Returning America to Prosperity

Returning America to Prosperity

by Maniel

Smashwords Edition

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Copyright © 2012 by Maniel

Smashwords Edition, License Notes

This ebook is licensed for your personal enjoyment and may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you are reading this book and did not purchase it, or it was not purchased for your use only, please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.

The author is not part of any special-interest group and has neither sought nor received outside funding to prepare this book. The ideas expressed herein are those of the author and, except where quoted or referenced, are attributable only to the author.

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Forward

I have been writing this book for several years and each time I rewrite it, I notice that while there are new stories, new events, and new players, there has been no need to change the message. That’s because the economic principles and the human condition underlying the message don’t change. The more things change, the more they stay the same (Plus ça change et plus c’est la même chose). However, it is my intent to make regular updates to this work, first published as an e-book in 2012, as long as I am able.

Why read a book based on economics by an unknown author? Because unlike the scholarly and often brilliant writings of Smith, Friedman, Sowell, Hayek, von Mises, Laffer, and many other well-known, formally-trained economists, this book puts us, you and me, squarely into the picture, helps us to understand America’s financial problems, and gives us the tools to be a part of the solutions. You read that last part right; this work offers a prescription for you and me to begin work, immediately, on our problems rather than simply to wait and hope that our governments will get it. As a bonus, there are quotes from and references to the above sages and many others throughout the book.

Introduction

It is no secret that the United States of America faces economic challenges which threaten to change our way of life forever. Unless we confront these challenges soon, declines in prosperity, already acutely evident, will be measured in a permanent drop in our standard of living. Our status as a debtor nation will directly affect any claim to world leadership. We can expect a rise in inter-generational conflict, as the working young are less able to support the increasing numbers of non-working old. Resentment will continue to rise as private-sector workers revolt against unsustainable public-sector defined-benefit health and retirement plans. Public-sector discretionary spending will continue to fall as private-sector workers are increasingly unable to bear the burden; this will continue to damage public education and the state and local services which many of us no longer take for granted.

Our situation is serious, but not hopeless. To reverse the decline, we will need to make changes. This book is intended to show that these changes are feasible, that they begin at a personal level and that, based on proven economic principles, may be extended to the governments of our cities, states, and country. More specifically, I will lay out the following approach: 1) reverse the decline in our national prosperity by increasing our individual prosperity; 2) increase our individual prosperity by investing in our personal equities; 3) set goals to protect our personal equities thereby increasing individual and national prosperity; and 4) meet those goals by following strategies in harmony with economic principles and axioms.

By training and profession, I am an engineer. My years of engineering experience have taught me that good intentions do not determine results. Success in engineering is objective: your bridge will stand, your machine will function, and your computer program will run correctly, only if designed and built in strict adherence to physical laws and principles. Emotions generally bear little relation to engineering outcomes. Since the discipline of engineering, meeting goals through actions based on proven principles, is lacking in our daily lives, it is no surprise that it is missing from our public policy.

Chapter 1: Where do we stand?

It wasn’t so long ago that we were doing just great.

In the latter half of the Twentieth Century, the USA was, by almost every measure, a prosperous country. A reputation as the land of opportunity was regularly confirmed by the large numbers of immigrants to the United States and the relatively small number of emigrants. During the 1990s, there was an average of 845,000 immigrants yearly against approximately 17,000 emigrants, an astonishing ratio of almost fifty to one. Private citizens and businesses manufactured the products and offered the services that made our country prosperous.

Following World War II, the USA benefitted from a confluence of conditions which made our economy the envy of the world. First, much of the capacity of the industrial nations – notably in Europe and Asia – was crushed during the war. The American "arsenal of democracy, left standing, was converted to supply consumer goods, such as automobiles and washing machines, at home and abroad, with little real competition. Second, the children of immigrants to the country, who had arrived a generation or two earlier, and new, well-educated immigrants, burst forth in schools and the professions to anchor a diverse, highly-productive work force. Third, soldiers back from the war, compensated with a GI Bill, upgraded their educations to further vitalize the work force. Fourth, after a deep economic depression and periods of war-time separation, young couples seized new hope and family formation and fertility rose, bringing forth the so-called baby boom" and promising further additions to an already dynamic work force. Fifth, discoveries of oil and natural gas, at home and abroad, powered a new era of cheap energy that made electrification and automation economical and put the majority of Americans into their own cars. Sixth, communism and other statist approaches to governance were discredited, breeding a political climate where capitalism was allowed to flourish and the free market to bring forth abundance. And seventh, new managers emerged who were more likely to empower, incentivize, and reward worker successes and therefore less likely to find their companies hobbled by unions and the attendant divisiveness, restrictions, and costs.

So, what happened?

