An ‘us-versus-them’ mentality has taken root in America.
This past Tuesday, Carl Paladino, an especially untelegenic candidate, fought his way past the GOP establishment to win the party’s nomination for governor of New York State. Also this week, gold prices hit an all-time high. Can we connect those dots? Easily.
Americans are angry, and they are anxious. In poll after poll, they express their frustration that their elected leaders – on the right and on the left – have ignored their needs and compromised their future. A Rasmussen survey just conducted finds only 25% – one quarter! – of Americans think that the policies of the federal government “have put the country on the right course.” A recent AP poll shows that almost half of the country has “little or no confidence in Congress.” It’s noteworthy that in 1964 three quarters of Americans had “great trust” in government.
The sources of this discontent are high unemployment, unpopular health-care legislation, rising taxes, unprecedented budget deficits and bloated government payrolls. These factors have made voters unpredictable and investors skittish. Gold soared to nearly $1,300 per ounce this week. Given that gold, now up about 25% year-over-year, is normally considered a hedge against inflation, and that price increases remain modest, the rise reflects profound (and reasonable) anxieties about the present and future economy. The important housing sector remains weak, with RealtyTrac estimating that foreclosures rose 4% in August. Worse, we may only be seeing the tip of the iceberg. Banks are doing everything possible to avoid calling in loans, since the overhanging inventory of homes for sale is already huge and continues to threaten any rebound.
A recovery in housing, like consumer spending, depends on job gains, which remain sickly. Unemployment claims indicate that job losses have peaked, but new openings remain scarce and disappointing. Americans are angry that the Stimulus Program didn’t engineer the kind of upturn that was promised. They are also incensed that President Obama and his colleagues in Congress did not immediately focus on job creation, instead spending almost an entire year on the divisive battle over Obamacare. Their wrath is also directed at businesses that, they are told, are earning good profits and sitting on cash, seemingly indifferent to the needs of workers. They also suspect the Chinese have undermined American manufacturing.
While understandable, none of this ire is helpful to the country. As President Obama’s polls and popularity have nosedived, he has attacked business leaders and his political opponents. This has deepened the country’s gloom (a new survey out today shows consumer sentiment at its lowest level since August 2009), widened existing divides and disappointed those who elected Mr. Obama. This was the leader, after all, who was supposed to bring the country together. President Obama has consistently attacked Republicans for blocking his legislative agenda, but Americans remember that Democrats control both the House and the Senate, and therefore hold the White House accountable. Probably the only person who has enjoyed the recent rancor is Minority Leader John Boehner, who leapt to fame virtually overnight when the president called him out eight times in a campaign-style speech supposedly focused on economics. Viewers all across the country wondered, “Who in the heck is John Boehner?” The Beltway brawl used to be fodder for pundits; now it’s dinner table conversation.
The president’s assault on business has also weakened the country, spawning an “us versus them” mentality. Relations between industry and the White House have soured, discouraging cooperation and joint efforts to get the economy moving. This is clearly not helpful, especially since the administration is alarmingly devoid of business know-how.
Americans are also incensed about China. In hearings this week, Congress demanded more forceful retaliation against China’s purposefully undervalued currency. The yuan has risen less than 1% against the dollar since mid-June, when China indicated it would adopt a looser policy. Our officials are not impressed, and they are not alone. A rather shocking confrontation has emerged between China and Japan. The government of Japan has aggressively intervened in currency markets to stifle the ascent of the yen against the dollar (it is up about 10% this year and was recently hitting 15-year highs) and the yuan. As an export-driven country, Japan is especially vulnerable to an artificially low yuan/yen relationship.
Arguments over currency values follow other slaps at China. The United Steelworkers recently filed a trade case pushing the Obama administration to sue China in the World Trade Organization over what it claims are illegal practices that ensure Beijing’s grip on “green” industries. There have also been numerous complaints raised by foreign companies from all over the globe doing business in China, saying that they are required to give up trade secrets in order to maintain their perch.
Are we surprised? No. China is the economic equivalent of an ultimate fighter – they obey no rules. They are wresting an enormous population out of poverty with the most astonishing industrialization the world has ever seen. As they battle rising social unrest caused by a gaping divide between the country’s haves and have-nots, China’s leaders are racing against the clock. They may pay lip service to participating in international trade organizations and they would like to be accorded political clout equal to their economic success, but they are still renegades whose self-interest will always come first. The government will do what it takes to tee up Chinese companies to compete globally and to raise the standard of living for the Chinese people.
Would that our leaders were equally committed. The perceived incompetence and irresponsibility of our leaders combined with soaring government spending have spawned anxiety about our future, and given birth to the Tea Party. Even those who disagree with their politics must admire the Tea Partiers success in bringing fresh energy to our jaded politics. Also, they have forcefully reminded our elected officials that they do indeed answer to the people. In this Internet age, the people can now be heard. We should not be shocked that they also want to be counted.
Editor’s Note: Liz Peek is a financial columnist.