After The Bailouts: A Cautionary Tale
2010 didn't dawn too auspiciously for the United States of America. The country was still reeling from the midsummer assassination of President Barack Obama by a crazed racist skinhead, and for all of his political experience, President Joseph Biden was not able to instill confidence in the American public and the world.
The recession was now formally into its third year, and showed no signs of lifting. The unemployment rate was stuck at 16% and the Dow Jones drowsed along in the 4,000s, dragged down by the closure of Sears and Target causing a manufacturing ripple effect which was felt everywhere except Bentonville, Arkansas where the WalMart chain galloped along, swiftly becoming a behemoth which in any other age would have spurred anti-trust action. However, the U.S. government didn't dare move against the Waltons as millions of precious manufacturing, transportation and service jobs relied upon them.
The list of defunct companies was like a litany of a former Fortune 500: Boeing, General Electric, Procter & Gamble, Bank of America, Hewlett-Packard, Johnson & Johnson, American Express, even North American Airlines, the conglomeration of Delta, United, American and Air Canada was gone. United States Motors, the nationalized conglomerate created from the structure of Ford Motor Company after Paul Volcker placed General Motors and Chrysler into bankruptcy was still losing market share and had just been outsold in the last quarter by Hyundai.
Canada was forced to dynamite the Ambassador Bridge linking Windsor, Ontario to Detroit after the Motor City's core was burned to the ground by rampaging rioting mobs of unemployed workers. The National Guard was unable to stop the rioting so it fell back to a perimeter marked by Grosse Point, Hamtramck and Dearborn, acknowledging that the city's center was lost, but trying to preserve the suburbs.
Governor Schwarzenegger had just placed a separation referendum on the California ballot which would see the Golden State along with parts of Southern Nevada secede from the union under an autonomy statute. So demoralized and shellshocked by the years of economic turmoil was the U.S. Congress that they seemed to barely raise any meaningful objections. Many Representatives and Senators admitted in private that California might just be better off alone.
But by far the worst problem was that the United States government was on the edge of default, unable to keep up with the interest payments on the trillions of dollars of debt accumulated during the Iraq War and the enormous bailouts of 2009.
Tax rates on income earners over $250,000 a year skyrocketed and so did their departure from American soil. So many wealthy Americans had moved to Costa Rica that English was now an official language, and citizenship was automatically granted to any U.S. investor who purchased a house there. Given the collapse of the middle class and the stratospheric unemployment, the government's revenues could not possibly hope to keep up with its expenditures and debts, thus what was once the world's economic engine stood at the edge of the chasm.
It had seemed at the time that the best way to halt the economic slide provoked by the subprime mortgage crisis was to toss money at the system, but it turned out that no one truly estimated who was going to have to pay for all those trillions of dollars: When the bill came due, there was no money left in the piggy bank.
Apparently the American public had believed that the government could just wave its magic wand and create all those trillions out of thin air, when in reality those bailouts were the most toxic mortgage security of them all: mortgaging the future of the citizens of the nation.