Bill's Notes

OK, it's safe to say we're probably going to get economically hammered. The U.S. economy has proven itself incredibly resilient to the shocks it has faced in the past eight years. It survived:

* the Dot-Com bust
* the Y2K and tech-related busts, which caused a serious recession
* a series of horrific corporate-governance and securities-related scandals
* the 9-11 terrorist attacks
* the over-reaction of Sarbanes-Oxley, which was extremely costly to U.S. businesses
* record-deficit spending
* losing one U.S. city to a massive hurricane-related flood
* gas prices that tripled and simply remained high
* a housing boom-and-bust
* an unpopular, expensive war, and
* a credit crunch.

We've taken a hell of a lot of hits, though many of these wounds were self-inflicted. Still, we've absorbed huge losses and kept going. It appears, however, that we're starting to show signs of weakening. The U.S. dollar is falling, we're seeing inflation, and the economy is sliding into recession. We still face an ongoing, expensive war in both Iraq and Afghanistan, and we've got dark clouds on the horizon in both Iran and Pakistan.

That's what the next president faces. Simultaneous trouble at home and abroad. High oil prices. Remember also that in 2010, the Bush tax cuts sunset, and we will face the largest tax increase in U.S. history. A big tax increase during stagflation or even just a recession is usually a bad idea.

And none of the leading political candidates seems to be talking about what we need to do. Domestically, the good news is we've been here before. We've been plenty better buggered than this. Unfortunately, the solution is painful.

1. Created a tighter monetary policy to contain inflation. (Unhappily, this will cause a nasty recession, but it will lift and we'll be on solid footing.)
2. Tax cuts to encourage investment and spending.
3. And this is crucial — rein in government spending. Everyone talks about this as if it's complicated, but it's politically complicated. Truth is, there are only four big spending items, and everything else is cheap. They are military spending, welfare entitlements, interest on the debt, and Social Security. The cuts have to come there, or they will come from nowhere. Better, a balanced budget will calm the markets.

Next, we need to do something about oil prices. This solution is fairly simple, but not without pain:

1. Energy independence. This needs to be our top priority — it's the reason we're involved in the War on Terror (along with our support of Israel), and it's the reason our economy is under such attack right now.

2. Support investment in alternative technologies by offering to protect U.S. investments. The problem with investing in non-oil technologies is OPEC can just drop the price to $10 a barrel one day and then all the investment is lost. This happened in the early 80s and people who were investing got hammered — severely. People are skittish to do it again. We need to eliminate this risk by, essentially, protecting those industries with a tariff. I know tariff is a scary word. But say we say, OK, imported oil is never again going to be cheaper than $50 a barrel in this country. That gives companies a benchmark — at $49 a barrel, our new technology is cheaper than imported oil.

Next, we need to do something about the Middle East. I can't see anything politically feasible at this time short of inoculating our population against a bioweapon and threatening to release it if we keep getting pestered.

And if that doesn't work, we can always pull back all our troops from overseas, put them on the Mexican border, cancel our foreign debt and renege on our foreign obligations, and ride out the ensuing worldwide terror and economic shitstorm as New Switzerland.