From Zell to Fiscal Hell

“A college education should be more than an item of currency to be traded on the job market. To view it solely as an economic asset is to devalue it.” – Zell Miller, former Governor and US Senator representing the state of Georgia

I would like to welcome a guest blogger this week, my brother Christopher.  Chris has been actively involved in matters pertaining to public education for several years and has served as Chair of the Georgia House District 103 Education Advisory Board to Rep. David Casas.  A few weeks ago, the NY Times published an article titled, Georgia Facing a Hard Choice on Free Tuition.  I asked Chris for his view and here is what he wrote:


I have lived in Georgia since 1981. While the state has many things to boast about, public education is not one of them. For the past 30 years, student achievement has ranked at the bottom or near the bottom of state rankings. Every Governor comes into office vowing to make measurable improvements in education and most fall short. One significant exception was when Gov. Zell Miller fulfilled a campaign promise to institute a State Lottery and use the proceeds solely for public education.

The controversial Georgia Lottery law was written so that the funds could only be used for three specific purposes: Pre-K programs available to every family at no cost, technology for primary and secondary school systems, and the HOPE scholarship.

HOPE stands for Helping Outstanding Pupils Educationally. The program provides that any student who maintains at least a B average will not pay any tuition when attending a post-secondary program in a Georgia public college. The HOPE Scholarship is based on merit, not means.

A recent NY Times article talked about students at The University of Georgia driving “HOPEmobiles” which are cars given to students from families with means. The parents don’t have to pay tuition, so they reward their kids with cars. But, to talk about HOPE as giving money to families who don’t need it misses the point. The principle of HOPE is that it rewards hard work. You give something; you get something.

The HOPE Scholarship program has had many consequences for Georgia; both intended and unintended. Over the past two decades, many of our top high school students have stayed in-state for college when they may have otherwise gone out-of-state. This has swelled the rolls of many of Georgia’s colleges, created a demand for new colleges to be built, and increased competition for admission to the top schools. The University of Georgia, for instance, once was accessible to average students. Now, it’s the hardest public school in the state to get into.

The demand for HOPE money has increased as attendance in Georgia’s post-secondary schools increased. Then, as the economy declined and the state cut the education budget, colleges have had to raise tuition and fees. The result is that HOPE’s liabilities now far outstrip its funding mechanism. The newly elected Governor, Nathan Deal, has had to propose some tough and unpopular choices. Do we increase the GPA requirement, reduce the percent of tuition covered, or institute means testing?

Attempts to duplicate the success of HOPE at the national level have fallen short. Tax credits for education involve complex IRS rules and only rebate you after the money is spent. A federal education loan is good but it has to be paid back. A recently released government report indicates that the total outstanding education debt held by Americans is greater than that owed on credit cards. Has the ease of getting these loans created another economic “bubble” waiting to burst?

Few would disagree that a well-educated work force is key to our future success in this global economy. While we used to view a high school education as the door to opportunity, increasingly that is not enough. Persons without a college degree, on average, have seen lower pay and higher unemployment. Few parents would discourage their children from seeking a college degree, but more are having trouble paying for it.

America has the finest post-secondary educational institutions in the world. That’s one reason why colleges are bulging with enrollment of foreign students. Should the best and brightest Americans be excluded because it’s too expensive? For once, the politicians in Georgia got it right. While HOPE will certainly change with the current economic realities, it’s not going away. Good students in Georgia will continue to have opportunity regardless of their means. The question is why other states haven’t followed Georgia’s lead.

Since 1993, the Georgia Lottery has generated $5 billion for education. So, go out and buy a lottery ticket and feel good about it. We shouldn’t be “HOPE-less”, we need to invest in the next generation.

- Chris Calia

Christopher Calia graduated cum laude from the University of Virginia and received his Masters in Mechanical Engineering from M.I.T.  He was a national Fellow in Nuclear Engineering and now runs a small, private software company.  He clearly values the education he was fortunate enough to receive, and is a frequent activist on legislative issues related to education.