It was not pre-ordained that our country would remain prosperous. While the USA retains many assets – a sophisticated infrastructure, cultural diversity, natural resources, and a tradition of political and economic freedom – many favorable post-war conditions have either been mitigated or have disappeared altogether. The economies of the world have caught up, the developed world has long since recovered from World War II, and developing nations, such as China and India, have shown dramatic economic progress and now provide stiff competition. The vast majority of Americans are native born and do not necessarily share the urgency or enthusiasm of their parents and grandparents for hard-won education or dedication to work. Baby Boomers are now swinging from the producer to the consumer side as they retire. Their progeny, not as numerous – the well-to-do tend to have smaller families – are undermanned. Energy demand has risen along with the rise in world economies and has exceeded the rise in supply bringing a rise in price. As the competitive edge in the USA has eroded, many Americans have come to doubt the benefits of free markets and have sought increased protection from government which in turn has imposed heavy burdens on the private sector. The immigration which powered this country throughout its history is viewed with skepticism, undocumented residents are measured by a double standard (we take their labor but treat them as criminals), and even legal immigrants are viewed with envy and mistrust. While the long decline in union membership continues, unions still weigh on several American industries and increase the cost of public sector services. And, having forgotten (or never learned) the lessons of our ground war in Vietnam, our federal government recently committed American military forces to fight in two long, costly foreign wars.

My dream is of a place and a time where America will once again be seen as the last best hope of earth. Abraham Lincoln

Where do we stand?

In 2012, the USA is the world’s biggest debtor nation. We produce a fraction (which is beginning to increase) of our own energy and import more consumer goods than we export. Our governments – at the local, state, and federal levels – have, in general, overcommitted the funds of the taxpayers and lenders who support them. As a result, at all levels we see few improvements in our infrastructure, our productivity, or our overall well-being. And, we are only just beginning to move from a credit-card culture of have it now and pay for it later to an equity culture of saving and investing.

A people that values its privileges above its principles soon loses both. Dwight D. Eisenhower

Was the American Twentieth Century just a fluke? Is it possible for us to return to prosperity, mired as we are in debt, both public and private? Is the USA now just another country, doomed to mediocrity? Are the financial disasters of the recently begun 21st Century the harbingers of an economy and a society on the verge of a long decline or even a collapse?

The future ain't what it used to be. Yogi Berra

It is unlikely that the USA will soon reclaim the role of undisputed world leader that we held at the millennium. Nuclear weapons and aircraft carriers notwithstanding, we’re not a superpower if we can’t pay our debts. The financial crises that we are now experiencing are evidence of deep, structural problems. However, we are no more pre-ordained to mediocrity than we ever were to greatness. Our situation is serious but it is not hopeless. To return to prosperity, we must invest wisely in ourselves and we must master the discipline of economics so that we apply sound principles to our own lives and investments and to our governments.

You don't have to be old in America to say of a world you lived in: That world is gone. Peggy Noonan

How did we get into this situation?

Those who receive from government are avid voters and lobbyists. Those who pay taxes may be interested voters, but are generally too busy earning a living to follow the details of all legislation. Many of the people whose future is mortgaged are too young to vote. And, those who represent us in government believe that, to be re-elected, they must pay more attention to receivers of government money, often older people who have better voting records, than to those who pay the bills. For that matter, legislation is often so complex, with clauses to cover the wishes and whims of those whose votes are needed to pass it, that many representatives don’t even know what is in the bills they vote for. The behavior of our governments reflects our personal tendencies to have now and pay later.

How do we get out of it?

Only with understanding, discipline, and effort, can we fight our way back. Note that I said we. No political party or politician will do the job for us. Solving problems of the scope we have created for ourselves requires that you and I work together and, make no mistake, we have real work to do. The purpose of this book is to move toward the shared understanding we need to pull in the same direction, to make the disciplined effort necessary to give us a fighting chance. It will not be easy and there will be no quick fix, but it is urgent that we begin now because the longer we wait, the harder it will be.

Where would we like to be?

I maintain that prosperity is a worthwhile pursuit, for you and me and for our country. Our liberties and quality of life depend in large measure on our economic strength. While it may be true that people with few material possessions can be happy, it is no accident that so many people born elsewhere have risked so much to live and work in the USA. The opposite of prosperity, poverty, is not an acceptable permanent condition.

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. Adam Smith

Chapter 2: What’s the plan?

Let us first draw inspiration from the words of our 44th president.

Yes, we can change. Yes, we can heal this nation. Yes, we can seize our future. Barack Obama

Let us also benefit from the wisdom of an earlier sage.

If you don’t know where you are going, any road will take you there. Lewis Carroll (Through the Looking Glass)

To return this country to prosperity, we need a plan. Modesty compels us to start with ourselves, with you and me, because unless we can seize our [own] futures, we have precious little hope of finding the road to heal this nation. If you have ever been a passenger in a commercial airplane, you have undoubtedly heard words to the effect that if there is a loss of cabin pressure, oxygen masks will drop from the overhead compartment and been instructed to put on your own mask before attempting to aid your child in the adjacent seat. The reason for this is that when we ourselves are capable and strong, we are in a position to help others. Does this mean that I should not share the small amount of water from my canteen with my companion dying of thirst in the desert? It does not, but if we don’t gain access to a reliable source of water soon, we’ll both be dead.

