The Great Awakening

There is something going on. That is what I know. I do not know exactly what it is, but something strange, and perhaps not so wonderful is going on in the U.S. The environment in this country is ripe for revolution. The United States appears to be a powder keg ready to explode right now.

Commentaries on the Occupy Wall Street protests (and the Tea Party for that matter) are missing something. One side mocks the Occupy Wall Street protestors, one side glorifies them. The reverse is true of the Tea Party. Yet there is something bigger going on that such small analysis misses. Occupy Wall Street and the Tea Party are protesting different sides of the same coin. OWS is protesting the "1 percent", those who have gotten fat from Big Business. The Tea Party is protesting Big Government. I believe that Big Business, Big Government, Big Labor, and to a large extent, Big Media have been in an unholy alliance of greed and hubris. Finally, the excess greed is catching up to all of them.

Executive compensation has been out of touch with reality for the better part of the last twenty years. There seems to be very little accountability on the part of corporate boards of directors to reign in executive compensation, even during this difficult economic period. This is especially true on Wall Street, where taxpayers were called upon to bail out bank after bank that took The System down. Within two years of the bailouts, Wall Street securities firms were posting record profits and handing out bonuses deemed obscene by many who were struggling to find work or make ends meet. Their tax dollars went to line the pockets of the fat cats in the most unholy of alliances between government and business. So the "1%" live as high as ever on the hog while the rest of us fight for scraps. Is it any wonder that this type of largess has drawn protests?

Now, do not misunderstand me. I do believe that executives should earn more than entry level, clerical type workers. I applaud those who risk their capital and earn a fair profit. And if consumers are willing to pay premium prices for certain products (i.e. Apple products), then God bless that company. And I do not mind an executive has earned a large compensation, including bonuses. But too often, executive compensation is disconnected from reality. Executives too often have been paid fat bonuses in the face of declining sales and declining profits (or even losses). It is easy for the masses to become disillusioned when the company's fortunes are declining, workers are being asked to take pay cuts or are laid off, and the executives are earning ever higher amounts of money.

Meanwhile, the Tea Party protests a government that has clearly grown too big. The government is now running $1.5 trillion annual budget deficits and has a national debt equal to our annual GDP. Until the Tea Party came along there was no action by either party in Washington to do anything about it, other than kick it down the road. The Tea Party to its credit understands that there is a fundamental entitlement mentality among the politicians in Washington that is bankrupting our country. Yet until they awoke the politicians, they were all for living off the fat of taxpayer money, being completely oblivious to taxpayer anger over irresponsible spending. Is it any wonder CNBC commentator Rick Santelli ranted on TV and got the Tea Party started. If it wasn't him, it would have been someone else.

With the $1.5 trillion budget deficits projected as far as the eye can see, interest expense to service the debt will become an ever larger piece of the federal government's budget. Even with record low interest rates, this component is one of the largest parts of the budget. What happens if short-term interest rates go to 3%? Interest expense will explode and we will be looking at the budget deficit increasing by hundreds of millions of dollars each year simply due to a movement in interest rates. On top of that, the latest CBO estimate is that the new health care law will increase the budget deficit by $540 billion in the first 10 years of the law's existence. Remember when we were told that it would cut the deficit by $138 billion during the first ten years? Not going to happen. Remember all the back room deals made to pass the bill? Is it any wonder that people rose up and protested a government that was too big and too arrogant?

What this all amounts to is a Great Awakening by ordinary citizens of this country. The politicians either ignore or mock the protestors at their own peril. The Tea Party needs to understand that in the end, the OWS crowd is their friend and vice versa. If the 1% and the government are truly responsive to the protestors, then we will wind up with a more accountable Corporate America which will help facilitate a more limited government. If Big Government and Big Business take on a "let them eat cake" mentality (which both seem to be carrying at the moment), then this thing will end very very badly. Revolutions never end well for those in power, and right now, those in power are sitting on a powder keg that is ready to explode.