In my last posting, I repeated the oft spouted phrase that governing is about choosing.  Clearly, we are all facing some tough choices which will create controversy and disillusion many Americans.  The only question is:

WHO WILL LEAD? 

Adam Smith: Communitarian

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.



 Adam Smith, Scottish philosopher, economist and author



A colleague of mine – a college professor – describes herself as a Communitarian. She quickly quips that her husband says that’s the same as a Communist. But, while some Communists might be Communitarians and some Communitarians might be Communists, they are not the same. Wikipedia defines the term this way: “Communitarianism emphasizes the need to balance individual rights and interests with that of the community as a whole, and argues that individual people (or citizens) are shaped by the cultures and values of their communities”. Sounds pretty far from the common perception of Adam Smith. However, I think it’s fair to say that Smith might buy into that philosophy.

Conservative politicians have promoted the “invisible hand” of the markets quoting Adam Smith from his treatise, the Wealth of Nations. I doubt that many of them have actually read the 1000 page tome. If they had, they would know that Smith believed that efficient markets and general welfare resulted from local business owners bearing the cost of their enterprise and sharing the values of their communities.

Smith strongly disliked both governments and corporations. He viewed government primarily as an instrument for extracting taxes to subsidize elites and for intervening in the market to protect corporate monopolies. In his words, "Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.” Certainly, that was an accurate description of 18th Century colonial America ruled by the British throne.

But, Adam Smith was a Scottish philosopher whose theories were not supported by data. A century and a half later, Friedrich Hayek developed the data to take Adam Smith’s philosophy to a new level. He advanced what would later be called Austrian Economics, a theory of monetarism that was embraced by his colleagues (including Milton Friedman) while he was part of the faculty at the University of Chicago in the 1950’s. Hayek believed that manipulation of interest rates distorted the price of capital leading to the boom and bust cycles we have seen throughout our history. In other words, the way to prevent the bust is to avoid the boom.

Like most students of economics of my generation, I lean toward the supply side theories that have been espoused by conservative economists, Hayek and Friedman. Their progeny like Arthur Laffer influenced Ronald Reagan whose response to an economic crisis was to return control of capital to those that earned the money. Lower taxes meant more money in your pockets, lower capital costs (without monetary distortions) and through the “multiplier effect” an expansion of the economy. He also coined the term “trickle-down economics” to describe the benefit to lower income families.

The expansion of our economy these last 30 years has been extraordinary. However, the promised trickle-down effect isn’t trickling. Over the last decade we have seen global corporations earning more money while the average real income for families has remained flat. Adam Smith would be appalled. Not only is the central government co-opting a significant share of our personal incomes but also it is reallocating our income to corporate interests in the form of subsidies and tax breaks. And, it has done so to the ill effect of the people who have elected that government.

Indeed, I know of no economic theory called trickle-down economics nor of any data to support its promise. It’s a political phrase. That’s all.

So, what would Smith and Hayek have to say about that?

Rarely do we hear of the other views expressed in The Wealth of Nations captured here: “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” Nor, do we hear much from his seminal work, The Theory of Moral Sentiments, where he explored the nature of mankind in civil society. How’s this for an Adam Smith quote: “This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments.”

Hayek, who had the advantage of observing governments in action in the 20th Century (Smith lived his entire life in the 18th), also espoused the creation of a “safety net”. In his most read work, The Road to Serfdom, he said: "There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision."

So, where do we go from here? The threat posed by our national debt and its evil twin, the budget deficit, are real. If current trends continue, 100% of our tax revenue will go to paying interest on the debt within 10 years. That can’t happen. And, when something can’t happen, it won’t.

It is often said that governing is about choosing. We have rarely faced choices as difficult as those we face today.

