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Where is our government?
The document discusses concerns about the U.S. government’s inefficiency and lack of accountability, particularly regarding the economic recession of 2008 and its aftermath. It emphasizes the need for a combination of fiscal and monetary policies to address structural economic issues and calls for improved governance to better serve all citizens rather than select groups. Furthermore, it highlights the urgency of tackling social and infrastructure needs while also advocating for government efficiency to enhance overall effectiveness and transparency.
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Where is our government?
- 1. Where is ourgovernment? MyopicNegligence or Operational Inefficiency 1 As we approachthe next electionandthe candidates are once again appealingtoaverage citizensand positioningthemselvestobecome the next Presidentof the UnitedStates,Ithinkit isworthyforus to stepback and askourselveswhere ourgovernmenthasbeenoverthe last15 or 20 years.There isno bettertime forus to reflectbackthannow before castingourvote. Foremost,there are too many questionsastowhythe governmentdoesnotappeartobe workingforitsconstituents,but way toofew answers. Americansfeelisolatedfromthe leadersthattheysenttoWashington torepresentthem. Therefore,itisimperative,more thanever,thatourleadersinWashingtonfocusonaddressingand confrontingthe problemsthatafflictAmericatoday- withbothforesightanddetermination. Iama firm believerthatwhatthe Americanpeople deserve isaclearand concise explanationfromourleadersas to howtheydo plansolve the mostpertinentissuesfacingthe country. One suchissue thatcomesto mind, as hardit isto believe,forithaslingeredonfordecades, isthe questionof whoisresponsiblefor the economicrecessionof 2008. The governmentmustacceptthat the U.S. iscontinuingtoface a structural problemratherthana cyclical one,and needstoimplementfiscal policiesinconjunctionwith monetary onesinorderto address itand move thiscountryforward. The Federal Reserve Bankcannot do italone. Washingtonneedsto fulfil itspromisestoitspeople.Lastly,the governmentshould make it a priorityto improve itsownefficiencyforthe countrycannotcontinue tooperate like itdid20 or 40 yearsago. There had beenagreat deal of discussion aboutthe recentfinancial crisisandwho the actors responsible forcausingitwere. The governmentconvenientlyplaced the blame onWall Street,which was an easytarget.Although Wall Streetwasbyfar withoutblame,ourgovernmentshouldbe upfront aboutits ownfailure. Likewise,itisimportanttomentionthatthe accommodatingand/orlax regulatory environmentof the bankingsector beganduringthe Clintonadministration. The bipartisanpassage of the Gramm-Leach-BlileyAct,alsoknownasthe Financial ServicesModernizationActof 1999, repealed part of the Glass-SteagallActof 1933 and wassignedintolaw by PresidentClinton. Anotherimportant change that complementedthisstate of affairswasthe followingoccurrence: “in2000, the Clinton administrationdramatically cutthe minimumdownpayment requiredfor a borrower to qualifyforan FHA guarantee to 3 percent, increased the maximumsizeof mortgage it wouldguarantee,and halved the premiumsit chargedborrowers for the guarantee.” Indeed,one more relevantidea thatneedsto be highlightedisthatClinton and Bush worried thatgrowth wasleaving largesegmentsof the population behind,and theirsolution wasto expand homeownership.TheClinton administration did anotherthing beforeleaving office,which wasto increase themandateforlow-incomelending from42 percentof assets in 1995 to 50 percent.
