This is the spring of 2009. Most Friday nights I can be found playing “Rock Band” in my friend Dan’s living room. His wife is our lead vocalist, while Dan handles lead guitar duties; I commandeer the drum set. The three of us are lined up in front of the television, singing and playing along with the game, while their five kids play around our feet. Between the loud music, the instruments and the kids, the already-cramped living room becomes a scene of joyful chaos. (At least until one of the kids trips over the microphone cord, putting a quick end to the joyful part.)
One of our staples is “Kids In America,” a 1980s song that usually gets the kids to step onto the dance floor.
We’re the kids in America
Oh, Oh, Oh
We’re the kids in America
Everybody live for the music-go-round
From my perch behind the drum set, I have two recurring thoughts: If this song’s tempo doesn’t let up, I’m going to have a stroke. And, I wonder what kind of future these “kids in America” are going to have. That second thought flashes through my mind as I watch Dan’s blonde-haired, 8-year-old daughter sing and dance along with the song. She is blissfully unaware of the nation’s bleak economic situation; for her, being a kid in America is a cause for celebration. My adult mind, polluted by too much knowledge of politics and the day’s news, wonders if her optimism isn’t misplaced. My worries don’t end with the song; I don’t find relief from my nagging doubts until our customary “half-time” of hot fudge sundaes. (Of course, while I’m enjoying my ice cream, I then worry that I’m increasing my risk of a stroke.)
But it is not just on our Friday nights that I worry. These days, I’m worrying all the time about the future of what’s out there for America. Like a lot of Americans, I have a list of villains to blame when I watch the nightly news. We’re living through an economic meltdown that could have—should have—been avoided. It seems as if the entire nation is on the verge of bankruptcy, and there’s no good reason why this should be. [velderman]
There is greed and incompetence behind all this mess, but my biggest concern is what happens after the dust finally settles. Right now, even the best and brightest players we can call on tell us they are simply trying to keep the patient alive, while I’m worrying what lies ahead for that patient, should he survive.
For news junkies like me, following the daily drip, drip, drip of bad news can wreak havoc on the nervous system. Beginning sometime last fall, the media let the insidious comparison, “since the Great Depression,” creep into their stories. The media, in conjunction with our politicians, have decided that the United States is embarking on Great Depression II: The Wrath of Tom Joad. National news magazines have run cover stories with titles such as: “The New Hard Times,” “Rethinking the American Dream,” “The New New Deal” and “We Are All Socialists Now.” The media invoke images of soup lines full of down-and-outers looking forlorn and hopeless. Can it really be this bad? Is this our future?
Our political leaders seem to think so. Since last fall, billions upon billions of dollars have been given in bailouts. On top of that, Washington has spent nearly $800 billion to stimulate the economy, while preparing to pass the largest budget in our nation’s history (somewhere around $3.6 trillion with projected annual deficits of a trillion dollars or so). Our national debt stands at $11 trillion, and grows daily. And if that isn’t enough to set one’s head spinning, Social Security, Medicare and Medicaid (our national programs to aid the elderly and the poor) are themselves headed toward insolvency.
It is very conceivable that the American children of today will inherit an insurmountable pile of debt as well as a social safety net that is completely in tatters. When the economy finally turns around and the bill comes due, will we find the cure to be worse than the disease? Can future generations expect to live as well as their parents and grandparents? Or are they likely to look back on this era and curse their own list of villains and fools? Bottom line: Are we undergoing a once-in-a-century transformation, or are the media and the politicians hyping the situation to get our money and votes? These are some of the questions that have been haunting me the past several months. (I’m also thinking this might be a good time for another hot fudge sundae. Warren Buffett owns all the Dairy Queens. What does he know?)
And so I decided to ask a few people who are supposed to know some of the answers. I began with my most pressing question: Is the nation’s economy and political superstructure really undergoing a major transformation? In other words, will Americans be forced to fundamentally change the way they live? That question led me to the office of Ross Emmett, professor of economics and economic history at MSU. Professor Emmett explained that while our current economic situation is more than just a run-of-the-mill recession, it is not Great Depression II. “What this shares with the Great Depression, was the Depression was our own fault,” Emmett says. “Today, it’s the fault of the markets and the lack of policy got us into the current mess. I wouldn’t view the economic and financial crisis by itself as [transformational]. We could see a shift towards more activist government, a green revolution, a greater sense that people are included in the government and public service…If you put a whole bunch of things together, there may be a major shift, but the economic crisis alone is not that.”
[emmett]While that cheered me up a bit, I still wanted to know what he felt our economic future would be like. Emmett points to the March rain falling outside his office window. “Weather forecasters have a good ability to predict weather, one day at a time. It gets dicey beyond that. Economics has similar limitations….I don’t think the new realities are as different as some people want to make them—they were not made by the crisis, but they were brought to our attention because of the crisis.”
