Thursday, February 12, 2009

Tough Love: Hard Decisions Need to be made Now!

I continue to hear how eerily similar our financial crisis is to Japan's in the 1990s. Unlike Japan, we want to avoid ten years of stagnant growth that followed. The way to avoid repeating the same missteps of the Japanese government is to invoke tough love on the banks. We have to let banks go under that are not financially able to operate without government subsidies. Everyone argues that this will put us into a deeper recession. Unfortunately, if we do not do this, we may be facing 10 years of slow growth with a huge bill to payoff in the future. Some times we have to make hard decisions that will cause short term pain. We have developed as a nation a mind set of delaying negative outcomes; however, this behavior only postpones and sometimes worsens the inevitable negative result.

This same mind set has been applied to fighting global warming. We continue to: (i) ignore the science; (ii) make arguments that if we take certain action now, it will negatively impact our economic growth; or (iii) search for that magic bullet that will solve all of our environmental woes without changing our life style, which seems similar to someone who is trying to diet by taking a weight loss drug while continuing to eat the same amount of food that made him or her overweight in the first place. We are unwilling to limit our voracious appetite to consume and reevaluate our lifestyle. Unfortunately, like the future of our economy, we are creating a future with significant negative destructive consequences. Continuing this course will result in reduction of the global GDP by 5% to 20% in the future. More importantly, this will impact how we live in the future with less land and more chaotic weather.

Similar to the banks, we need have some tough love here on our consumer habits and our lifestyles. We need to make some tough decisions that might impact our daily lives, such as driving less, consuming products that are in season, and reducing what we purchase. One could argue that we will negatively impact our current economic growth if we do all of this; however, if we do not do it, we will negatively impact our economic growth in the future more significantly. In the end, by invoking this tough love and changing our habits, this will benefit us and the economy in the future. As a parent, I do not like using tough love; however, in the end, sometimes that is what is needed to ensure my kids grow healthy and lead a balanced life. The President of the United States, as a parent, should invoke this tough love of this nation to make certain we and the environment have a healthy and balanced future.

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