Tuesday’s State of the Union Address will be interesting on many levels, political and otherwise. The President’s public pronouncements have recently focused on helping business in the name of lowering unemployment. He even took the extraordinary step of authoring an Op Ed piece in the Wall Street Journal. Will he announce that he will introduce the recommendations of his Fiscal Commission to Congress and ask that they make them law? Will he acknowledge the work of Rep. Paul Ryan who is carrying the Republican flag, toward a compromise that will balance our budget within a decade?

Will the next two years be marked by more partisan bickering? Or, to paraphrase my usual closing question, WILL HE LEAD?

How's This for a Healthcare Problem?

"Hundreds of residents had been seized by the disease within a few hours of one another, in many cases entire families, left to tend for themselves in dark, suffocating rooms."

Steven Johnson, from his book “The Ghost Map: The Story of London's Most Terrifying Epidemic - and How It Changed Science, Cities, and the Modern World”



Not much was understood about disease and how it spread in the early part of the nineteenth century. In London -- perhaps the most civilized of cities at that time -- the medical profession theorized that the black plague and cholera were spread through miasma, the foul smelling stench that emanated from factories and sewers. London’s population had more than quadrupled in the first half of the century and the city was unprepared for the impact of more than 2.4 million people.

A cholera epidemic in the 1840’s had killed thousands and led to the creation of the General Board of Health. Despite the Board’s efforts, an outbreak of Cholera threatened London again in 1854. Inside of a week, over 100 people died and many more were sick. Seventy-five percent of the residents of Soho fled the city leaving factories with a dearth of workers. There were calls to shut down the factories as they were thought to be the primary cause of the miasma.

Dr. John Snow did not believe in the miasma theory and he set about to prove that contaminated water was the cause. The science of epidemiology was in its infancy and it wasn’t as simple as peering at water samples under a microscope. Rather, Snow acted more detective than physician. He famously mapped the cases and triangulated on a public well – the Broad Street Well -- that had been contaminated by sewage.

The city government shut down the well. How? By removing the pump handle. Wouldn’t it be great if all such problems could be solved so easily?

The following year, the General Board of Health drafted a bill for consideration by Parliament. The Nuisances Removal and Diseases Prevention Act threatened to curtail or shut down factories by regulating the foul odors that emanated through the city. Its proponents continued to promote the theory that miasma caused disease. Businesses objected vehemently. In their view, the bill jeopardized their ability to continue to do business.

In other words, the bill was a “job killing” healthcare law. Dr. Snow testified on behalf of industry, reasoning that since factory workers were no more likely to die of the disease than other residents of the city the smell could not be its cause. The bill was defeated.

I guess some things never change.

Today, congressional Democrats, who believe that the government should engage in economic intervention, argue that we are the only industrialized country that does not provide universal healthcare to its citizens. As though that is a good reason to do anything!

Meanwhile the Republicans have labeled Obamacare as “government controlled healthcare” and have promised to “repeal and replace” it. Huh? Replace it with what? If you think that government controlled healthcare is bad, then just repeal it! They point to the US Constitution as the proper construct and who can argue with that. It’s an extraordinary document and no other country has been able to improve upon it in the last 230 years.

In my view, all of the political rhetoric is a distraction.

The Brits don’t even have a constitution. And, whether the foul stench of 1850’s London was causing disease or not, it was probably a good idea to get rid of it. It’s not there today so something must have happened in the last century and a half.

There’s no question healthcare needs reform. The rising costs threaten our economic security.

Fifty years ago, the AMA feared Medicare and decried it as “socialized medicine”. Over the last two generations the program, which is a bottomless pit of taxpayer money, has made many a doctor filthy rich. Meanwhile, roughly 40 million Americans have no coverage. Many, who can afford it, can’t get it because of pre-existing conditions or some other nonsense. (I’ve been there, personally.)

