Beginning The 'Great Reset' In America

Posted on January 13, 2010

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Today is the first day of the 2010 legislative session for the Maryland General Assembly. The state of Maryland, along with most of its counties and local governments, is at a point of financial reckoning.

Maryland is not alone. Almost every other state is in the same predicament, or worse. It is possible that California may suffer default or bankruptcy in some form this year.

I think 2010 will mark the beginning of The Great Reset in America, starting at the state and local and household levels. By reset, I mean that we will have to accept change, and establish new paradigms, new “normals,” in our economy, politics, government, and business.  For many of us, this means adjustments in our daily way of living. It started with work and employment. The jobs aren’t coming back. I doubt that consumer spending will come back either. We may adjust to smaller houses and smaller cars, with less borrowing and debt.

Jon Taplin has written extensively about what he calls the Interregnum. If I understand it correctly, Jon says that the old order has ended, but the new order has not yet begun, or if it has begun, it has not been firmly established. So we are in between, a time of Interregnum. I am suggesting that, at least at the State level, we are entering a later stage of the Interregnum, which I would call The Great Reset.

Let me try to sort this out.

Throughout 2009, America was in mass grieving after the end of the American Dream. No wait, that’s hyperbole. It’s more like America was in mass grieving about economic dislocation. America has been experiencing anger and denial following the collapse of multiple economic bubbles, the ensuing Wall Street crisis, and government intervention to rescue the private sector. Anger has degenerated into fierce arguing and finger-pointing, manifested by extreme partisan acrimony, and inability to agree on any part of a health care solution.

The next stage, which begins in 2010, has to be acceptance, or recognition of reality. Recognition that much has changed. Many of our our economic and political assumptions and paradigms need to be examined and revised.  Reality is forcing state governments to address their fiscal crises. Legislatures from Maryland to California need to set new priorities for spending and government services. Some of the changes in education, health care, government bureaucracies, pensions, and government regulation of business, will appear to be extreme, or radical, or impossible.

Of course, many in America, even if they acknowledge recent changes, still hope for a return to the status quo  ante. Many of us long for the comfort of the bubbles. Therefore, general acceptance of change will take some time. People will have to accept that the clock cannot be turned back. The changes are permanent, or more accurately, the changes are ongoing. I recommend Jon Taplin’s Blog for anyone trying to keep up with the economic, political and social changes taking place in America (and the world).

For the Maryland General Assembly and most of America, beginning the The Great Reset this year will be especially difficult because 2010 is an election year. Probably many painful decisions about The Great Reset will be postponed until 2011. Many individuals and families are out ahead of government and business — many of us have already started to adjust our lifestyles and spending.  But many institutions will resist resetting as stubbornly as Wall Street bankers have resisted parting with their bonuses.

The Great Reset is going to take more than one year.

If you’re trying to follow the action in the General Assembly this winter, I recommend Adam Pagnucco at Maryland Politics Watch. The same blog will likely be invaluable throughout the 2010 election year in Maryland.

— Bernie Hayden

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