Sunday, February 21, 2010

Obama's Vegas "Diss"--Bring It On

At a speech to high school students, Obama said ""You don't blow a bunch of cash on Vegas when you're trying to save for college. You prioritize. You make tough choices." He has since received a certain amount of criticism for that assertion, from such disinterested, insightful parties as the mayor of Las Vegas. Critics who clearly have both deep insight into the fundamentals of a strong, sound, sustainable economy, and who only have the best interests of the whole country at heart. Yeah, right.

The libertarian in me says, if people want to blow money gambling (yes, casino gambling does constitute blowing money), then they should not be prohibited from doing so. The pragmatist and ascetic in me says--gambling is bad for people, and bad for the overall economy. So just because it is legal, doesn't mean we have to pretend it is a neutral thing--much less that it is a positive good.

My personal, cherished belief is that the country is aching for a person or institution who will speak to them as if they were adults, who will consistently tell them hard truths. It will not be popular at the time, but would anyone deny that there are millions of people now who wish that someone had looked them in the eye and told them that buying houses they could not afford was a really, really bad idea, not likely to end well? Saying that gambling in Vegas amounts to blowing money is such a truth. Strong countries and socieities do not build strength on gambling.

Here are my ideas of some other hard truths that we would be better off for imbibing, understanding and accepting:
  • Healthcare reform won't come cheap. There is no free lunch. But we need to do something. There is abundant empirical evidence that modern, high-quality health care can be obtained for much less than we are spending--the gigantic political/policy/cultural/economic challenge is in getting from here to there. There is no shortcut, but it is not impossible. The journey will start with an honest assessment of the facts. (Here is something he could have said.)
  • We need to lose the credit mentality. Not just "responsible" use of credit. The fact is, there are not that many consumer cases where even responsible use of credit is a desirable thing. Credit is over-rated, period.[1]
  • The place of the United States in the world is changing. It is inevitable. The United States can still be the "leading" country in the world in most respects, but it is simply not realistic for it to continue to be the dominant hegemon. It is best to face this fact, and strategize accordingly (It would have been much easier for Bush to tell this truth, than for Obama to take it on.) [2]
  • It will take a long time to work off the effects of this financial crisis, and the debt we have accumulated. We should accept that and plan for it. Don't fool ourselves, and think that boom times are around the corner. (I do think this concept is taking hold somewhat.)
  • A hard question we should ask our collective selves: instead of having 15+% of the population effectively unemployed, and much of the rest over-worked and living in fear that they will be next, would it be better to contemplate an approach where everybody takes a 15% pay cut, but "everybody" also keeps working?. It is one thing to advocate a laissez-faire approach to unemployment when the rate is in the 5% range, the economy is sound, and qualified candidates can generally find replacement jobs. It is quite another in the current environment, when the bad luck of being in the wrong position in the wrong company at the wrong time can throw one out of work, with prospects for a very long period of unemployment. I know I am personally worried for a number of families who are unemployed and not finding work--I think I would actually feel better if I were making 15% less, but my friends were still employed.[3][4] The key to that, though, is the "all in it together" aspect.[5]
  • We have other major, major financial crises awaiting. The national debt of course is one huge one. Retirement is another. The three-legged retirement stool--comprised of pensions, savings and social security--is in very rickety shape. You know things are not sound when Social Security is one of the stronger legs. Private pensions have vanished for the vast majority of workers. Though there are exceptions with very high earners, private savings (mostly in the form of 401ks) are not going to make up for the lack of a pension. The only solutions: start saving way more, plan on working much longer.[6]
  • Cost of college is right there with healthcare in terms of devouring our standard of living. It is ridiculous how expensive college has gotten. And unlike healthcare, there is no intrinsic reason for it. There are structural reasons, relating largely to government getting in the financing game. They are well-known, I have been reading about them for years, but for whatever reasons, they have not percolated their way into public consciousness--in my opinion, most middle-and upper-middle class parents are still very much followers in this regard, pretty much blindly assuming that whatever the cost of college is, it is ultimately reasonable and worth it. This one would be easier to fix than healthcare, it just requires a sea-change in attitude.
  • Call to strength. The state of the union is not so strong. It is far, far from hopeless. But not so strong. However, strength is and should always be our goal. Toward that end, we need leadership which calls the nation to court strength. That means choosing saving over Vegas. Planning for a long, productive career, instead of coveting early retirement[7]. Reconsider our high-overhead lifestyles.[8] Take a hard look at how we spend our time--every minute spent watching Survivor is a minute not making yourself stronger, smarter or more capable. I know, leisure has its place, I totally agree it does, but--how we spend our leisure is just something to think about[9]. And it means investing in your personal fitness, mental, physical and financial.
More than some politicians, Obama dabbles in speaking some hard truth, but then he backs off. Here is his back-pedal on the Vegas comment:
"I was making the simple point that families use vacation dollars, not college tuition money, to have fun," Obama said, according to the letter released by Reid's office. "There is no place better to have fun than Vegas, one of our country's great destinations."
Sigh.

________
 NOTES

[1] Yes, there are exceptions. But not as many as you think. Newly graduated college student needs a car to drive to work? Okay, probably so, but does it have to be a brand-new car, with all the options that make modern cars expensive? The home mortgage would be another example. It is often cheaper to own than rent, for one thing. But--the size of American houses has gone up and up, even as family size has decreased. The mortgage mentality is part of what drives this. So yes, it might be necessary to borrow for your first house, but if houses were somewhat smaller and more affordable, the amount borrowed might be drastically cut. Instead of a 90% loan on a $250,000 house ($225,000 borrowed), how about a 50% loan on a $150,000 house (75,000 borrowed--1/3 as much debt).
[2] I say this even though I am a moderate "American Exceptionalist".
[3] From a practical and cultural standpoint, I do recognize that this is all-but-unthinkable in the U.S. Most of my peers to whom I have mentioned it, honestly had not even for a moment thought of the srpead-the-pain approach. For those who consider themselves Christians--and even more so those who believe the United States is a "Christian nation"--this is something to think about.
[4] There is also an optimizing aspect to this approach. In many cases, the result of cuts is that those remaining behind working harder than ever, for the same wages. While those laid off are either involuntarily idle, or spending all their time mostly vainly hunting for a job. So both the employed and the unemployer are worse off, though in different ways. On the other hand, if wages and hours were cut, roughly in proportion, it would provide at least a partially off-setting benefit to the loss in wages. I know this is absolutely, completely "un-American" and will never happen.[5] I am thinking of "austerity Britain", but hopefully less severe--if we start soon.
[6] In regard to working longer, I think there is a silver lining. It seems like most of the studies I have read about suggest that people who are able to work, and working, in later life often age better than the early-retired.
[7] If you have planned very, very well on your own to retire, more power to you. Go ahead. All I am saying is that most people are not in good shape for retirement, so while they should definitely begin saving for retirement, equally important is to plan to keep working for a long time. An important part of that plan is preserving your ability to earn--your skills and your health.
[8] Houses that get bigger, even as families get smaller. Cars that get more expensive, without getting any better at their core mission of providing transportation. Capital-intensive kids sports (no, your child is not likely to get a "full ride" just because they are pretty good at baseball!) My daughter's band trip is to Hawaii. Hawaii! That just doesn't seem like a reasonable thing for a public school to even consider.
[9]  Call me a scold if you will. Guilty as charged.

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