The problem with Obamacare is that it doesn’t address the core problem – cost. So, what should we do? Like most of you, I have opinions but lack expertise. However, I have read a number of studies including one by McKinsey and Co. which compares the embedded costs of our system to others in the industrialized world. McKinsey lays it down to three simple matters that need to be addressed: (1) the rapid growth of outpatient costs due to higher utilization, (2) higher pharmacy costs and (3) higher administrative costs (including malpractice claims). I won’t go into details. If you’re interested, you can read the study by clicking HERE.

Those who would argue for no change (let the market decide) are not coming to grips with reality. The current system is not free enterprise. And, anyone who doesn’t think it needs reform is simply nuts. The reason that government needs to be involved is that the industry is too fragmented. Unlike for example the auto industry, there is no dominant player who can drive standards and automation into the supply chain like GM did in the 80’s.

That said, the country simply cannot afford another entitlement program when the national debt threatens our financial security.

We will undoubtedly be treated to lots of posturing by politicians and blathering by pundits. Ignore it. It’s a distraction.

It really comes down to one question: WHO WILL LEAD?

Why I LIke Ike

“Moderation shall rule in all things except exact sciences and morality”                         

 Dwight David Eisenhower

A friend recently asked me which President during my life was my favorite. Easy, I said, I like Ike. I usually get a blank stare when I say this and this time was no exception. Many of my contemporaries, Baby Boomers, have little memory of Eisenhower’s administration other than nostalgia – egg crèmes, tail fins, pastel colors, hoop skirts and the like. Those are my memories too. However, I love history and the 50’s provide some interesting perspectives.

Many people think of Ike as a “do nothing” President. By the end of his second term, he was old and ill having survived a heart attack while in office. Energetic and thriving, the WW II generation (“… born in this century…” as JFK put it) were anxious to move on. JFK’s “vigor” (or, “vigah” as he famously said it with his Boston accent) seemed like just the ticket. Ike’s image wasn’t helped by the televised White House tour hosted by Jackie Kennedy in 1962 in which she pointed out the damage to the Oval Office floor from Ike’s golf cleats. He apparently liked to practice his putting from time to time.

Do-nothing? Well, one thing he didn’t do is get us into Vietnam after the French were defeated by the Viet Cong in 1954. Also, he didn’t send troops to Hungary in 1956 to fight the Soviets as many conservatives wanted him to do.

Eisenhower was motivated to run for President because he wanted to ensure that international institutions created after WW II were preserved – NATO, the United Nations. The conservative wing of his party, led by Robert Taft, was "non-interventionist". I don’t know if there were rumors of black helicopters but the sentiment springs from the same well.

Here are some things that do-nothing Ike did. He ended the armed conflict in Korea. He initiated the development of the interstate highway system, joined the space race through the establishment of NASA, paid down the extensive debt from WW II and ran a balanced budget. He eschewed party politics, leaving that burden to his Vice President. Absent politics, how did he decide the best course? In his own words:

“I have one yardstick by which I test every major problem - and that yardstick is: Is it good for America?”

I had the extraordinary privilege of attending a dinner last week at which the guest speaker was US Supreme Court Justice Stephen Breyer. The event, arranged by good friend and colleague, Phil Bakes, and sponsored by The Strategic Forum was awe inspiring. Moreover, Justice Breyer gave us another reason to like Ike.

The Justice, who carries a copy of the US Constitution in his coat pocket, cited the Federalist Papers to provide context for the establishment of the Supreme Court. The framers were concerned about the court having too much power, it seems. They were finally persuaded that the Court represented no threat. After all, they had no power of the purse or to order military action.

The power of the Court was put to the test in 1830 when it found that the Cherokee Nation had rights to the land it occupied in Georgia. What did President Andrew Jackson do? He ignored the Court’s ruling and evicted the Cherokees anyway. Their journey west to Oklahoma along with other tribes, Creeks, Choctaw and Seminole, was called the Trail of Tears as roughly half the Native Americans didn’t survive the trip.

