Failure to Capitulate

Compromise, says Obama. The House and Senate should compromise on a solution to the debt crisis. Democrats and Republicans should come together to create a solution. Tea-baggers are screaming about the debt and the tax code. (I think everyone agrees the tax code needs to be changed). Money out, money in. National credit rating. Another vote required in 6 months or a year. Cuts to programs. Etc…

I watched it last night and realized that the complete and utter failure of the current system was in evidence. The process is not working. The country is ruled by polar opposites, and the President – who is supposed to reign these sides in – is so reviled by the political right that what he says is completely ignored. It’s all about posturing and positioning, not what’s right for the country, because what’s right for the country takes a back seat to gaining votes. This is true even for the President.

Ross Perot had it right in regards to a flat tax system. But it didn’t matter did it? Republicans (and everyone else it seems these days) like to quote Reagan as if he were the ultimate solution. The don’t seem to remember how hated “Reaganomics” were, or how Reagan raised taxes. They rail against raising taxes at the same time they quote Reagan. The bottom line is that taxes will have to be raised at some point. There will be no other choice if we continue on our current path. Cutting all entitlement programs would result in a catastrophe. Health care, elderly care, and social security cannot be terminated without severe repercussions such as major poverty.

Obama will be the scapegoat in all of this, meaning that a Republican may well be elected. That will result in major cuts to many programs. At this point, I don’t think there will be a choice. Taxes will have to be raised, and programs will be cut as far as they can. We will return to trickle-down economics. What tax breaks remain will be pumped into businesses. The gap between the rich and the poor will become even more extreme than it is already. This isn’t to say that the rich want this. I don’t believe that the majority of them like the gap any better than the poor or shrinking middle class. But this won’t matter to the un-wealthy, they’ll hate the wealthy anyway, and blame them for their troubles.

What will happen? I believe we’ll have two shifts and they’ll take place over the next ten to twelve years. First the Republicans will come in and cut everything to the bone. Then they’ll have to raise taxes on someone, and it will largely be on the middle class and poor, but it will effect everyone to some degree. The failure of these programs due to the cuts will result in a considerable backlash, but it will ease the debit problem. Unemployment will continue to increase for a few years, and then businesses will began hiring again (enough to decrease unemployment mildly, but not back to pre-depression levels). As unemployment decreases, some faith will be restored to the right-wing changes. At the same time, the right-wing social agenda will increase pressure on liberalism. Odds are good that whomever the Republicans replace Obama with will be re-elected, but this is no sure thing. Extremism will continue to increase, but mostly on the Democratic side now as the Democrats and liberals in general will be pointing out all the right-wing administration’s failings to the rest of the country. Most of those failings will be in regard to personal income.

Costs will continue to go up. Interest rates will rise. If the Republicans win a second term, the changes will continue. National debt will (should) decrease. Ends to the wars (assuming there aren’t others) will further dump money into the economy. Things will slowly get better for those who can find jobs, but the jobs won’t pay fantastically as there are millions still out of work. It will be an employers market, and most of the positions will require an education – but education will become extremely expensive, and loans hard to come by.

After the second Republican term (if it happens) the Democrats will win. Mainly due to extensive mud slinging and public dissatisfaction. From a business perspective, the economy will be improving, but from the perspective of the majority of people, house prices will still be low, food costs and energy will still be high, and a variety of natural disasters including pollution will become more of an issue. Medical costs will be ridiculous at this point, and if you don’t have employment then you can forget about getting medical.

The Democrats will be faced with a difficult situation at this point. They will want to restore money to entitlement programs, and they will, but that will siphon money away from paying down the debit that the government already owes. To do this, they’ll have to increase taxes on businesses, but that will slow down the recovery of the economy (theoretically). Regardless, they’ll try to fix health care again, and they’ll work to increase social security and education programs. It’s what they do. If they have control over the House and Senate (which isn’t impossible since the control often meshes between cycles) then they’ll push these changes through. Right-wingers will have a conniption but they won’t be able to stop it. The debit will increase again, or at best hold steady (assuming we don’t end up in another war).

While all this is going on, the world will continue to change around the US. China will continue their economic growth, and become a more considerable market for our goods, as will other countries. The US will become far less of an influence and a player on the global stage than they have been. Not only that, but the demographics in the US will change considerably. There will be more Muslims, and there will be more Hispanic and Asian voters. These growing voting blocks will have their own agendas, and politicians will be forced to deal with them. Social conservatism will likely grow because of this, at the same time as fiscal liberalism will be growing. There is no party that caters to both of these issues. Either one party will shift, or constituents within both of them will attempt to establish themselves as leaders in these areas.

Paint the picture. Imagine this world. Put yourself in it. It’s only ten years away.