The Real Problem Plaguing the Economy

The presidential election season is breathing down all our necks now. Both sides promise solutions to our lingering economic problems. Pundits, activists, and average Americans argue that "their" guys and gals will fix everything. Depending on their chosen uniform, these individuals blame a litany of political talking points for America's problems.

It's market-based thinking run amok, blasted capitalists. No, it's government intervention into the marketplace, blasted socialists. No, it's unions. No, it's the 1%. You know the drill.

Certainly some of these factors may exacerbate our problems, but the core issue is much bigger and more serious; it's a problem that can infect any economic system or culture. Corruption's simply run rampant in our society, and too many Americans are more concerned about grabbing the biggest piece of the pie they can than actually fostering true economic health and building happy, productive lives and a better long-term future.

Little do they realize, amid all this fighting (and spending) for political advantage, the aforementioned "pie" supposedly sitting around simply rots away.

The bottomless pit
The American economy may be a mess, but here's one area that's getting a substantial capital infusion: the insatiable political machine. The Democratic and Republican national conventions together racked up a $136 million price tag. The Center for Responsive Politics has estimated that the entire presidential election will end up costing $2.5 billion this year.

The Center for Responsive Politics tracks "heavy hitter" donors on both sides of the political fence on its opensecrets.org site. It recently launched detailed profiles where the public can look up facts on the biggest organizations that use their funds to attempt to influence politics and, by extension, economic rules and regulations.

The Center has identified all-time top heavy hitters including ActBlue, the American Federation of State, County, and Municipal Employees, and the National Education Association, as well as huge corporations like AT&T (NYSE: T  ) and Goldman Sachs (NYSE: GS  ) .

Meanwhile, the U.S. Chamber of Commerce, the nation's largest lobbying firm, which says it's "Fighting For Your Business" on its website, made the list as the top lobbying organization in 2012, to the tune of $55.3 million.

If you're like me and don't believe politicians are offering many real, long-term economic solutions to our current malaise and the huge number of jobless Americans, the upshot there is that a lot of money's going down a fairly unproductive hole as our economy suffers ongoing and excruciating suckage.

Hope springs from the quagmire
The political game is all about rigging these days, and I doubt either side's solutions will result in anything other than ongoing fiscal crisis, extending malaise, and maybe even destroying us. The only differences may be exactly how they allocate the unproductive funds and the untenable debts they're amassing.

There's no political will to really fix the economy; Americans are simply being smacked with a giant political bill. The average citizen really can't afford it anymore, despite politicians' empty promises about the benefits they'll receive.

Regardless, there are positive signs of innovative American spirit bubbling beneath the radar, even while things look bleak. A few of my ideas fit into an inspiring do-it-yourself ethos despite the sluggish economy:

  • Etsy: A hub for artists and crafters to sell their wares over the Internet; it recently achieved B Corp. (short for Benefit Corporation) status, meaning it seeks not only to profit but to also bring about social and environmental good.
  • Square: A mobile payment product that helps small businesses and individuals easily accept credit cards using smartphones.
  • Khan Academy: Its promise: "Learn almost anything for free." Last year, Wired discussed how the site is trying to change the rules of education.

Those of us who are individual investors can also look for the best and brightest companies to invest in, the ones that are growing and innovating instead of slashing or spending millions to tilt the playing field to their advantage. Sadly enough, it's difficult to find any company that escapes the need to spend some politically tinged dollars, but at least some American companies represent more positive themes for economic growth, or even job expansion. Here are a few:

  • Costco (Nasdaq: COST  ) provides discounted bulk merchandise for small businesses, helping reduce their costs and hopefully even grow profitability and expand.
  • Whole Foods Market (Nasdaq: WFM  ) treats its employees well, paying well over the industry standard; it also offers health benefits and stock options to all employees. The organic retailer is also financially successful enough to ultimately plan for 1,000 stores from about 300 today.
  • Google (Nasdaq: GOOG  ) is no stranger to lobbying (it made The Center for Responsive Politics' Top Lobbying Organizations in 2012 list), but if knowledge and information are power, democratized access to these resources define its bread-and-butter Internet search product.

Real return on investment
Americans squander a heck of a lot of time and resources obsessing over, arguing about, or feeding the political machine. If they spent a fraction of that time and money learning, researching, inventing, making, and doing, perhaps the U.S. economy would step up its competitiveness and start generating more businesses and providing more jobs.

Let's stop fighting over rotting scraps and buying into an expensive, unproductive political machine that constantly sells Americans out. If we're going to think about elections, let's spend more time thinking about the ways we ourselves can elect to support the individuals and businesses that create value, growth, world-changing ideas, new inventions, and vibrant opportunity for the long term.

Whole Foods is one of the positive-facing, growing companies mentioned in this article -- and is also a stock that has netted some investors more than 30 times their initial investment. Our analysts have identified the risks and opportunities facing the organic grocer, and in this new premium report, they walk you through the must-know items for every Whole Foods investor. It comes complete with timely updates, so you'll always be in-the-know. Click here for your detailed report.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax owns shares of Whole Foods. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Goldman Sachs, Google, Whole Foods, and Costco. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (12) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 19, 2012, at 7:15 PM, Anishinabe wrote:

    Brava Alyce!

