The 12 Step Program to Financial Sobriety

Swimming against the tide is no fun.  You feel swept away from where you want to go by forces beyond your control.  That’s the way those of us who favor market controls feel right now.  Many, if not most, are treating the meltdown as if it was a business cycle, and you just ride it out.  Unfortunately, all the wishful thinking in the world will not fix the fundamental flaws in our economy, which after all, only reflect our own flaws.  The second worst economic cataclysm in a hundred years, one that was decades in the making, will not magically right itself in a year or two.  The entitlement thinking that got us here leads us to believe it can all be made right without the hard work of reconstructing how the economy works, not to mention changing our straying values.

A debt fueled expansion 20 -30 years long made everyone think we were being prosperous.  That debt is a mountain and it’s looming over us.  Balance sheets of individuals, governments, companies, cities, states, and towns are swimming in red ink.  The current run-up in the markets is a sign of how whacked out everything is.  There are no business fundamentals supporting it.  Depending on who is doing the accounting, between 14 and 19 trillion dollars was fed into the banking system to keep the Wall Street party going.  That’s by far more money than all the wars in US history, with enough left over to end poverty in America.  A recent sobering report states that 20 million children in America go hungry at least a few days every week.  The 20 billion that will be paid out in Wall Street bonuses this year, some of it taxpayer funded, could provide enough to lift these children out of hunger.

Oops, now I’m talking like a bleeding heart liberal again.  Let’s get back to raw capitalism.  We could have used the trillions to build a new economy based on something solid.  To Hell with the banks and their stupid ass financial gimmickry!  How can that ever turn into anything like prosperity for America?  What about leading the world into a new energy future?  Many are saying that will be an economic expansion larger than the tech revolution, and right now Europe is poised to leave us at the starting line.  I don’t begrudge the fabulously wealthy their wealth.  If they were able to look beyond instant gratification, they could get even more wealthy by positioning themselves for this boom, and it would spin enough jobs to create a new boom economy for all of us, based on something real.  Sadly, like drunken fools, the financial elite are spending it at the stock market casino.  A big payday today perhaps, but it won’t create any lasting wealth for them or the larger economy.  It’s just another good time.

And where is our indignation?  We should be in the streets with torches and pitchforks.  Except that our own behavior has not been too much different, we sucked into the debt boom too.  We didn’t even think it odd to borrow money from China for another tax cut.  In fact we wouldn’t even vote for a politician of either party who wouldn’t promise us one.

 In trying to get a handle on how this all happened, it occurred to me that we are not unlike any drink or drug abuser who pushed the pleasure button once too often.   After all, there must be all kinds of dysfunction going on, and it didn’t start yesterday.  I keep thinking it started with Reaganomics.  In 1980, as Ronald Reagan took office, he lamented the 1 trillion dollar deficit he had inherited.  Apparently he started out sober.  Somewhere though, the tax cut ideologues got a hold of him and a previously tightwad deficit hawk Republican quadrupled the deficit.  Did we have a clue how wrong that was, or were our thoughts were sublimated by good feelings generated by borrowing prosperity from the future? 

Jimmy Carter, in the context of the oil embargo, had previously told us “button up your cardigan and suck it up”.  Ronnie was swept to power when he told us “it’s morning in America” and the bill will never come due.  It felt good, it felt like prosperity, so whose going to spoil the party?  George HW Bush added another trillion to that.  Clinton, that party animal, surprise, turned out to be the only sober guy in the room.  He actually started to back the deficit against the wall.  Then George W Bush, who was faking sobriety, threw one hell of a tax cut bash, doubling the deficit again.

With easy money flowing everywhere, it turned out to be the biggest party ever.  People with incomes of $37,000 a year were buying $450,000 homes with no verification.  Mortgage brokers right out of college were making a million dollars a year.  Wall Street traders were so out of control that the slightest road bump, and the whole show was headed for the ditch.  They must have all been seriously snockered on something.  I don’t know how else to explain it!  How there could have been any sober people at the wheel?  If there had been, surely someone would have told us to straighten out.

But no one did.

Every drunken bacchanal comes to a bad end, and so did ours.  We crashed the economy and hurt some people and everything was busted up real bad.  We felt bad too, so we did what most drunks do when the hurting but they’re not ready to get sober yet.  We decided to go on a bender.  We borrowed  trillions of dollars to make ourselves feel better again. 

