An American History Post 2010: The Great Deconstruction

There is a great battle brewing ? the proverbial paradox of the immovable object versus an irresistible force. The battle lines are drawn. On one side is the Greatest Generation, Americans over 60, middle class and mostly white. Mainstream media calls them The Tea Party and worse.

On the other side is President Barack Obama and a younger generation of progressive Democrats who see the need for an ever more expansive government. The battlefield is spending and debt. The Greatest Generation, following World War II, bought homes with a 30-year mortgage and 20% down, and paid off those mortgages accumulating trillions in equity along the way. The Credit Card Generation ? epitomized by both George W. Bush and his Democratic successor ? nurtured the zero down, no doc, adjustable rate mortgage that allowed millions of homebuyers, who could not afford to purchase a home, to buy one. The bursting of the housing bubble cost trillions in lost equity and resulted in 2.8 million foreclosures in 2009.The figures tell the story.

Spending

According to the Office of Management & Budget (OMB), Federal spending has grown more than eight times faster than Household Median Income. Since 1970, middle-income Americans? earnings have risen 29 percent, but federal spending has increased 242 percent (Percentage Change of Inflation-Adjusted Dollars, 2009). The Greatest Generation believes that spending by Washington politicians has grown out of control. They understand it is not a Republican or Democrat issue. They opposed the $800 billion TARP Bailout under Bush as much as Obama?s $800 Stimulus Bill. They opposed the trillion dollar Healthcare Bill recently enacted into law despite a clear majority opposed to its passage. They recognize that Social Security and Healthcare comprise huge unfunded obligations that will be passed on to their grandchildren.

Debt

Since World War II, publicly held debt as a percentage of the economy (GDP) has remained below 50%. In 2008 when President Obama took office, it was 40.8 percent, nearly five points below the post-war average. According to the OMB, Obama?s budget would more than double this figure to 90 percent of Gross Domestic Product by 2020, levels not seen since World War II. (Greece?s debt level of 150% precipitated their meltdown). By 2020, Americans will spend more on interest payments on the Federal debt than on military spending. The Greatest Generation believes these debt levels to be unsustainable.

An Unsustainable Path

In 1990, the federal budget was less than $2 trillion. Ten years later the federal budget was just $2.3 trillion. By 2010 the budget exploded to $4 trillion. The Obama budget projects a 43% growth to $4.3 trillion by 2019 according to the OMB. This massive increase over the $2.9 trillion budget Obama inherited in 2008 is not due to emergency spending alone but an intentional structural growth in government. Federal revenues have not kept pace with spending. The U.S. government was forced to borrow $1.5 trillion to pay its bills last year. The national debt is projected to increase from $13 trillion to $20 trillion by 2020 (Inflation-Adjusted Dollars, 2009). The path is unsustainable.

While the classic paradox of the immoveable object versus the irresistible force can never be solved, this battle will be settled at the ballot box in 2010 and 2012 when Americans determine the path their country will follow in the 21st Century. If the Greatest Generation prevails, many incumbent politicians will find themselves out of a job as collateral damage. A new wave of politicians will begin The Great Deconstruction.

New Jersey Governor Chris Christie may be the prototype of this new generation of politicians. He was elected to deconstruct the dysfunctional government of New Jersey, an economy that resembles Greece. Christie inherited the nation?s worst state deficit ? $10.7 billion out of a $29.3 billion budget. Christie is doing something unusual, honoring his campaign promises and acting like his last election is behind him. Christie epitomizes the politician the Greatest Generation craves, one willing to lose his job.

Christie has already declared a state of emergency, signed an executive order freezing spending, and cut $13 billion in spending ? in just two months. His first budget included 1,300 layoffs, cut spending by 9%, and privatized government services. The deconstruction of New Jersey has begun. New Jersey may be an unlikely place for The Great Deconstruction to begin, but it is a harbinger of things to come.

The Great Deconstruction is a series written exclusively for New Geography. Future articles will address the impact of The Great Deconstruction at the national, state, county and local levels.

Robert J. Cristiano PhD is the Real Estate Professional in Residence at Chapman University in Orange County, CA and Director of Special Projects at the Hoag Center for Real Estate & Finance. He has been a successful real estate developer in Newport Beach California for twenty-nine years.

Other works in The Great Deconstruction series for New Geography

The Great Deconstruction ? First in a New Series - April 11, 2010

Deconstruction: The Fate of America? ? March 2010