Is rebirth possible?
The US, like many sinners, will have to hit bottom before seeking redemption
Between theory and practice is, alas, real life. And in real life, in America circa 2024, things are not at all as bright as Joe Biden might have you believe. The latest inflation data show that prices rose 3.2% in February from a year earlier, the “latest instalment in a string of recent data suggesting that inflation remains stubbornly high”, says The Wall Street Journal. Higher prices mean lower real income.
Meanwhile, record numbers of Americans are plundering their 401(k) pension pots. “A record share of 401(k) account holders took early withdrawals from their accounts last year for financial emergencies,” says The Wall Street Journal. “Overall, 3.6% of its plan participants did so last year, up from 2.8% in 2022 and a pre-pandemic average of about 2%.”
The whole point of a 401(k) is to keep that money out of reach until you reach age 59 and a half or above. Removing that money earlier is about the worst financial move anyone can make. The beauty of these retirement accounts is that 1) you defer your income tax on your contribution, and 2) you invest long-term and watch your money grow and grow over the decades.
It is still theoretically possible to reverse America’s slide into debt and chaos. But it wouldn’t be easy. Drug addicts tend to “hit bottom” before they reform. Alcoholics too. Sinners repent. Even former defence secretaries may shed tears and regret the misery they caused (Robert MacNamara is the only one we’ve heard of who did so).
Redemption comes at a price. In theory, a man might be “reborn” at 90 – but in practice, he dies. So too, like a grand old tree, cut into pieces to make common chipboard, an empire must be crushed and humiliated. It must hit some kind of bottom before it can be reconstituted.
But where does the “bottom” lie? We keep an eye on Argentina, looking for a clue. If the gaucho republic has not actually found its bottom, it must be close. Sixty per cent of its people live in poverty. Compared with the rest of the world, it has been going downhill for 75 years. Doing business is such a challenge – with constantly shifting financial lanes – that most people either crack up or give up. GDP slumps. Ambitious people leave the country. And those who remain – including our own kith and kin – develop extraordinary survival skills.
And now, from Argentina, comes a bit of hope. President Javier Milei says what Biden doesn’t. He’s identified the real problem – the “political caste”, with all its cons, tricks, and grifts. And he has a plan to correct things. He failed to win the support he needed in the Argentine parliament, so he’s gone to state governors and the people with something he calls the “25th of May pact”. It’s a plan, with several key elements,
– 1) the inviolability of private property. 2) a nonnegotiable balanced budget. 3) government spending must be kept under 25% of GDP and 4) free trade.
In the US today, federal budgets haven’t been balanced in 50 years. The US balance of trade has been negative, too, for half a century. And the cost of government – including taxes, regulation and inflation – must be running over 30% of GDP.
Things are becoming less groovy all the time. But let’s not despair. So far, no pompous military numbskull has seized power. No gangs of brownshirts or blackshirts “disappear” their opponents at night. Shops are still full. The stockmarket is still near a top, not a bottom. And somewhere ahead, perhaps far ahead, lies the bottom. Sooner or later, we will find it.
“Things are getting less groovy all the time. But let’s not despair”