We keep re-electing them without demanding they do the right things. I have great admiration for Rick Santelli for standing up and yelling and bringing America’s focus to this reprehensible blight on our character and our history. Rick Santelli and I are philosophically much closer than you might think and both passionately patriotic.
On the issue of the debt limit this August, the answer isn’t that simple. We are in the middle of the weakest economy recovery from the second worst economic downturn in American history.
Housing prices continue to fall. Twenty-eight percent of all mortgages in this country are for more than the value of the collateral house, and 9.2 percent of our workforce is unemployed. The unemployment rate for blue-collar workers is about 14 percent, and the group of underemployed is more than 17 percent.
If the U.S. stops paying its bills, the result will be similar to you if you stopped paying your bills: your credit score would drop. Standard & Poors has already placed the U.S. on negative credit watch.
They do that before they downgrade the credit rating. If we leave bills unpaid (whether or not S&P actually reports a downgrade), our creditors, from which we will necessarily have to borrow, will want higher rates on whatever money they may loan us.
If the interest rates on U.S. Treasury bonds go up, mortgage rates and interest rates paid by corporations go up too. If houses aren’t selling in a 4.5 percent mortgage rate environment, how many folks will be eager to borrow at 6.5 percent? How many employers will want to add employees? Oh, and taxes will go higher.
The U.S. Constitution is the greatest document we have. It was created as a device of the mind by courageous, high-minded, intelligent people who were willing to fight and sacrifice for a dream of freedom and possibility and dignity. It was bitterly argued and wrought from deliberate compromise.
The current debt limit threat is significant but won’t be our last. The ramifications for America and for our children and grandchildren are too dire to be shouting ultimatums. Our elected officials need to make hard choices about our economic future, and profound spending cuts are absolutely necessary. This will not happen if we voters do not demand it.
It has been said that we get the government we deserve. My fellow Americans, we deserve a hell of a lot better than this, but it won’t change until we each assume our responsibility as citizens and demand that the tough sacrifices be made and vow individually to make them.
The Constitution provides for the right to pursue happiness. It does not guarantee happiness, and it certainly does not guarantee happiness based on taxing each according to his ability to pay and providing to each according to his need. That’s called Socialism, and it’s not what America’s about.
We’ve got a serious problem in America. Let’s dispense with the bluster and get down to the hard, unpleasant work at hand. We, like no other nation in the world, can do it.
Michael K. Farr is President and majority owner of investment management firm Farr, Miller & Washington, LLC in Washington, D.C. Mr. Farr is a Contributor for CNBC television, and he is quoted regularly in the Wall Street Journal, Businessweek, USA Today, and many other publications. He has been in the investment business for over twenty years.