Now, I knew all that. What I didn’t know was that this was the first of many Court rulings that Presidents over the succeeding 125 years chose not to enforce. The Court having no military or financial authority was powerless. Until the 1954 Brown v. the Board of Education, that is.

The Court’s ruling led to the order to integrate the public schools in Little Rock. Governor Orval Faubus defied the Federal government. Southern congressman warned the President that if he sent in troops, he would have to “occupy” the entire South. Ike’s response? He sent in the 101st Airborne Division. Not only did he force the integration of schools, but he also firmly established the authority of the US Supreme Court by, finally, giving their rulings the force of law.

The Supreme Court is a lightning rod that attracts most of the electricity around emotional issues the Congress hasn’t the courage to address. Yet, that is the role envisioned by the framers. Someone needs to look at laws objectively with the objective of deciding if those laws comply with the intent of the Constitution. Eisenhower’s LEADERSHIP defied the politically expedient course.

Justice Breyer held the audience in the palm of his hand for about an hour. I think everyone took something different away from the evening. The history lesson for me was that it was Ike’s LEADERSHIP that gave the US Supreme Court the force of law.

Eisenhower was a conservative at heart. A reading of history informs us that he saw government’s role as limited to national security, assuring equal justice under the law and responsibility for the basic prosperity of our country. That said, he refused to follow the reactionary course encouraged by some members of his party. He, also, worked against fellow Republican, Joseph McCarthy.

And, that’s why I LIKE IKE.

Which modern President is your favorite? I would love to hear from you. Please scroll down to leave your comments.

Time to Call the Plumber?

Loose lips sink ships.


 Advice given to service men and women during WW II



It’s kind of amazing to think about it but prior to World War II, there were no rules provided to members of our military on what they could and couldn’t communicate to people outside their unit.  I assume it was a little easier to be a spy before that time.

Espionage has been around for centuries, of course. There is evidence that the ancient Egyptians used agents to assess enemy forces. And, the very quotable Sun Tzu said, “It is essential to seek out enemy agents who have come to conduct espionage against you and to bribe them to serve you…. Thus doubled agents are recruited and used”.

Leaking is different than spying. Pamphleteer, Thomas Paine, famously published (leaked?) information about a secret alliance between the Americans and the French, which was news to the British at the time. He was forced to resign as secretary to a committee of Congress.

French revolutionary, Joseph Fouche, is often credited with establishing the first government institutions dedicated to espionage. He was a popular guy by the time Napoleon began his campaign.

During the Civil War, the Confederacy developed an extensive network of spies who were managed from an office in Richmond down the hall from Jefferson Davis. One agent brought a copy of the Philadelphia Enquirer to General Robert E. Lee outlining troop movements by Union General McClellan. Lee cancelled his battle plans and moved his own forces to counter the moves.

The CIA is perhaps more famous for its failures than its successes. (How would we know about their successes?) There was the Bay of Pigs, of course. And, the CIA missed important developments leading to India getting the bomb in 1974, the collapse of the USSR and the presence of Weapons of Mass Destruction in Iraq.

While the Iraq war continues to have daily impact on the United States, those other events of the last 50 years are now part of history. It is unlikely that a Wikileaks event would have changed the outcome. There are inexorable forces at work that will affect our security long after this controversy becomes part of the history books. So, it strikes me that we need to take a long term view of Wikileaks.

It is important that we pay careful attention to the interests of Russia in Eastern Europe. During the Cold War, the Iron Curtain represented the western most boundary of the Russian sphere of influence in their entire history. Conversely, the current western border of Russia is set more to the east than it has ever been. Noting that Vladimir Putin is an “alpha dog” should surprise no one, least of all Vlad. What he might do next could surprise us all.

China’s economic growth rate is unsustainable in the long term. The cracks are already starting to show. Yet, they continue to be the single most important influencer in Asia. Are we prepared to deal with both the short term and long term developments?

The Arab world has been unstable for decades. Their only economic asset is oil. They have no middle class to speak of and the ongoing Jihad makes even our best allies suspect over the long term.

