Is it time to pull the plug on the American Dream?

I’ve written about my parents numerous times. They are immigrants. I am grateful to be a first generation American and humbled by their story.

My father came here to attend college nearly 50 years ago. He was brilliant, poor, and proud. He came with a suit case full of towels. He was a teacher and towels were all that the parents of his students could afford to give him as a going away present. When my mother – an immigrant herself- met him on the yard at Howard University, he was sleeping on those towels in a tiny apartment. During the day he attended university, at night, he swept floors, worked in convenience stores and studied. My mother’s parents barely had elementary educations. Her mother cleaned houses until she was able to open a hair salon in the basement of the apartment building they saved to buy. When my mother went to college, she gave her the most valuable thing she had – her signature... My father graduated with a degree in Electrical Engineering, my mother with one in Economics. Eventually they both got very good jobs. They had kids. They saved. They bought our home.

I am a product of the American Dream fulfilled. I grew up understanding what it means to start with little and work like hell for your piece of the pie. However, as the economy stagnates, inflation cuts into the few remaining discretionary dollars families have, and income taxes return to their pre-TARP levels; our belts tighten our savings shrink and, the Dream deferred seems a lot more like Don Quixote’s impossible one. The American Dream has been on life support long enough for many to think that it’s time to pull the plug. Well, I don’t believe the Dream is dead, but, it certainly needs saving, and after I read the The SMART plan, not only was I sure of it, I knew I needed to share it.

From both sides of the aisle, we hear a lot of spend this, cut spending on that, but, little that will amount to either an economic boost or a real long term solution. As heads of households, we know what it means to have a budget. We also know what happens when we live outside of our means. The problem is that we do not understand how that thinking is dangerous for a country’s economy. Logic will say if you don’t have it then don’t spend it. It is what our grandparents did. It is how Americans survived the depression. Paradoxically, it is also what causes recession, adds to our national debt and, shrinks our GDP. According to the the SMART plan, there are straightforward solutions that can have definitive positive impact and, get our economy growing faster than throwing more good money (TARP) after bad.  

In a consumer driven economy that no longer functions on the exchange of durable goods, it’s easy to think that simple “family budget” style solutions will amount to the changes our nation needs to regain our economic stability. But, that simply is not true. When GDP was a direct reflection of the exchange of goods, that theory was workable, but, in today’s complex monetization of thoughts, ideas and services, it’s not that easy anymore. That does not mean that simple solutions can’t work, they just need to address the challenges we currently face. The Smart plan does just that.  

Speaking honestly, this country lives on credit. It is the backbone of our entire economy. That poses a lot of problems that consistently drive our economy backward not forward. Do me a favor. Pull out your last pay stub. Look at what you made- year to date, then think of how much your car costs, not the monthly payment, the actual cost. Likely, what you’ve made so far this year is nowhere near what you would need to purchase that vehicle in cash. Likely, what you made ALL of last year would barely purchase your vehicle and certainly would not even begin to pay for the home you live in if you are fortunate enough to be a homeowner. Without credit, much of what we believe the Dream to be is out of our reach, especially the core of the American Dream- Homeownership. Most of what we purchase would be so far outside of the earning capacity of most American families there would be no hope of ever buying a home, a vehicle, or even imagining a family vacation or sending your daughter to college.

Those are the major purchases, the foundation of the American Dream purchases, but what about the smaller ones that keep our stores open. What about buying that flat screen TV, the new cell phone, the laptop, the iPad, car repairs, tires, even groceries? Many of our citizens can only afford these items as a result of being heavily in debt and leveraging their future income. I understand that the natural response is again, “then you shouldn’t be buying that stuff”, but what if people did that. Only buy what they can afford. The effects of that would be catastrophic! Huge numbers of businesses would shut their doors leaving hundreds of thousands of people unemployed, pushing more and more Americans further from experiencing any part of the Dream.

Sadly, the fact that our economy survives on credit, does not mean that it is a credit system that is functional or even productive. The system we have is designed to fail. Don’t believe me. Look at it this way. It takes you much of your life to establish a “good” credit history. Think back to when you first were establishing credit, how many times did you get turned down on the basis of not having enough past credit? The other side of the equation is even scarier. Good credit is extremely hard to build, as easy as co-signing the wrong loan for your college kid or forgetting what day it is to ruin and, impossible to fix. It's a house of cards. God help you if something bumps the table. But, what if it wasn’t? What if people could repair their credit? Instead of begging friends and family members to pay off debts that are going to haunt them for YEARS and still cause them to be unable to purchase; goods, homes, vehicles, or even get a job (20% of employers use credit as a basis for employment), what if people could fix the issues?

What if when a negatively reflecting account - like a collection, is paid in full, it is removed from your credit history? What if, on delinquent accounts, people had the ability to remove the late pays from their report? These straightforward measures would incentivize people paying off accounts, increase the revenues collectors are able to post and, give our economy a much needed economic driver as this population will continue to spend instead of being forced out of the consumer market. It is time to face the reality that wealthy Americans DO NOT drive our economy. Low to middle income and secondary credit purchasers do.

If we are serious about getting the Dream off life support and help it to thrive again, it is time to fix our immigration problem STAT! Immigration? Yes. Immigration!! With 20 million undocumented immigrants in our country, assuming that they are a drain on our economy is not only unfounded, but economically stupid. Giving law abiding undocumented immigrants citizenship is a substantial revenue boast for the government. Where else can we instantly add 20 million new tax payers? Though my parents came through legal channels, like my parents, our undocumented population is in search of providing a bright future for their children and, like my parents, they will be overwhelmingly successful at doing so. Work ethic is not just implied it is dogmatic to our immigrant families. They are not out for a free ride, and what they are able to assist us with in dollars only makes sense- pardon the terrible cliché. Many of these families are laborers, and though they are the backbone of farming and construction, they could also open a small business, spending on goods and services, employing more Americans, and growing our economy.

You would be amazed by what we can do with this new found market and revenue stream. We could bolster a failing housing market and reverse the tide of foreclosure. How, you ask? Substitution of collateral, no, I’m serious and, it will work. Follow me. Banks, bogged down with bad debt, write it off by the tons. These write-offs don’t just hurt their share holders they hurt all of us. Foreclosures drive down the value of communities. Foreclosed homes become eyesores and attract vagrant populations. The banks that are holding these toxic debts don’t just stop lending; they force consumers out of the market and, make them unemployable.

What if we took homeowners that could no longer afford their homes, switched them into houses (that stand to be foreclosed on) they could afford? It would keep them as homeowners, customers, and out of the renting market. We could substantially reduce both the amount of toxic debt and foreclosed homes, boosting the housing market and keeping the bank lending. Add the additional consumers in the market as a result of the changes to the credit system and immigration policy and we have a thriving economy. It may sound like magic, but, it’s just sound economics. Sound economics that ensure that the American Dream keeps home ownership fundamental to its achievement.

The American Dream has been an enduring message passed down from generation to generation. The Dream embodies the notion that everyone if they work hard enough, can accomplish more in life than their birth station designs. It is where our love of ambition marries our appreciation for hard work. It is the foundation of the freedoms that we believe in. It is the reason that America is the nexus of innovation. Like the Constitution the Dream is founded on it must be evolving and able to adjust to the times we face. The Dream doesn't need TARP or austerity, it needs a plan that addresses the ills causing undue peril for millions of hard working Americans. It is long overdue that the Dream be taken off life support and with enacting the SMART plan or one similar we can ensure that it doesn't die. Why pull the plug for the next generation when a transfusion can save its life?