By Mike Berry, CFP®
I’m glad that I’m nearing 60 years of age. I don’t believe that one generation has it necessarily any better or worse overall than the next. Each generation faces its own challenges and goes through its own good and bad times. I believe that the United States is nearing a crossroads and the challenge that faces the 30 and 40 something’s is going to be whether the United States continues on the current path down the road of European Socialism or turns back to the individualistic capitalism that has succeeded in the past. That choice will determine much of how their generation lives out their time.
Right now we are seeing how European Socialism turns out. In Greece, where years and years of huge spending on government programs has left Greece with a debt so high that even if they invoke great austerity programs, they won’t be able to pay off their debt. And the people of Greece have become so used to being cared for by their government that they riot in the streets at the thought of having to cut back on their government benefits. Spain is also starting to unravel and yet people in both countries believe that the way out is to borrow more and spend more to “stimulate” their economies. What they don’t factor in is who is going to lend them any more money?
Even the countries in Europe who aren’t nearing default, such as France, Germany and Sweden feel the weight of their government sponsored programs dragging on their economic growth. These countries have had economic growth in the 1 to 2% range for decades now because so much of the money in their countries is used to pay for government sponsored programs and not used to fund further business development and expansion.
We’re beginning to see that here. We have had the weakest economic expansion coming out of a recession since the Great Depression. To many, it feels like we are still in recession. Our most recent GDP figure for the first quarter was recently revised down to 1.9%. We created just 69,000 new jobs in May. Unemployment hovers at 8.2% and will not go down until we get our economy growing at better than 3%. Our debt is like a lead weight dragging on our economic growth.
As I said before, I am nearing 60 years old and I was raised at a time and by parents who believed that you should work hard, live within your means, save a few nickels and you could get ahead in the world. You were responsible for your own well-being, not anyone else. No job was “below you.” Somewhere that changed and I believe it began with Lyndon Johnson and his Great Society movement. Under this program, Medicare and Medicaid were created and social welfare programs were expanded. Government spending increased to take care of people. Taxes increased to pay for the programs. Politicians began finding more and more ways to “care for us,” and much like the frog being slowly cooked in first warm water, then a little warmer water and gradually up to boiling water, we liked these benefits and weren’t willing to jump out of the pot before the water started boiling.
We have gone from a country where people believed that no one, not even the government owed them anything and they were responsible for their own actions to a country where people believe that not only the government owes them something, but so does their employer (health care and retirement) and that someone else is responsible for their circumstances and actions. People would rather live on welfare and food stamps than take a job that is “below them.”
So, we’re nearing a crossroads. This December we will have another budget face off as we once again reach our “legal” debt limit. (What’s your legal debt limit?) And Congress can kick the can down the road for another few years. Probably even long enough to where I will be living peacefully in eternity. But the crossroads is coming. Do we continue on a path that will deliver slower and slower economic growth, persistently high unemployment and unsustainable debt levels? Or do we get off the backs of business and begin the painful process of learning to live within our means and taking back responsibility for our own well being?
Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
Copyright ©2012 Mike Berry. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.