And, then there’s Korea……

Nothing that Wiki leaked will have a serious impact on these inexorable trends.

At the end of the day, it reminds me of when your high school teacher intercepted a note being passed around the class and read it out loud. A little bit of name calling and characterizations that are embarrassing to hear out in the open but no real harm done in the long term. (I suppose kids send text messages now. What’s a school teacher to do?)

There were two things that really struck me during the airing of all this gossip. When I was a young military officer, I had a Top Secret clearance. It was granted to me because I had access to encrypted messages. However, during my brief career in uniform, I never once saw any Top Secret information. Why? Because I didn’t have a “need to know”.

So, how is it that a private first class in the US Army had access to all this information? Did he really need to know what was being said between the Ambassador to Pakistan and the Secretary of State? What possible purpose could that serve?

My second observation has to do with LEADERSHIP. Despite our hyper partisan political environment, the opposition Republicans refrained from attacking the administration’s policies. It was a rare display of LEADERSHIP on their part.

“You don't lead by hitting people over the head - that's assault, not leadership.”
                                          ----  Dwight D. Eisenhower

Little Brother is Running Things Now

The atom bombs are piling up in the factories, the police are prowling through the cities, the lies are streaming from the loudspeakers, but the earth is still going round the sun.

-- George Orwell, British author

Boy, did this guy get it wrong! (Other than the part about the earth and the sun) Those of us who grew up in the 50's, 60's or 70's read Orwell's famous novel, Nineteen Eighty-Four, with fascination. It was intended as an attack on totalitarian regimes and was a cautionary tale. However, its depiction of post-WW III life was often taken as commentary on modern society.

And, we can find ample evidence of its ironies everywhere. We need go further than Jon Stewart's or Steven Colbert's nightly TV shows for a catalogue of the day’s "Doublethink" and "Newspeak". Many of the invented terms from the novel were adopted in popular speech. Indeed, the term Orwellian is often used to describe subjugation by the "Thought Police". Moreover, Orwell's home city of London is intensely surveilled by cameras in every public place. Big Brother is, indeed, watching us.

However, Orwell's core theme -- that technology would permit the state to control the actions of its citizens -- has proven to be the opposite of our current condition.

Technology -- specifically, the Internet -- has enabled the masses to effect leadership from the grassroots level. Examples abound.

CEO's for Cities is a web-based community of people driving change in urban environments. Their bottoms up approach has achieved results in Portland, OR, Chicago, IL and New York. So far.

Maryland based Kapston Corporation, a marketing company, has started a non-profit Internet initiative to support green business.

Cancer.im has as its mission "to empower every cancer patient regardless of their ability to pay, with the ability to research their disease and assist in finding, organizing and managing their own cancer support network".

Last June, Think Social, a NY based non-profit, hosted a one day conference the goal of which was to “explore how social & mobile media are empowering corporate citizenship to create social & environmental change.

None of these efforts rely upon support from taxpayer dollars. There is no hierarchy imposing control of the process. The success of each is based upon the initiative of its participants. The technology enables their success rather than hindering it.

Can you think of any examples of LEADERSHIP emanating from the Internet? If so, I would like to hear from you. Please scroll down to post your comments.

Who's Steering the Boat?

Help one another for we are all in the same boat.


Chinese Proverb



In 1405, Chinese Admiral Zheng began the first of seven voyages of exploration and conquest in the western Pacific and South Seas. Eighty-seven years later, Columbus sailed the ocean blue. He had to “pitch” his idea to Queen Isabella who granted him enough money to build four ships to cross the ocean on a westerly route to India. Admiral Zheng had a fleet of over 300 ships and a crew totaling 28,000. Columbus had a crew of about 150 on all four ships.

