The elephant in the room that nobody wants to discuss -- especially elected leaders and presidential candidates -- is the nation's ticking debt bomb. Everyone wants Social Security, Medicare, good roads, big houses and lots of stuff to put in them. But the U.S. is now the world's biggest debtor nation -- the national debt has doubled in the past seven years. And the housing bust has exposed many Americans to the vicissitudes of overborrowing on mortgages, car loans and credit cards. Companies, meanwhile, inexorably cut back on pension and healthcare benefits, putting more of the burden on workers. We all know that 50 million Americans have no health insurance at all. President Bush introduces a budget that ignores the alternative minimum tax problem and pretends that the Iraq War doesn't need funding.
Back in the 1970s, my father was a member of a blue-ribbon panel selected by Congress to come up with solutions to keep Social Security solvent for future generations. Well 30 years later nothing has been done and funding Medicare is another fast approaching train wreck. Democrats talk about Universal Health Care coverage and taxing the rich, while Republicans hail cutting taxes and increasing the defense budget (America spends more on defense than all our enemies and friends combined). Everybody gives lip service to cutting earmarks, but earmarks comprise less than 1% of the federal budget. In effect, both parties adopt the let's keep borrowing solution.
At some point, probably sooner than later, foreign investors will stop taking a chance on investing in T-bills and other instruments that float our national debt, because the country is too much in hock. Interest rates will shoot up, the dollar falls more, and our standard of living starts to tank. Social Security and Medicare programs crash and our roads stop functioning.
It's a Nero fiddles scenario... In the late 1990s we knew tech stocks couldn't keep skyrocketing, but we kept investing in them anyway. The housing market was too good to be true, but everyone kept leveraging up and paying more. Now it is increasingly obvious that something has to give -- either we pare down our entitlements (higher age eligibilities, less coverage for wealthier citizens) or spend more of what we earn to keep them at present levels (higher taxes, user fees). We can't keep borrowing to sustain the unsustainable.
(And wouldn't you think Congress has better things to do than posture before the miserable likes of Roger Clemens and his trainer.)
© Miller Ryan LLC 2008
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
