Thank you Bill! It is so refreshing having your voice in Minyanville. Some Minyanville profs aren't thinking clearly or with sufficient long term vision. You always have done so.

The constant assault of data about the economy misses the point you are alluding to: What are the jobs going to be that replace the ones we are losing? In order to answer that question, we have to ask "What do we need?"
Food, shelter, clothing, water.

The pyramid of infrastructure (local communities, generational housing, generational manufacturing legacies, bulk transport on water and rails) which built the current power base of our country has been mined like the salt under Detroit. Very few of the stones at the base of the pyramid are left, and we have to fill the holes by hand if necessary. The petroleum scare is going to come back with a vengeance if we keep dumping cheap money into the top of the system. Alternative methods of living without imported petroleum and without bureaucracies to get the food and petroleum to the countryside must be implemented NOW. Transition is going to happen, we just have to decide to lead or get washed away by the rising water levels at the coasts.
Plenty of jobs, just not the will or the skills.

We also need either social order or a means of self defense.

William,

I'm pretty sure investing in nuclear power is no longer such a good idea. I think the world is running out of nuclear fuel -- see the "Conclusion" in this article (take out the spaces in the web address): www.world-nuclear.org/ sym/2005/pdf/Maeda.pdf

In addition to the four necessities, I suggest we add energy (AS IN INDEPENDENCE). We must move forward on ALL viable energy forms SIMULTANEOUSLY NOW to reach independence soonest, including well-proven programs such as offshore drilling and nuclear as well as funding alternative energy sources such as wind and gas. People, regardless of what we do, it will be many years -- possibly 10+, before we enjoy any impact of these programs --- a long time to suffer through this! Name me one critical issue for this country that isn't solved, or at least improved, with energy independence. This is the real way we can lead the world and regain our former stature and respect! The longer we wait to implement a progam, the longer the pain! By the way, high paying quality jabs are created, a nice side benefit.

"What do we need?"
"Food, shelter, clothing, water."

What about hope? What about dreams? What about a meaning of life?

We are not machines that simply need to be maintained.

The trouble is that our society and our esteemed leadership has told us that the answers to all these questions is consumption. If I understand the premise correctly it seems to be 'the more we consume the happier we will be'.

In the immortal words of Dr. Phil..."how's that working for you?"

We worked for generations in this country so that 'our kids would have a better life than we did'. A funny thing happened along the way...we ended up with a spoiled, self-centered, 'I want it now' society raised on televison and dedicated to the proposition that credit was the answer. Not hard work, not excellence, not sacrifice, not saving but I'm going to get mine!

We seemingly have conquered the battle for survival (at least in this country for the time being) but what is the answer to why we are here? What is our purpose?

It may seem this is a pretty off-topic, philosophical question to ask in a forum devoted to the discussion of the economy and the markets but if you distill down all our current economic problems they are really just manifestations of this question. If we don't answer it in some plausible way what good will all the other solutions do?

The real problem in our economy for a long time has been the rapidly declining discretionary income of the average household. Our economy is roughly 65% dependent on consumer spending. Consumer spending is dependent on discretionary income. Therefore, as discretionary incomes fall, so does consumer spending, and so does the economy.

When we created social security back in the 1930's, we basically created a program that was a pay as you go plan. Pay as you go is a Ponzi scheme in which the benefits of one generation are paid for by the next generation. This works so long as the generation to generation populations and discretionary earnings continue to grow.

What started happening in the 1970's was that population growth began to slow and people began to live longer. If nothing else had changed, the social security Ponzi scheme would have faltered just from the declining populations that had to support the higher payouts required for the longer living and increasingly older population. The problem is simply more folks on social security living longer. But this wasn't all that happened. There have been several very important occurrences since the 1970's that have had a tremendous impact on how we got to where we are, and will heavily impact how we get back to where we need to be.

First, Congress not only continued to enrich existing programs, they also created new and even more expensive programs such as Medicare and Medicare Part B. And, being totally inept, Congress stayed on the course of pay as you go. So even though payroll taxes for these programs have increased from 1% of the first $3,000 ($30 per year) when the first program was created, to the whopping 15.3% of the first $102,000 ($15,606 per year) of today, the off balance sheet obligations for these programs have continued to spiral out of control at an ever increasing rate and in an ever increasing magnitude.

Second, these "payroll" taxes were confiscated from the worker's pay. There is no end of year discussion as to deductions. This confiscation is final. No debate allowed. The result has been that with each round of payroll tax increase, the worker's discretionary income has been reduced. Significant payroll taxes reduce discretionary income significantly.

