’t have the capacity to understand what they were getting into. The ill-conceived TARP is losing value at an alarming rate.
- States, municipalities, pension funds, virtually every organization charged with maintaining a budget, went into the red and started requesting their bailout. How could the same state that was the epicenter of the internet boom, the biotech boom (and Hollywood?!) and all its benefits be bankrupt less than a decade later? How could states take a windfall tobacco settlement and shamelessly squander it on other spending programs, debt and other unintended destinations?
- We elected a president on a platform of tax increases and spending restraint and “change” from the prior regime that is already pushing the next round of giveaways in the form of tax breaks that, as we’ve seen before, pretty much end up paying down debt or going into savings.
What Have We Done?
We have saddled future generations of Americans with our debts that they will be unable to pay. Few will be able to pay their own way through college like earlier generations could. They will have to work longer and harder than prior generations for a lower standard of living that what we enjoyed. Our standing on the world stage has been tarnished.
Believe it or not, I’m an optimist. Perhaps the recent economic turmoil has been a wakeup call. Perhaps the boom-bust cycle that we continue to set ourselves up for will not be so bad next time because we’ve finally learned what happens when self-serving politicians focused solely on what it takes to win the next election is combined with unbridled human greed and instant gratification. Can we get ourselves out of this? Anything’s possible. We’ve managed to overcome substantial challenges in prior generations. I’d like to think that by the time I retire, that generation of children has a decent shot a college and a steady job without the assistance of generational wealth. I’d like to think that the world sees America as a force for good again. I’d like to think we turn this around.
For, if we don’t, our children will hate us.
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