The current leaders of the Republican Party, particularly those in the Bush administration, have run roughshod over the brilliance of the American founding principle of checks and balances, which was specifically crafted to prevent excess and maintain stability. Not only have they allowed corporate interests to dictate health care, energy, and fiscal policy, they took it upon themselves to test lessons already learned... such as the need for actual enforcement of the laws already in place (curious that said enforcement has been absent for the last 8 years) as well as the benefit of Congressional oversight (which abruptly resurfaced in 2007 after a 6 year hiatus).
Make no mistake, these Republicans are buckwild, and show little respect for (or knowledge of) economic stability. They aren't the old breed I grew up with, who thought that small government, local control, low taxes, and fiscal responsibility were the pillars of a strong society. I disagreed with parts of that model, but I could respect their ideas and the logic behind them, particularly the need for fiscal solvency. I certainly did not anticipate the transformation of their party into the raging monster that would eventually ransack our economy, leaving record numbers homeless, jobless, foodless, and so on. These new Republicans started invading Congress in large numbers after the mid-term elections of 1994, rallied behind George W. Bush in 2000, and the rest is unfortunate history.
What international capital the United States had in 2000, be it financial, social, etc., President Bush has spent with the zeal of a shopping addict on Rodeo Drive. With the continuing depreciation of the dollar, he has spent way beyond his means, and in an effort to bluff his way out of this mess, he and his trusted cohort have created an even lower low, attempting to delude the public from the reality of the havoc they've created.
When we had social and financial capital, other countries were willing to cooperate with our government, even at times when we opted not to play fair. In many cases, we were like an older sibling, bigger, more advanced (or so we assumed) and thus more capable of getting our way. That we abused this status is debatable. Amidst our feelings of entitlement, we've been outgrown. The Euro has doubled in relation to the dollar in less than a decade. Other currencies have grown similarly, mostly under the watch of George W. Bush.
The housing debacle has many facets that escaped the "watchful eye" of the Bush administration, policymakers, and bankers who had plenty of evidence to anticipate our current predicament. For those of us who have been poor, and know plenty of poor people, it was clear from early on that sub-prime lending is an unsustainable practice. People can't pay their mortgages with money they don't have and will never get. This is not rocket science. The ticking time bomb that was the American housing bubble was the large white elephant in the room that bankers chose to ignore for years. Increased mortgage payments, combined with equity that disappeared almost overnight, contributed to more than 2 million home foreclosures across the country last year. With each foreclosure, neighborhood home values depreciate, leading to the continued loss of equity even for homeowners with excellent credit records.
For many readers, this is not new information, but we are not fully prepared for what lies ahead. All the optimistic spin the Bush administration can provide does not account for the drastic changes we will see over the next five years. The gradual nature of our current economic decline has provided the administration with a deniability that seems delusional when compared to fiscal projections. We should be expecting a prolonged and severe recession, full of record job losses, wage declines, commercial insolvency, and yes, even a higher rate of foreclosures.
Also problematic are the "solutions" being offered by Congress and the president. Recently enacted stimulus legislation and housing rescues are mere band-aids staving off the inevitable need for a fullscale overhaul of both our financial practices and our tax policy. To be clear, our errant fiscal policies over the last eight years will correct themselves, whether we like it or not. How this situation differs from past scenarios, however, is that we are now dealing in a much more globalized economy where we have few, if any, international friends willing to come to our aid.
At both the macro and micro levels of the United States, we require rigorous lessons in prudence and foresight. Our consumer driven economy has a fatal flaw: It relies on consumers to spend with little regard to whether they can pay. Given the more recent rate of layoffs, buyouts, reduced wages, and canceled benefits, many of us now lack the resources to maintain our status quo. We wrongly assumed that gas prices would remain low. We wrongly assumed that home values would continue to inflate at a record pace. We wrongly assumed that our banks knew what they were doing, and that our dollar would always be worth more than the Canadian looney.
Saving for a rainy day has always been wise advice. Thanks to the Bush administration, our rainy day has come, and we have little, if anything, to fall back on.