Third, these payroll taxes have been used by one administration after the other and by one Congress after the other as pseudo income taxes in that they have been spent however Congress wanted the money spent. There is still no set aside based on these payroll tax receipts because Congress wanted a pay as you go system. The lack of a proper set aside for future obligations will reduce future discretionary incomes as taxes will have to be increased in the future to cover the ever growing unfunded obligations.

Forth, the paradigm of tax free trading zones, container based seaports, containerized freight, big box retail distribution, and no meaningful regulation has meant that the higher paying manufacturing jobs have been sent overseas and the remaining service sector jobs, paying less, have resulted in further reductions in average discretionary incomes.

Fifth, local sales taxes, phone taxes, excise taxes, real estate taxes and all the other semi hidden taxes that are used to confiscate even more from the worker have all ballooned as local governments try to take their "fair" share from the worker's pay. The result has been a lowering of discretionary income.

Sixth, the creation of high bandwidth Internet traffic has allowed many of the higher paying service sector jobs in technology, health care, finance and legal services to be electronically sent overseas eliminating domestic jobs and creating competition among workers for existing jobs that has to a large degree caused wages to stagnate while the cost of living has increased. The result has been a lowering of discretionary incomes.

Seventh, the totally inept response of government to the illegal immigration problem has resulted in pay scales being lowered for legal workers as businesses recruit and hire illegals willing to work for lower pay which as had the effect of a reverse auction for workers pay rates. The result has been a lowering of discretionary income.

Eighth, and most recently, the government response to the current economic crisis is setting the stage for even more failures in the future. Now listen to this. This is not that hard to understand. Congress has confiscated taxes from the workers and given so far about 1.5 trillion dollars of that money to the Treasury and the Federal Reserve to "fix" things. The bulk of the money has been loaned to the largest banks based on the argument that loaning the biggest banks enough money to guarantee they survive is the best way to get the credit markets moving again. The money was loaned with no strings attached as to mandating that some percentage, not even 1%, had to be loaned out into the economy. Worse still, the government's loan program in essence is a variable rate loan. That's right. We are fixing the millions of small defaulting variable rate mortgages with hundred billion dollar variable rate loans to the largest banks that are using the money to buy up other banks, reducing competition in the process instead of loaning the money back into the economy as was promised by the Secretary of the Treasury as he "sold" his ideas to Congress. The interest rates on these jumbo bank "loans" will jump up in five years just like a variable rate mortgage. What happens then? What happens if they can not pay it back? How does concentrating the banking industry into the hands of the federally subsidized few impact interest rates and competition in the future?

Was this plan created by Saturday Night Live or the Three Stooges? Where is the logic in fixing a variable rate mortgage problem with a variable rate loan to banks. The only difference is the borrower is now in the words of the stooges that created this plan, "Too Big To Fail". Oh what folly.

All of the above has had the effect of wiping out most discretionary income from the average household. When discretionary income was gone, the average household turned to debt. And when the debt got too expensive, they leveraged even more. After all, this is what their government did. This is what their banks did. This is what their mutual funds and hedge funds did. So this is what the consumer did.

So here we are now with unfunded government obligations in the 100 trillion dollar range, discretionary incomes in far too many cases destroyed, and credit dried up due to being over used. Now, no one can buy a new car so the car companies (even the good ones) will close or cut back and hundreds of thousands of workers will lose their jobs. People can't buy a house so the price of housing collapses and the construction workers will lose their jobs. People can not afford to go to restaurants so they close. Same for clothing stores, appliance stores, malls, strip malls, stand alone stores, hotels, casinos, etc.

In short, it is discretionary income that allows the worker the "freedom" to choose where to spend which in turn allows capitalism the freedom to invest and compete for those discretionary dollars. As government confiscates more and more, there is less and less economic "freedom", so the economy contracts. To fix this contraction with more and more government debt is simply the lunacy of Congress and government. This is where we are now.

To understand this fundamental problem is to make it very clear that promises of redistribution of wealth, or the creation of more social programs is simply going to make matters much worse and dig the hole ever deeper. America worked figuratively and literally when people were free to save for themselves.

We now have over 100 trillion dollars of off balance sheet obligations of the federal government alone. State after state is in dire straights as well. And most of this is because in one way or another, government is saying that you should not be required to save for your own future, that you should instead have government save for you.

The folly in this argument is that in the last 232 years, the federal government has not been able to save one thin dime. How is adding more programs going to change this record?