Problem though.  Wall Street was friends with the guy who owns the liquor store (read Federal Reserve), so they took most of the booze.  Newsweek says they took 91% of this money for themselves, and gave the rest of the public 9% of it.  That’s probably why they’re still walking around grinning.  For us, the 9% was not enough to keep us high, so that’s why we have one hell of a hangover.

So now that we’re half sober, we are seriously talking about recovery.  But recovery is about more than just staggering out of the gutter, and that’s all we’ve done so far.  Fiscal sobriety doesn’t come easy and is not pain free.  Especially after a 30 year bender.  It takes a long time and it hurts like hell.  Sobriety is about faith and optimism.  Through all the guilt and self doubt you have to believe you can change.  There are programs for people like us who really want to be sober but need some help to do it.  If we were ready to change, our 12 steps would go something like this:

1.  We admit we are powerless over greed and material wealth – that our economy has become unmanageable.

Capitalism, given a chance for unfettered growth on its own terms, couldn’t have fared much worse.  Almost anything was cause for wild financial speculation, save perhaps the rubber tips on crutches.  At the heart of everything, once the scarcity of common sense is accepted, was a massive collective failure of morality.

 Part of sobriety is squaring with reality.  After multiple injections of corporate welfare, Wall Street is right back at it.  They haven’t disciplined their business model because they didn’t have to.  Unfortunately, the fragile economy is in no position to weather more storms right around the corner.  #1 is the inevitable commercial real estate crash.  It’s happening already.  The John Hancock tower in Boston lost half its value, some $700 million, in just a few months. #2 is the reset of millions of Option ARM mortgages, which will bring a fresh round of foreclosures, perhaps as bad as the first.

That’s the near term storms.  Far term is Social Security, Medicare and Medicaid starting to head underwater in a few short years.  Somewhere in there, inflation could rear its ugly head because of all the Mad Money the Fed is printing to forestall the inevitable reckoning with reality. The world may well lose faith in the strength of the dollar.  All this “Chicken Little” prognosticating gets weary, I know.  But I worry that the required frugality is not something we are familiar with, and I would rather we face into it than get hit broadside.

 Admitting our economy has become unmanageable would start with a sober look at reality.  Then we would hunker down for a long battle for an economy that has some hope for the future, because this one doesn’t.      

 2.  We come to believe that there is a power greater than ourselves, which could help us toward living more normally.

  Almost every religion on earth is based on a few clear messages.  One is the notion that you are judged by how you treat “the least among you”.  The current health care debate puts this in stark relief.  The constitution guarantees “Life liberty and the pursuit of happiness.”  But without health, none of these mean anything.  Alone among the world’s advanced cultures, we refuse to recognize health care as a basic human right.

America is the wealthiest, most powerful nation on earth, and is still a land of promise.  Yet we have the highest per capita rate of incarceration of any country, including third world dictatorships (Christian Science Monitor).  1 in every 37 people in America is in prison or on parole.  Statistically, there are few nations more violent except for countries that are at war and a handful of “basket case” countries like Zimbabwe.  (#6 in assaults per capita, #8 in murders with firearms per capita, NationMaster.com) 

 We are a nation where health care isn’t a basic human right, but owning an assault rifle is.  Maybe it’s time to get in touch with our higher power, whatever we individually perceive that to be.

3.  We make a decision to turn our economy and our lives over to something greater than ourselves.

It’s abundantly clear that out economy cannot survive when it is guided by the instinct of monetary gain alone.  Apparently we are not sufficiently evolved to put long term good above short term greed.  It’s a given that a certain amount of greed gives free enterprise it’s zip, still we were unable to stop drinking from that cup.  A higher principle of some kind is the only thing to cause the hand to put the cup down when we had had enough.

From the lowliest homeowner to the mightiest CEO, we have made Mammon our God of choice.

4.  We make a searching and fearless inventory of our economy and ourselves.

 Most disturbing aspect of the aftermath is our failure to do this very thing.  There has been no soul searching, no introspection whatsoever.  The public wants right back into the bubble economy so we can resume consuming, and the CEO wants to re-light the fuse and ride the speculation rocket.  Crash landings and collateral damage are the price of admission.

 We should be walking around repeating “never again.”  A blue ribbon panel should be picking through the rubble trying to reconstruct the crash scene.  White collar criminals should be doing time for securities fraud.  This would start to build some confidence that things can change.