- 2. Where is ourgovernment? MyopicNegligence or Operational Inefficiency 2 Undeniably, Wall Streetplayedacritical role inthe recession, because,aswe are acutelyaware, theydo utilize theirfinancialresourcestotilt certainlegislationsintheirfavorthroughaggressivelobbying. However,whenone looksmore closelyatthe situation,one cannotice that the governmentis vastly responsible forthisscenariotakingplace byallowingthe bankinginfluence todictate the legislative process. It isthenno wonderthatmany people are still askingwhy all the responsiblebankersdidnot go to jail.Ihope youdo have a betterunderstandingof the answertothisquestion now.The cumulative effectof all these “short-termfixer”policiesoverlappedwith the greedandpowerof the bankers on Wall Streetwasthe “monster”thatcame to be knownas the Great Recession.Althoughwe are convincedthatmyopicvision(short-termism) onlyaffectsWall Street,ourgovernmenthasbeen impactedbythe same short-sightednessaswell,andthere are numerousexamplesthat substantiate that throughoutourhistory. Evenwhenthe financial crisiswasuponus,the governmentfailedtotake appropriate fiscalmeasuresto alleviate and/orrectifythe structural problemthatournationwas,andstill is, facing.Itwas clearfrom the verybeginningthateconomicissuesimpactingournationwere indeed notcyclical innature. Asthe BIS,whichhas beenadvisingthe EuropeanandU.S.governments forquite some timenow, statedinits mostrecentreport “monetary policyhas beenoverburdenedforfar too long.It must be part of the answer, but cannot be the whole answer.” EvenBenBernanke statedthat“if fiscal policymakerstook moreof the responsibilityforpromoting economicrecovery and job creation,monetary policy could be less aggressive.”Ithinkwe do have a general consensus inthiscountry thatthe government,and especially the fiscal policymakers, shouldincrease itsinvolvementinsolvingthe mattersathand. The governmenthas relied onthe Federal Reserve Bankandits monetarypolicies forfartoolongin orderto addressthe economicmalaise thatshould have beenaddressedwithacombinationof fiscal and monetarypolicies.Manyof youare alreadyfamiliarwiththe QEprogramwhichis the acquisitionof bondsby the Fedwithnewlyprinted“fiat”money. Anotherstrategythatthe Fedhas implemented in the lightof the financial crisis ismonetaryeasingbykeepinginterestratesartificiallylow. AlthoughIdo understandthatthe expertswill claimthatthisisanarrow sense because the Feddoesnothave full control overthe rates, the BIS advisedusonitslatestreportthat perhapswe are overly concernedwith the inflationtargetatthe expense of financial boomandburst. However,the mainissue thatcannotbe emphasizedenoughishow beneficial thislow interest rate environmentisforWall Streetandthe U.S. government.Let’snotforgetthatthe government isable toborrow at 1.9 percentfor10 yearsand 2.5 percentfor30 years,as statedrecently byBenBernanke in hisblog.Thisis quite a bargain,giventhe amountof debtthat ourgovernmenthasamassedwhichis estimatedtobe between $14 and$17
- 3. Where is ourgovernment? MyopicNegligence or Operational Inefficiency 3 trillion. “TheBankforInternationalSettlementsestimated in June2013 thatif the rate rise by just2 points,then America’sdebt-GDPratio would reach 200 percent of the GDP, up fromthe current100 percent.” Wall Streetlikewise tendstobenefittremendously fromlow interestrate,whichhas a tendencyof pushingassetpriceshigherandencourage risk-takingbehaviorinthe financial sector.Aneven more profitable waytomake money bybankersis to borrow moneyat near-zerointerestratesandthenlend the moneyto the governmentat3 or 4 percent. Throughthis backhandmethod,one can make a substantial amountof moneywithout havingtoundertake ahuge amountof risk. Some experts have gone so far to state that the financial marketshave become addictedtolow interestrates,whichspells bad newsforMain Streetif the mortgage crisisisany benchmarktothisaddiction’soutcomes. The overreliance of fiscal policymakersonmonetarypolicytoaddressthe economicmalaise isvery apparentto anyone followingWashingtonandthe economyveryclosely.The idealscenarioisforthe fiscal andthe monetary policytowork hand-in-handtoensure some semblance inthe socioeconomic realm,butmore importantly,toprovide concrete andsustainable solutionstothe manysocial and economicproblemsfacedbythe nation. Andthisis precisely whatthe BISmeantwhenitsaidthat monetarypolicycannotbe the onlyanswer. We come to the perfect segwaycharacterizingthe thirdissue thatisdominatingthe discourse inthe U.S., particularlyinthe lightof the police brutalitycasesthathave surfacedacrossvariousstates. Namely,itisthe needforadditional investmentsinlow-incomecommunities.Here,manywould disagree withme thatthe needisas acute or evenmore