Why now? People have been unhappy with the political system for years; there have been times when the President's popularity polls and Congress' combined were under 50%- what's bringing people to the streets at this moment? A number of elements- some simmering under the radar for years, some new, and some that we had thought were comfortably in the future that we are now realizing are too close for comfort- are creating a "perfect storm" of public outcry... and it may be that the Tea Party phenomenon is not the culmination, but merely the first warning.
Simmering problems. As I reported in my post, Jobless recovery- or jobless economy?, there hasn't been a new private sector job created in eleven years. New types of jobs have been created, but in terms of more people working today than yesterday, not a single new job. This lack of new jobs was masked by the big corporate profits being made, and the fact that most of the unemployed had in the past been those without special skills or education- it's not headline network news when there's high unemployment among the high school dropout set. But then highly skilled workers, with college degrees and/or decades on the job started getting laid off.
What caused the collapse of the mortgage industry? Yes, yes, there were all kinds of crazy mortgage schemes going on; some actually illegal, some so new there were not yet regulations in place that covered them. But all the finger pointing at Freddie This and Fannie That and Soandso's Bank misses the point that the mortgages were being defaulted because people were losing their jobs and couldn't pay the mortgage! Think about the timeline of the first troubles being reported, the bankruptcies, the Bush bank bailouts (and the protests over them), the auto company bailouts, (and their protests), along with the formation of the Tea Party... now look at this interactive unemployment map. It's no wonder middle class people are protesting. The dearth of decent jobs has been preventing upward mobility from the lower class to the middle class for years; now the previously existing middle class is dwindling, as is discussed in America's Sinking Middle Class: "Middle-class wealth was personal savings, homeownership, and a pension, stemming in most cases from a decent job. Savings are now debt, homes are mortgaged and losing value, and the private-sector pension has devolved into a 401(k) with shrunken assets. Government pensions face shrunken assets, too."
Some new I know it's considered racist to call corporate bailouts and government interference in private industry socialism (which I guess proves that President Nixon was black, as conservatives called him a socialist for his Lockheed bailout and his wage and price controls. But I digress), but whatever it is, people resent it. The reason people resent it is that as most people work for small businesses, they never receive the benefits, but they can see the costs every April 15th. I know I resented it when the USPS started offering quick-printing services in direct competition with my shop; I know I received no bailout when my company failed, nor when the company I then went to work for failed, nor when the company that bought that one laid me and half the rest of its workforce failed. Play that interactive unemployment map again, and imagine how few of them are getting any benefit from the Bush/Obama bailouts.
Too close for comfort This is a fear of future problems; to understand it, we must look at the recent past as prologue. The symptom is debt. Look at these figures of both government debt, and privately held debt, in billions:
_National debt__%GDP_Public debt_%_Total
1990 _3,206.3___55.9___2,411.6_ 42.0__97.9
2000 _5,628.7___58.0___3,409.8 _35.1__93.1
2008 _9,985.8___70.2___5,802.0 _40.8_111.0
We haven't seen debt ratios like that since WW II. Why does it matter? Because when a country tries to borrow money, the lenders usually look at both the national debt and the public debt to determine interest rates- and that's already affecting us. As reported in Bloomberg," "The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market...While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week."
Ok, so it would be embarrassing if we lost our AAA rating, is it really that critical? Yes- because something is looming on the horizon that will force us to borrow huge amounts, no matter what the interest rate is: baby boomers retiring and demanding their Social Security. We've long known this day was coming; the predictions were that we would start paying out more SSI than we were taking in by 2016, exhaust the surplus by 2037, and then have to borrow the difference for a decade or so before demographics balanced the scales again. But those predictions were made before this major recession, and before major new entitlements like Bush's senior drug program and Obama's new healthcare law- not to mention little things like the Afghanistan and Iraq wars, the bailouts, etc. That old schedule is no longer operative; according to The Boston Globe, we've already hit the first of those predictions: "WASHINGTON — Social Security will pay more in benefits than it receives in payroll taxes in the current fiscal year, six years earlier than expected, the Congressional Budget Office reported yesterday." How will that affect the second prediction? I've seen projections that we will have to start borrowing to cover SSI not just six years earlier, but possibly ten or more years earlier, possibly as soon as 2025. And those are the middle projections, not the worst case ones.
In order to maintain our AAA rating during the borrowing we must do to cover the SSI baby boom, we must pay down a large portion of that total debt, both public and private, in the next 15 years. For that to happen, we have to have an economic boom in the next couple of years that will be big enough that tax receipts will balance the budget, plus extra to make big payments on the existing debt... in other words, double digit growth for pretty much the entire 15 years. And not have any emergencies in the meantime- no Katrinas, no 911's, no wars, no carbon taxes, nothing to upset the applecart for 15 years.
Tea Party members don't think that's going to happen with politics as usual. Perhaps you think it is going to happen, but it would be a mistake to dismiss the Tea Partier's fears as irrational or race based, and you'll win neither friends nor elections by sneering at them.