A philosophy of enlightened self interest, realized through the pursuit of personal prosperity, based on investment and the development of equity, requires no government action, no political campaigning, no grass-roots movement, and can be applied no matter where you fit in the broad sweep of political opinion. Later, we shall see that it is possible to extend this philosophy to the development of a prosperous country as a partial prescription for halting our continuing slide and beginning the long climb out of a very precarious financial situation. But, the critical point is that it all begins with you and me.

First ask what you can do for yourself; then ask what you can do for your country. With all due respect to the late JFK, I prefer my wording to his. Invest and build equity in yourself and those close to you. Then refine your governments – local, state, and federal – to protect that equity. As you prosper, your country will benefit. By personal prosperity, I mean the condition that you have the resources, such as time and money, to develop the equity and acquire the necessities of life for yourself and your family, now and in the foreseeable future. The country is prosperous if personal prosperity is the norm rather than the exception. In narrow terms, your equity is the amount of a tangible asset that you own. I use the term in a broader sense here to include such personal assets as skills, health, education, the trust and mutual support of family and friends, a career, etc. Investment is the application of resources, typically time, money, emotion, and energy, to build equity. One caveat: our pursuit of prosperity must be legal, ethical, and moral to be of lasting value (more about ethics and morals later).

Part 1 of the plan: Develop our equities.

Remember that we are using the term equity in a broad sense. Ten equities are presented here in order (roughly) of their acquisition. For example, you will need some education before you launch a career. There is a brief discussion of the resources you have to invest, primarily time and money. Then, since we want to protect our hard-won equities, equity destroyers are exposed. There is also a discussion of false gods, intended to make you question some of the critical pursuits we often take for granted. The chapter concludes with ideas about equities as an antidote for adversity.

This is not intended to be the definitive work on how to structure your life. There is an abundance of self-help books, newspaper columns, Internet blogs, and web-sites for that. It is intended to begin the process of building (or re-building) an efficient, equity-based economy from the bottom up, starting with you and me.

Disciplining yourself to do what you know is right and important, although difficult, is the highroad to pride, self-esteem, and personal satisfaction. Margaret Thatcher

Education

Continue your education, both formal and informal. More than just schools, teachers, and classes, education is a lifelong process. If you are in the workforce, keep up with the tools of your trade, learn from your mentors and your peers, and learn new approaches from new employees.

It's what you learn after you know it all that counts. John Wooden

If you are in school, find out from your teachers and counselors how to derive the most benefit from their courses and your course of study. Understand where the program you are following is taking you. If you have the opportunity, pursue fluency in the language of another country, in that country. From this experience you will learn what it’s like to compete on someone else’s turf and in someone else’s language and culture.

Not every high-school senior wants to or is ready to go college. I hope that if you are in high-school or if you have children in high-school, that you or your children have the option to pursue courses that lead to such jobs as electrician, computer technician, mechanic, chef, carpenter, policeman, fire fighter, landscaper, physical therapist, etc., necessary jobs which offer reasonable wages but don’t necessarily require advanced academic training. Apprentice programs are one solution to high dropout rates. I also hope that the enlightened citizens of your city or state offer voucher programs which empower students, level playing fields for access to the best schools, and often hold the key to the establishment of new, innovative schools.

If you like mathematics, you are very lucky. Competence in math is a skill of great practical value. Don’t stop studying math just because you’ve met some high-school or college course requirements. Math is the bedrock of almost every science, many aspects of business, and other disciplines which relate to everyday life. Math is challenging and requires the self-discipline basic to solving problems and continually mastering new concepts.

Should you go to college? If you are not sure, then answer two questions. First, How will I benefit from college? College is a means to an end and not an end in itself. For example, college can prepare you for a profession. Personal note: I am engineer today primarily because of the preparation I received in college. College can also help you prepare for life in general: to complete a body of work and to earn a degree require self-discipline and organization.

Second question, How will I pay my college expenses? Let’s rejoin the theme of equity. Borrowing money for college is taking on debt with the promise of equity. I suggest that you strongly consider paying for your education the old-fashioned way: work your way through college. How? Isn’t college punishingly expensive? You can do it. Work first and save your money. Enter a two-year community college where costs are reasonable and retain a part-time job. It may take you three years or more to complete the two-year program, but you can be justifiably proud of making it on your own. [Note: I assume that our community-colleges will survive, but be aware that even they are becoming more selective and more expensive.] Your devotion to your studies and your understanding of why you are there will be all the greater. Then, seek out a four-year college which caters to your interests and strengths to