But won’t the huge national debt coupled with the trillions spent to save the economy mean that future generations will have to expect a lower standard of living? Emmett takes a long pause before continuing. “I’m not sure that means your generation will have to live on less….A lot of people ignore how much better their livelihood is today than it was in the past….What has made that better is innovation….I don’t see that stopping. In a lot of ways our life is going to be better in the future.”
But the debt that still needs to be repaid? “There were costs to the way we lived over the last 20 years or so that we weren’t always going to pay. That’s why we have a large national debt.” Emmett explained that one way Americans might handle the debt is through innovation. By creating new things and new ways to use existing things, the economy grows. A bigger economy makes repaying the debt more manageable. Of course, Americans will also have to make payments on the debt, or pass it down as an inheritance to future generations. “It’ll probably be some of all three,” he concluded.
I was reassured by such optimism, but I wanted a second opinion. I called Walter Williams, an economics professor at George Mason University and a nationally syndicated columnist. I knew from reading his work that Williams is no fan of government spending; in other words, my kind of guy.
My question was simple: Won’t the national debt have to be paid back by young Americans through high taxes? That made him laugh. “The federal government isn’t getting this kind of money from the tooth fairy, and they’re not getting it from Santa Claus.” Williams explains that Congress can tax Americans three ways: by raising taxes, inflation (caused by expanding the money supply, which drives down the value of the dollar) and debt.
Williams again. “What Congress is doing now isn’t a burden on future generations; it’s a burden on us right now because Congress can’t get a damn thing from future generations. If they’re going to spend today, they’re going to take what’s produced today.”
I was confused; will the national debt affect future generations at all? “What the profligate spending of Congress does is it enables us to bequeath less wealth to future generations, and make them poorer as a result,” Williams states. Money that might have been used as investment capital, to build new factories, for example, is used on consumption instead. “In that sense future generations inherit less capital.”
What about Social Security heading for bankruptcy? “Right now we’re running a Social Security surplus. There’s more money being paid into Social Security than being paid out. That’s going to end around 2016, 2017,” Williams says. “Depending on whose estimates you look at, somewhere between 2040 and 2050, the whole system is going to collapse.” The bottom line is that some combination of higher taxes and fewer benefits will have to enacted. “It will be your generation’s problem,” Williams signed off.
To put all of this into perspective, I spoke with journalist Robert Samuelson who has written extensively about the economy for the Washington Post and Newsweek. Samuelson confirmed what the others had said: Things may be bad, but they are not anywhere close to another Great Depression. “We’re still a long way from the 1930s,” Samuelson says, noting that the government has a built-in safety net that should keep things from getting too bad.
[williams]But that’s not to say that he’s unconcerned about the current conditions. “The speed the economy is falling is very frightening,” he says. And the American people feel that those in charge do not fully understand how to fix the situation. “People are legitimately scared.”
Samuelson believes that the outlook for young Americans is mixed. “There are a number of factors that will work against a higher standard of living for young people,” he says. “The baby-boomer commitments of Social Security and Medicare will probably raise taxes, and higher energy prices to combat climate change will drain purchasing power and erode discretionary income.” But that does not mean things are hopeless. “As people get older, they typically earn more. That probably won’t change,” Samuelson says.
Beyond that, the economic chaos may have a lasting psychological effect on young Americans. For example, young people coming of age during this troubled economic season may be more cautious as adults when it comes to spending and taking business risks. And their view of capitalism may also be affected. While capitalism has typically been seen as a good thing, young Americans will remember its downside as well. “Younger people will have the memory of the uncertainty of what’s going on—the difficulty in getting a job, the sharp decline of the stock market,” Samuelson says.
While Samuelson “is not euphoric about the future,” he points out that Americans have a lot of virtues that will serve them well in the future: a strong work ethic, a willingness to try new things and a fairly optimistic outlook about the future. “Americans believe in the United States,” Samuelson concludes. “That’s important.”
Hearing the insights of these three scholars made me slightly more optimistic about things. While there is still a fairly grim prospect of higher taxes, fewer benefits and less overall spending power, there is still a sense of national resilience and resolve—that old American can-do spirit that got us through two World Wars and the real Great Depression. And Americans can still be some of the most optimistic people on earth.
I see that on the faces of Dan’s kids, as they dance and sing around the living room. While they enjoy singing along with “Kids In America,” our Friday night concerts are not complete until we perform our show stopper, “Living On A Prayer.” As soon as they hear the opening chords, the kids drop whatever they are doing and come running to join us. They stand facing the television screen, waiting to sing along with the chorus:
Ohhhh, we’re half way there
Livin’ on a prayer
Take my hand and
We’ll make it, I swear,
Livin’ on a prayer
Livin’ on a prayer….
When I hear them singing along, I find myself believing they are going to be able to handle things and come out fine after all. And then I find myself worrying: Who’s supposed to answer that prayer?