sonecessaryininfrastructural improvements (an example thatcomestomindisthe highwaysystem). My intentionisnottoinitiate adebate asto whichismore important,because both issues are extremely important;rather,mygoal isto emphasize somethingthatmanyseemtooverlookbutwhichisessential - improvingthe efficiencyof ourfederal government. Itwouldbe ideal to tackle the efficiencygapissue,butIdo thinkthe nationis not willing to waitany longerandwouldideally likethe governmenttoaddressall of themat once. Thismeans that the governmentwillhave toputtogethera legislationthatencompassesall of the mostpertinent issues- efficiency,additional investments inlow-incomecommunities, andinfrastructure.Thisideahas the potential tomake the legislationmore appealingforall the representatives,asitwill be addressing somethingof substance forall the constituentsratherthanaselectedfew,nowadaysthe common practice in Washington,D.C. We are a one nationandshouldbe workinginunisontomove thiscountry forward. Luckily, the governmenthasalready takenthe necessarystepsinthisdirection,startingwith the passportoffice inNewYorkCity, whichwasselectedas the mostefficientofficeinthe world. My
- 4. Where is ourgovernment? MyopicNegligence or Operational Inefficiency 4 pointhere isthat we alreadyhave anexcellentexample tofollow.Itisjusta matterof exchangingbest practicesamongfederal agenciesandscalingthe nature of the operations of the passportoffice nationwide. There willalwaysbe minoradjustmentstobe made,butwhatappearsto be missing from thisequation inmakingthisacurrent realityisthe will and the necessary leadershipof ourleadersin Washington. Securingthe efficiency of ourgovernmentshouldbe apriorityforeveryone inAmerica, because itsramificationscanbe feltineveryone’slivesand beyondthe bordersof ournation. Thishas the potential of helpingusaccomplishamore transparentandseamless government,reducingthe numberandmagnitude of lobbyingactivitiesinthe process.Itistime forour representativestoproudly communicate totheirrespective constituents,ratherthanpayinglipservice to, the followingphrase; the governmentisof the People,bythe People,andfor the People,apatrioticphrase coinedby PresidentLincoln whousuallyendedhisspeecheswith it. It iscurrently imperative thatthe governmentplacesitself inthe driver’sseatinordertostrengthenthis countryand move itforward.As blindinertiashouldnolongerbe the answertothe manysocial and economicproblemsafflictingthis nation.Althoughthe economicindicatorskeepinsistingthatthe economyisheadinginthe rightdirection,Iam not so optimistic.Firstly,the fundamentalsare notas strongas they oughtto be,andsecondly,let’snotforgetthatthe governmenthasfailedtoaddress the structural problems.Itisnot a secretthat the governmentshouldreturntoitsoriginal rootsof serving all itsconstituents ratherthana selectfew inorderto provide solutionstothe manyproblems the nationisfacing.Thisaim isbecomingmore difficulttoaccomplishgiventhe increasinginfluence of moneyinpolitics.However,peopleare fedup,and if our electedleaders keepignoringthe manysignals that the constituentsare sendingthemonadailybasis,theywill exacerbatethe country’s problems, rather thanprovidingthe much-neededreliefthatthiscountry desperately needs. I will keepemphasizingthatefficiency inourgovernmentshouldbe addressed concomitantwith the needforadditional investmentsinlow-incomecommunitiesandthe desperate state of our infrastructure (e.g.,highway/freewaysystemandbridges),makingthe legislationmore appealing for everyone inthe process. One neverknowswhatincreasingefficiencyinourgovernmentcanleadto. Perhaps,the surplusfundsof betterefficiencycanthenbe usedtotackle the othersocioeconomic issues. You mighthave noticedthatI didnot mention the issue of jobautomationand/orcomputerization that the governmentisindeedrequired toprovide some guidance.Today,robotsare more thanever performingthe tasksthatusedto be carriedout by humans.Iam not ignoringthissignificantissue,but will notgo furtherwiththistopic,since itwould detractfromthe primaryissuesIwantedtodiscuss.This
- 5. Where is ourgovernment? MyopicNegligence or Operational Inefficiency 5 coulddefinitelybe animportant subjectmatterof anotherpaperinthe near future.HarvardBusiness Review (June 2015) and Martin Ford- the author of The Rise of the Robots - have done a phenomenal joboutliningthistopic. Ihighlyrecommend toeveryone toreadwhattheyhave tosay aboutthis emergingandfascinatingmatter. We oughtto remainvigilant.Iwould be happytoleave youwiththis powerful quote foryourown reflection:“Countriescanreturn to developing-countrystatusiftheir politicsbecome imbalanced,no matter how well developedtheir institutions.” See younexttime, www.fiscalintelligence.org REFERENCES