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Frank A. Weil

Frank A. Weil

Posted: July 14, 2010 02:20 PM

Compass Confusion

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There are times in life when the way ahead is clear. "Go West young man, go West!" [Attributed to Horace Greeley in 1851] was a rallying cry in the 19th century. Many people followed it and now we have California with its amazing diversity, population, genius and life. And it was easy enough to find one's way. You just followed the path the sun took across the country.

Metaphorically, where does the compass tell us we are headed today: North-up; South-down; West-future; East-past?

Since the Vietnam War ended in the mid 1970s the way ahead has at times been hard to find and harder to follow.

-- We had a miserable period of stagflation which ran Jimmy Carter out of a job. Call this one South.

-- Reagan's sunny optimism unleashed a period of prosperity and consumption grounded on the assumption that less government and less taxes would put two chickens in every pot. It was supposed to feel like North East.

-- Bush One tried to keep the country in balance but lost his in the process. Strictly South.

-- Clinton triangulated everything, including his personal life, and by the end of his second term with the help of a Secretary of the Treasury, of, by and for the bond market, had presided over the greatest spurt of economic growth in memory and briefly eliminated the national deficit. They dreamed of the North West passage.

-- Bush Two, an accidental President, but an intentional cowboy, recreated the deficits, mired the country in two foreign wars and laid foundations of catastrophe. South East again.

During this same period personal consumption as a percentage of GDP rose from 60% to nearly 71% as personal income rose and our trade deficits and foreign debts rose to history making levels for a country of our size. The internet and computers came to life, bubbled over and now are a staple the world over. Information and news on every subject finds its way into every corner of earth in milliseconds. The financial sector grew from the mid 1970s level of about 17% of corporate income to between 30% and 40% from 2003 to 2009 simply by growing into a gambling casino, though most of the presumed economic benefits accrued only to its participants, not the economy as a whole.

Then came 2008 and the confluence of perhaps the smartest, temperamentally solidest Presidential candidate with the closest thing to a financial economic collapse since the Great Depression. That candidate became President with the largest majority in decades and was greeted by the urgent need to head off disaster. Despite the trillion dollars needed to prevent a national bankruptcy, the new President deftly steered the Congress to create a giant stimulus package. The result, of course, is a vast increase in the national deficits and debt but also some renewed growth in the economy and light at the end of the tunnel.

And, despite an opposition party that knows only one word: NO -- the new President managed to get signed into law the most comprehensive health care package since the 1960s, and a solid, if not perfect, financial reform package to rein in the financial sector excesses which led to the meltdown. And at this writing, it looks like there is a chance that the new President just might get the Congress to adopt an overdue immigration reform, an environmental regime and a true energy independence package. This whole process will be looked back at, in due course, with awe. North West indeed.

One can now make the case that North could emerge as the direction to take, having dodged the collapse and with a new commitment to making society work better. Others can make the case that South is inevitable because of excessive debt, which puts us and the whole world in peril of our many creditors. East appeals to those who see retrenchment as the only prudent course and with that come risks of conflicts with those who bear the brunt of less. And, finally, West has appeal because, when on a high wire, stability comes with forward motion.

Perhaps the compass is swinging wildly because we have gotten too close to the sources of "gravity" which pull a large population in various directions, so that any small variation in the vector overcompensates any stable sense of direction. Serious people are spread all over the map in their perceptions of what the direction ahead is and should be. Obviously a widely held thought/wish sees North and believes that we can ultimately grow ourselves out of a mess. The more naturally cautious like the idea of retrenchment, which they mistakenly see as prudence. And serious risk takers seem to say, "Damn the torpedoes! Full speed ahead!" or "Go West Again!"

If there is an answer to the direction to take, it surely lies in the face of the compass. No wise person today should even think for a minute about taking just one direction. That does not mean that people should just circle about. Balance, as seen with the hindsight of history, may not have been the best way to gain in what lies ahead, but it is surely the safest way for people to keep alive and well in whatever direction the compass has in store for us.