Who is to blame for the economy? It's all of us, stupid!

I recently got into an impassioned Facebook discussion with a good FB buddy on the "blame game" being played by those in power for our country's economic woes. She was in the "It's the GOP and the Tea Partier" camp while I was in the "Nah, it's all politicians and beltway insiders, not just those on the other team" camp. As I began to try to illuminate why I felt this way, it became apparent to me that it was time to visit the Blog again. The topic was too huge to be covered in Facebook. So here goes.

I begin by outlining what I believe to be the main reasons for our current economic condition. The problem most people have who talk about this issue is that they are looking for a single throat to choke. One person, or group, or action that they can blame for all our problems. Thing is, our economy is VERY complex, as are its problems. As such, so too will be the solutions. But before looking forward, let's take a moment to look back. Not in the interest of playing the blame game, but in the interest of analyzing REASONS for what we have experienced. Here, in no particular order, are what I consider to be the main reasons for our current economic woes.

1) The subprime mortgage mess - The relaxing of lending standards was one of the major players in how we ended up where we are. Lending hundreds of thousands of dollars to people who hadn't a prayer of being able to pay it back was a recipe for disaster from the start. Congress talked about it and talked about for years but only acted to curtail it long after the damage was done. This practice allowed too many Americans to emulate the federal government and live light years beyond our means. Eventually, the bills come due. Years of explosive real estate growth caused too many to believe that day would never come, including the banks, who resisted these loans at first but eventually acquiesced after the Feds threatened them for not writing them AND offered to back them up with federal dollars. Once the housing boom subsided and all those equity loans based on unrealistic valuations of homes and incomes came due, a major crash was inevitable.

2) The Dot.Com boom - and the subsequent, inevitable bust. When I worked for Sun Microsystems, one of our "mottos" was "We're the DOT in DOT.COM." Cute, catchy and stupid. I became aware that Sun was issuing multi-million dollar lines of credit to startups who had no product and no prospect of having a product for 5-6 years. Sun was not alone in this practice of course. What this betting on "vaporware," which is what we in the computer business call products that don't exist, did is made paper millionaires of a lot of people. Many of those people went out and traded on that wealth and bought multi-million dollar mansions, expensive cars and all in all lived "The life" until the boom went bust and all that came tumbling down. What was left was a lot of people with massive tax bills from trading monstrous amounts of stock options, against stock that had great value at one time, but became worthless almost overnight. They also had now a mortgage that was three income brackets beyond where they could afford to be. Yeah, that was good for America.

3) 9-11-2001 - Not only did nearly 4000 American lose their lives this day but America lost her innocence with respect to terrorism. The years that have followed have exacted a cost which could easily be put above a trillion dollars domestically and double or triple that worldwide. Think about all the air travel not taken over the next several years. Our airline industry has never truly recovered from that. Then factor in the impact this new uncertainty in the Middle East has had on the oil industry and gas prices worldwide which of course impact the price of virtually everything else in every economy in the world. Except of course the middle east. People like to cite the amount of money we have spent on "Bush's Wars" as the reason for this mess. I say bullsh*t. I don't know what the numbers are on the military cost. I remember it being about $75 billion a year during the peak and I assume somewhere in the $40 - $50 billion a year in the draw down years. I won't be mad if someone has different numbers but the point is, it's a fraction of the total cost of what Al Quaida did to us that day.

4) Lack of Wall Street Oversight - From insider trading, to the energy speculation issues with ENRON, to the rampant gambling with other people's money in the banking industry, particularly in the buying and selling of mortgages, right up to the flat out criminal misrepresentation of some hedge funds, Wall Street has been in rare form the past decade. But I don't blame Wall Street. Wall Street millionaires are greedy. They are driven by greed.. They are the proverbial lion who if you put your head in its mouth you cannot be mad at if he bites down. This is why we have oversight of Wall Street built into our system. The problem is, recently there has been far too much movement of personnel back and forth between Wall Street and Capitol Hill for that oversight to have any teeth. Head of Merrill Lynch one week, a cabinet position the next. Too many of the people who are supposed to be monitoring Wall Street ARE Wall Street so to speak. The result has been rampant abuses and trillions of dollars.. lost forever.

5) Big Government - Yes I am a conservative so you could have predicted I would come here. But one of the first things you learn in Economics 10 (or Economics 101 for other schools) is "The law of diminishing marginal return." This principle simply states that in any endeavor, there is a point of growth where the return on having "more" benefits you less and less until at some point the benefits go negative. As in you have too much of a good thing and it starts to get worse for you if you have more of it. I think our government crossed that boundary years ago. We have a Nuclear Regulatory Commission, a Department of Energy and an "Energy CZAR." Or is it TSAR? In any case, there are examples of overlap and redundancy all over our government. Simply put, our government can hardly get out of its own way and I don't think giving them MORE money to waste is any way shape or form a solution for anything. Every one of us knows areas where our government is wasting tons and tons of our money. Even you liberals have to admit that. If you don't then I will outright accuse you of being intellectually dishonest. I would never call you stupid.. I don't have stupid friends. :-)


So those are my top five reasons why were are where we are. Notice I don't point the finger at any one person, or party or program. Next chance I get, after I've had some time to think about it.. I will consider some solutions. The fact of the matter is life is hard.. solving these problems will be hard.. and there are no magic pills. Any politician in any party representing that there is, should be booed off the podium.