The Economic Game Is Over

Edward J. Dodson

[Reprinted from Land & Liberty, No. 1222, Vol. 115, Autumn 2008]

There is a saying on this side of the pond, that the game isn't over until "the fat lady sings". Well, there are signs aplenty that the economic game is over, and the home team has lost big time. Many of us are singing. The tune is "We need change".

Our government puts the rate of unemployment at 5.5% . The problem is that people who no longer have unemployment benefits are excluded from the base. Independent analysts put the real rate of unemployment at nearly 11%. And, even this rate is colored by the growing size of government payrolls. There are now more people employed by government (22.4 million) than in goods production (21.6 million).

Across the United States, some 500,000 people are homeless. Six out of ten are single men; however, families now make up one-third of the homeless.

People who lose employment and income quickly absorb savings and then stop making payments to creditors. We should not be surprised that foreclosures keep climbing. Over 1.5 million homeowners defaulted on their mortgages in 2007. Another 2.5 million could lose their homes in 2008. Predatory lending practices and mortgage fraud have played their part. However, another factor is the very low effective rate of taxation on land values. Foolishly, In response to public outrage over rising property taxes, many states have imposed restrictions on property taxes or provided rebates. Revenue shortfalls are made up by higher taxes on sales and/or income, or by reductions in expenditures on public goods and services.

Another symptom of deeper problems is the increase in the number of banks falling into insolvency. Some analysts are forecasting about 200 bank failures over the next few years. Those institutions with heavy construction lending are particularly at risk, as the demand for newly-constructed homes falls. Banking giants that securitized billions of dollars in sub-prime mortgage loans are also absorbing huge losses and are reserving billions more against forecasted loan losses to come.

We also face the problem of a growing prison population. Although the U.S. has less than 5 percent of the world's population, our prisons hold nearly one-fourth of the world's prisoners. The correlation between poverty and criminal behavior is strong, and roughly one million additional people are falling into poverty every year.

As the U.S. population continues to age, the number of people over age 65 who are living in poverty is growing. The poorest elderly today are women living. Many of these widowed women did not participate in the work force on a consistent basis; therefore, they receive no pensions and have minimal savings.

We have reached a watershed moment in this country. The fat lady is singing to us, and her song tells of deepening distress. The rules of the game brought us to the point of collapse. Widespread criminal behavior is doing the rest.