Government (Congress) has absolutely no credibility in this matter. Government (Congress) can not be trusted. And with the government programs and taxes that have been levied on the average household, the average household is now unable to save for itself. This is the situation we are facing. The government won't save the high payroll taxes confiscated from the worker, and the government has taken away the ability of the average household to save for itself. Ergo, no savings.

You explain to me how a new government program is going to improve this fundamental problem, and I will recommend you as King and we can scrap government as we know it. But logic dictates that another program is only going to make the root problem worse.

Both candidates for president want more programs and are drooling as they anticipate spending even trillions more that we do not have which will only push the problem farther into the future. This is simply madness and is indicative of government that is out of control. Those that have significant assets are moving those assets off shore to protect them from this run away government. And that my friends, only reduces discretionary income even more by increasing either the cost of borrowing or reducing opportunity through reduced investment that would have otherwise been invested here.

How does the private sector maintain or create new jobs if the private sector has little or no discretionary income? Obviously, if discretionary incomes are on the decline, then the economy too will be on the decline once the false boost from credit has been exhausted. This is where we are now. We have been artificially propping up the economy with debt. That debt bubble, like the housing bubble, has popped. It is not coming back.

Discretionary incomes will continue to contract for at least another year and as that happens, the economy will continue to contract as well. Add higher taxes into the equation and the problem simply worsens. This isn't that hard to understand. Yet everything our government has proposed so far to fix what in essence is rooted in a lack of discretionary income has been more spending, more debt, and more taxes. Look out below. We are no where near the bottom.

Discretionary income is the problem. Solve this problem, and you solve everything. Ignore this problem, and all fixes are a waste of time and money.

300 million people with about a billion guns don't need so much for defense.
The current mil-industrial system is merely for getting stuff we don't already have, not to "protect" us from anyone.
Trust me on that: I spent 13 years doing it. There are no credible threats to our sovereign land.

When most of our activity is for plastic junk that ends up in landfills, we have a long way to go before our necessities require foreign oil. We import oil so people can drive to jobs to advertise cars to drive to work to buy foreign oil.

Sorry, David, but Hope is what gets people on the trains to go to concentration camps, not what makes life worth living.
Life itself and the cooperation of community toward stable futures for children: this is what makes life better. Advances in technology and especially in our knowledge should be applied to simplification and satisfaction of needs, not toward castles in the sky paid for with our grandchildren's indebtedness.
Living in the now is preached by every guru from God to Gandhi to Dr Phil, but everything about our economic systems has been used to sell a future that is disconnected from reality.

To some extent, I agree with you. Some of the problem is that the things people SHOULD be paying more for were easily commoditized( food, clothing, shelter), and then manufactured in centralized locations more 'efficiently'. This efficiency came only from the availability of cheap energy to run factories and transport resources and products.
The less people paid for food and clothing and building materials, the more money they had to spend on junk they didn't need, which put more power in centralized manufacturing and the manipulation of markets.
We can now easily provide the basic needs at low prices with local regions, but we should not automatically say it's okay for people to promise the rest of their lives buying junk for the sake of buying (the Bush Economic Doctrine).
We should probably either teach people to find satisfaction in simple cooperation and community, or somehow limit the amount of spending they do, in order to limit the amount of resources consumed and moderate volatility in the supply/demand ratio.
FairTax.org
http://www.normec onomics.com/distribution.html
The other option is Manifest Perpetual Growth Destiny: we have to find more planets that we can a: reach and b: dump our trash on.

I agree wih much of Glenn's argument but if you have so much to say you should write an article not a comment.
Dan, do you really believe that subsistence farming is the answer?

Only one aspect of the Answer. The answer lies in the ratio between what we grow and create vs. what we consume. If we are going to consume a planet every 100 years, then we have to grow a little more than a planet during that time in order to have some insurance against black swans.
Grow is a figure of speech, as well as subsistence. It is much easier to have a positive creative ratio if we start at a lower consumption level. Most of the resources we are consuming go to things that are not necessary, and basing decisions on the size of the economy (an after-effect of human activity) is like basing automobile design on the amount of rubber dust settling on our houses from the tire wear.
We have to evaluate our creative/consumption ratio locally, regionally, nationally, and globally as a species. Cooperation toward actual goals of reduction and invention are the key: not expanding for the sake of expanding an economy which is so destructive of the world we need in order to survive.
Does anybody really care enough to think this much? Most refuse to question the status quo because it has been so profitable in the past. We generationally forget where those profits come from (the externalized costs of Empire), and religiously believe that we are on top of the pile of dead bodies because we deserve to be.

Try thorium instead of uranium and we are not running out.