Part two of the great Boomer credit contraction will be the collapse of credit card companies who have mailed out 27 billion credit card offers in the last five years. They are now reaping what they have sown. As Boomers could no longer borrow from their homes, they switched to credit cards to make mortgage payments and car payments. That well is running dry. The losses to card companies will make the losses in 2000 to 2002 seem like good times. Losses in the 1st half of 2008 soared to $21 billion. Losses are expected to total $55 billion in the next year and a half. This brings me to the latest outrage perpetrated upon the U.S. citizens by Hank Paulson and his Treasury cronies.
The credit card industry, which collects 23% interest and $12 billion in late fees from consumers, is lining up to get their piece of the $700 billion bank handout. Capital One (COF) has just received a $3.6 billion injection from the American taxpayer, one week after projecting that their write-offs will be $7.2 billion in the next twelve months. This will allow them to send another million offers to more people who shouldn’t have a credit card. Why not? The taxpayer will pay, if the losses are too high. Why aren’t the pundits on CNBC outraged at this misuse of taxpayer money? Would the bankruptcy of Capital One hurt our country in any way?
The Great American Empire has begun its long slow decline. It may take a few generations to reach its nadir, but the poor decisions already made and crucial decisions postponed in the last 25 years by our Boomer dominated leadership has put our country on a path to a declining standard of living. The U.S. is like a punch drunk ex-champion boxer who still thinks he has what it takes, but is living off his old press clippings. He lived the good life, got fat and didn’t do the hard work required of a champion. A slew of young brash fighters are itching to take him down. It is just a matter of time.
In our heyday during the 1950s, manufacturing accounted for 25% of GDP. In 1980 it was still 22% of GDP. Today it is 12% of GDP. By 2010 it will be under 10% of GDP. Our Government bureaucracy, which contributes nothing to the advancement of our society, now is a larger portion of GDP than manufacturing. Services such as banking, retail sales, transportation, and health care now account for two-thirds of the value of U.S. GDP. We have become a nation of bureaucratic paper pushers. Past U.S. generations invented the airplane; invented the automobile; discovered penicillin; and built the Interstate highway system. The Baby Boom generation has invented credit default swaps; mortgage backed securities; the fast food drive thru window; discovered the cure for erectile dysfunction; and built bridges to nowhere. No wonder we’re in so much trouble.
Now that I have laid out our bleak future, I can tell you that, like Dickens’ Christmas Carol, this is only a vision of what might be. There is time to change our course before our ship wrecks on a jagged reef. David M. Walker, former Comptroller of the United States, at a recent Fiscal Wake Up Tour at the University of Pennsylvania, described what has been happening in this country for the last 25 years in one word – laggardship. The last six months have been a perfect example of laggardship. Our leaders have floundered from crisis to crisis, overreacting and blustering rather than leading. True leaders are proactive, not reactive. After not addressing our energy policy for decades, as soon as oil reached $140 a barrel, Congress lurched into action so their constituents would think they were leading. As our financial system has imploded, government “leaders” have flailed about with one rescue package after another and Congress looks for scapegoats. Meddling, tinkering, and non-enforcement of rules by Congress and other government bureaucracies caused the crisis that they are reacting to. Government creates the problems and then assumes even more power over our lives with their ridiculous “solutions”.
No one in Washington has shown an ounce of leadership in decades. True leadership requires strength of character, clear vision to see the future as it is, the bravery to make unpopular decisions, and the honesty to tell the public the unvarnished truth based on the facts.
The facts are: we have a $10.5 trillion national debt; $53 trillion of unfunded liabilities; a military empire that has U.S. troops in 117 countries and has spent $700 billion on a pre-emptive war that has killed over 4,000 Americans; a $60 billion trade deficit; an annual budget deficit that will exceed $1 trillion in the next year; a crumbling infrastructure with 156,000 structurally deficient bridges; almost total dependence on foreign oil; and an educational system that is failing miserably. We can not fund guns, butter, banks and now car companies without collapsing our system.
I truly hope that President Obama can rise to the occasion and become a true statesman and leader. David Walker lays out our dilemma:
The regular order in Washington is broken. We must move beyond crisis management approaches and start to address some of the key fiscal and other challenges facing this country if we want our future to be better than our past. Our fiscal time bomb is ticking, and the time for action is now!
Ultimately, it is up to the Baby Boom generation to change our country’s course. The oldest Boomer is 62 years old and the youngest 45 years old. It is time for Boomers to take a hard look in the mirror and rethink their priorities. It is time to cast aside the $88,000 Range Rovers, $1,200 Jimmy Choo boots, $5,000 Rolex watches and daily double lattes at Starbucks. It is time to live within your means, distinguish between needs and wants, reduce debt, save 10% of your income, make sure your kids get a good education, not try and keep up with the Joneses, show compassion for your fellow man, and possibly pay more taxes and get less benefits, for the good of the country. We must support true leaders like [former Comptroller General] David Walker and get rid of the old time corrupted politicians who want to keep the status quo. Texas Congressman Ron Paul gives the blunt truth that a true leader is willing to give:
Our government has lived beyond its means for decades. We now face a crucial juncture, at which we determine whether to continue down the path of debt, inflation, and government intervention or choose to return to the economics of the free market, which have been ignored for almost a century. Increased debt leads to higher taxes on future generations, while increased inflation diminishes the purchasing power of American families and destroys the dollar. No society has ever been achieved prosperity through indebtedness or inflation, and the United States is no exception. We cannot afford to continue our current policies of monetary expansion and unending bailouts. Unless we return to sound monetary policy, sharply reduce government expenditures, and realize that the government cannot act as a lender of last resort, we will drive our economy to ruin.
The Baby Boom generation has one last chance to change the course of U.S. history, keep us from wrecking in a storm of debt on the approaching jagged reef and shed the title of “Shallowest Generation”.
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