5.  Admit to ourselves and others the exact nature of our economic failure and misdeeds of those we trusted it to.

 If John Thain, the ex-CEO of defunct Merrill Lynch, and the rest of the failed bank big wigs had foregone the hundreds of millions in bonuses they paid themselves after they blew the economy’s brains out, they could have funded unemployment insurance for 22 months for the 11,000 Wall Street underlings that were let go after the crash.  Never mind the rest of us and our trashed retirement savings.  That’s how far we are from step 5.

 Not a single politician, economist, stock trader, or CEO has apologized to the millions of people they hurt.  The bonus fiasco is all the information we need about how much contrition is present in the boardrooms of America.

6.   We are ready to remove the economy’s defects, and our defects of character.

The further we go in the steps the scarier it gets.  In the 1950’s, television taught us what to expect from life.  Appearances are everything and if values and common sense get in the way – they’re expendable.  Sixty years of indoctrination later it’s quite stretch to think that we would suddenly stop worshipping “the pointless dreamland of trinkets and desire.”  Any con man will tell you, you can’t con someone unless they have a little greed in themselves too.  That’s why we bought into the whole debt thing.  While we’re still struggling with step 1, step 6, seems like a mission to Mars.

7.   Humbly ask the help of others in the removal of the economy’s short comings and also resolve to work to remove these same faults in ourselves.

Quaker theologian Parker Palmer writes: “Who doesn’t know that a society where the rich get richer, while the poor get poorer, is a society that will someday have to pay the piper?  Who doesn’t know that a society that encourages us to live beyond our means and refuses to regulate greed is one in which our avarice will come back to bite us?”  In a more perfect world, the less broken help the more broken.  Our leaders in government and business are the most broken of all.  Who will lead the way?

8.  Make a list of all persons that have been harmed by the crash, and be willing to make amends to them all. 

I realize I’m stretching this analogy to the breaking point, but that in itself is an indicator of where we are in our steps.  The bailouts came from people who could least afford it and went to those who least needed it.  The socialism of government welfare is said to weaken the will of poor to struggle to succeed.  Apparently though, handouts don’t taint the powerful who find themselves in a bad spot.  Today, in America, the wealthiest 1% own more assets than the bottom 99%.  The economy has become a wealth extraction machine for the ultra rich, and never was that more evident than during this meltdown.

9.  Make direct amends to such people whenever possible.

 If step 6 is a mission to Mars, step 9 is finding life in the Andromeda Galaxy.  Making amends would have looked like a “bottom up” bailout, where mortgage holders who screwed up would have fared no worse than bankers who screwed up.  I guess that’s where it helps to be “too big to fail.”

10. We Continue to take a personal inventory and when we are wrong, promptly admit it.

Fearless soul searching is the key to self improvement.  Only by skipping this step can the economy go from mass hysteria to mass denial.    Don’t look to Wall Street, the Fed or the Treasury to change anything beyond the window dressing.  They’ve tilted the playing board their way and have no intention of changing it.  The money Wall Street pumps into the coffers of politicians guarantees they will listen to them, not us.  The big fundamental changes needed now would be disruptive to the economy.  That’s why we don’t want them.  That’s why we aren’t marching in the streets demanding fiscal sanity.

11. Seek through study and meditation to improve our awareness of the natural forces that govern life and the economy, hoping for knowledge of right and wrong and the strength to follow that knowledge.

Strength is the key element here.  Our founding fathers had the strength to challenge the status quo and free themselves from economic tyranny.  We have it so much easier than them.  Democracy still works, sort of.  But silent people will get nothing.  How long will they get away with it?  As long as we let them.

12. Having had an awakening as the result of these steps, we tried to carry this message to others and to practice these principles in all our affairs.

 They didn’t call our parents “the greatest generation” for nothing.  They grew up in modest means, unselfishly pulled together in sacrifice for the war effort, and for the most part were happy enough to live out their days in a funny looking little house down some quiet street in America.

 What legacy to we intend to leave?  Saddling future generations with our debt so we can live high off the hog?  I’m childless, and I’m worried about what the kids I don’t even have will think of me.  Eventually our society will learn to live within its means and that’s probably starting, like it or not, right about now.  It’s never too late to get sober.  

Doug Friesen 11/17/09