The largest of Columbus’ ships was about 100 feet long. Zheng’s longest ship was over 400 feet, slightly smaller than a modern US Navy frigate. It functioned like a small city, carried an Army, horses and provided relative luxury. Columbus Spartan ships provided an atmosphere that led to near mutiny.

Never heard of Admiral Zheng? Well, maybe that’s because the new emperor decided the venture was too expensive to continue in 1433. He decreed that anyone who built a ship with more than two masts would be executed. Just as Europe was beginning to expand its influence through colonization of North and South America, Africa and Australia; the Chinese shut out the rest of the world.

British economist, Angus Maddison, estimated that in the mid-14th Century, GDP per capita in Europe and China were about the same – around $600 in today’s dollars. Over the next six centuries (to about 1950), China’s GDP per capita remained about the same. During the same period, Western Europe increased by 600 percent. Such is the impact of free trade, liberal institutions and openness to innovation. China, by remaining closed to the rest of the world, missed the industrial revolution and failed to grow. Even today, the majority of Chinese live in poverty.

The U.S. has engaged the nations of the world in international trade to our benefit and theirs. While we continue to lead the world in pharmaceuticals, technology, food production and financial services, Europe and the developing world have benefited from U.S. consumers purchasing everything from Japanese electronics to French wine to Italian shoes.

President Obama’s trip to Asia has been widely covered by the press. There was lots of discussion about the weaker dollar, Chinese currency manipulation, quantitative easing, etc. I suggest you do not let all the noise detract from the President’s core message: The world’s exporting nations cannot continue to rely upon US consumer spending to support their economies.

This is not a blog about economics. However, I would like to offer an arithmetic lesson. GDP is the sum of government and consumer spending plus private investment plus net exports. So, if you live in a net exporting country (Australia, Canada, China, Germany, Korea), your GDP can grow with less government and consumer spending than a net importing country (the US and the rest of Europe). Got that? Exports good!  Imports bad!

So, when the President mentions “global imbalances” that’s what he is talking about. We have been “imbalanced” on this score for about 30 years.

Our trading partners complain that the Fed’s policy will weaken the U.S. dollar making their exports less competitive. While the weaker dollar will, over the long term, increase our total exports, it will also be painful for U.S. consumers. Commodities – primarily food and fuel – will increase in price. Other impacts are less well understood. The Fed’s program has never been tried before; so, there are bound to be some unintended consequences.

Meanwhile back at the ranch, we are going through our own balancing act. Households have become net savers again. Burned by the recession and scared to death of losing our homes and livelihoods, we are paying off credit card debt and saving for retirement. That reversal has benefits for individuals, families and the financial stability of our economy. But, it does little to pull us out of the doldrums.

The final – and biggest – balancing act is the responsibility of government. Will the new Congress get our house in order? Will the President tack to the middle? Who knows? The President’s commission chartered to balance the budget has some ideas. Some very painful ideas. The pundits pronounced their plan dead on arrival. But no serious economist or budget expert thinks we can get on track without lots of pain. The politicians all promise to balance the budget, reduce taxes and leave entitlements alone all while we are fighting two wars overseas. But, it simply can’t be done.

So, the long and short of it is that we are in for a lot of pain. Higher taxes, reduced entitlements, reduction or elimination of popular government programs, lower defense spending and on and on.

But, you knew all that, right? Why am I telling you this? Well, it’s because there’s something missing.

Politicians warn that our profligate spending will result in a massive debt burden for our children and grandchildren. But, no one has laid out a vision of the future for the generations that succeed us. Why go through all the pain if we can’t see a better world on the other side of this crisis? Someone (gee, maybe a President) needs to provide us a believable picture of what life in the United States of America will be like in 2030 or 2040.

Moreover, we need more than a vision, we need a plan. To be competitive in the global economy, we need better educated children, less reliance on foreign energy, investment in R&D and a business environment that encourages innovation.

How do we get there? What are the key elements? What’s the plan? How much will it cost? Where will we get the money?

Or, to put it another way, WHO WILL LEAD?