A New Era Begins

The Election of 2008 marks a turning point in the history of the USA just as the 1933 election did. President Franklin D Roosevelt steered the USA to a socialist direction with greater regulation, redistribution of wealth and expanded Government. The first crisis of the house that Roosevelt built happened in the late 1970s with stagflation. President Ronald Reagan changed course by deregulation of industries, greater stress on monetary policy rather than Keynesian fiscal policies and lower rates of taxation for business. His tenure, however, left issues of government spending largely unresolved which was reflected in large fiscal deficits in his time. Newt Gingrich's Contract with America was the first to confront spiralling government expenditures by lowering welfare expenditures by encouraging more people to seek employment and did so with a great deal of success. As a result, America enjoyed a brief period of fiscal surpluses in the late 1990s. Despite these leaps in the quality of governance, the legacy of the Roosevelt era continued to lurk in the background. Housing, education, health care and social security still mired in the past. Unfunded liabilities in health care and social security exceed $50 trillion dollars. The hidden costs of gaurantees of housing came to surface with the meltdown in the real estate sector in recent years. As government unions expanded their influence in the education and civil services sector, their wages increased and so did the fiscal deficits. California state's parlous state of finances is indicative of where the USA is headed--towards bankruptcy. The Tea Party movement and shifting voting behavior of independents is indicative the current angst and the desire for a new kind of leadership. The need is pressing as the economy continues to stagnate and will continue to be in a quagmire till the larger issues of entitlements and social sector reform are not addressed. Increasing costs of entitlements also raise the cost of doing business in the USA. The slow pace of economic recovery is undermining the confidence in the dollar and bring the day of a possible collapse of the financial edifice closer. This Blog will discuss the larger issues of the emergence of this new era in the history of the USA.