    Campaign reform is just one of the positive steps that need to be taken. However, Republicans and Democrats will not support limiting their access to megabucks. I own stock in the three good companies you list and hope they continue to prosper. I saw canvassers on street corners in Orlando collecting signatures for months to put on the ballot a measure requiring a small amount of annual earned sick leave from employers. They reached their goal of 50,000 signatures only to have the county commissioners manufacture an excuse to prevent the measure from going on the ballot. This is a prime example of corruption in government, in my view. Business won.

  • Report this Comment On September 19, 2012, at 7:17 PM, JaiYen wrote:

    I respectfully disagree. The root cause of our economic malaise is automation. That is the elephant in the room. Innovation results in increased productivity which means that fewer humans are required to produce more goods. Eventually we reach a tipping point where unemployment levels and the accompanying entitlement expenditures plunge us into ever deeper recession. Politics and politicians don't have the answer. Innovation and exponentially increasing technology are the genies that have been let loose from the bottle. The Luddites were right....they were simply a century ahead of their time.

  • Report this Comment On September 19, 2012, at 8:14 PM, maiday2000 wrote:

    The real problem plaguing the economy is that government investment, which is inefficient and wasteful, has crowded out private investment and long term value and wealth creation. We are borrowing money to give to people who don't work, to companies that waste money, to endeavors with no viable ROI, and to a bureaucracy that is bloated, outdated, and continuing to grow.

    Of course, the investments above named companies may be quite profitable, but I don't think I would take advice from an author who knows as much about the economy as Joe Paterno knew about child protection.

  • Report this Comment On September 19, 2012, at 10:53 PM, ztnjpv wrote:

    Excellent. I'm a libertartian who hates politics and you sum up my feelings pretty well. This particular passage is a gem:

    ..........................................................................

    Americans squander a heck of a lot of time and resources obsessing over, arguing about, or feeding the political machine. If they spent a fraction of that time and money learning, researching, inventing, making, and doing, perhaps the U.S. economy would step up its competitiveness and start generating more businesses and providing more jobs.

    Let's stop fighting over rotting scraps and buying into an expensive, unproductive political machine that constantly sells Americans out.

    ..............................................................................

    Well said!!!

  • Report this Comment On September 20, 2012, at 12:44 AM, xetn wrote:

    Fact: no politician has ever created one single job except for a government job.

    Every dollar the government takes out of the private sector reduces the private sector.

    The major problems with the economy is high taxes (estimated total US taxes (federal, state, etc) are the highest of 1st world economies. Add to that the huge burden of government regulation of almost every aspect of the private sector has force many to go off-shore. Just the cost of trying to comply with the regulations is mind boggling. (An article in 2005 suggested that government regulation cost every man, woman and child over $6000 per year).

    Jailen is an idiot. There are always jobs unfilled, but at the right price. The first regulation to be eliminated is the minimum wage. The minimum wage law should be renamed to the Guaranteed Unemployment law.

  • Report this Comment On September 20, 2012, at 6:34 AM, CheshireJimmy wrote:

    xetn, I'm kind of tired of the argument that government doesn't create jobs. If someone gave it any thought would realize how false it was. I've heard the argument from people I've worked with at a company who's jobs they owed to the government. I work at a company that builds ships for the navy employing 20,000 people. In order for those ships to be built thousands more people work for suppliers to supply our company with steel, pipes, wire, computers and other equipment. All of these thousands of people have to feed, cloth, entertain and educate themselves and their children creating more jobs in restaurants, stores and schools.

    The governments (state and federal) keep the roads, rail roads, waterways, utilities, bridges maintained or funds companies to maintain them so we can get to work, suppliers can supply our manufactures and their goods can be delivered to their customers.

    As an investor I would think it important to understand basic economics.

    I don't even want to get started with gov't regulation and why it's a bad thing to drink water with dioxin in it or medical waste washing up on the shores of NJ or why it was a bad thing for the gov't to get rid of the Glass Steagall regulations so banks wouldn't invest in speculative investments that would eventually tank the economy.

  • Report this Comment On September 20, 2012, at 1:02 PM, djkumquat wrote:

    "basic economics" by thomas sowell. 4th edition in stores now. or check it out from your local library. cheers!

  • Report this Comment On September 21, 2012, at 12:25 AM, DoctorLewis4 wrote:

    I love your columns - they are always thought provoking. But I'm afraid I can't buy into your cynicism here. We have always had heated politics in the US. Go back through history and you will find it was even nastier back then. The great thing about our country is that through the noise we generally do the right thing. Was FDR right to do what he did to expand the federal government and get us out of the depression? Yes. Was Ronald Reagan right that taxes were too high? Yes. We are currently going through a vast technological shift that will take us time to work through. It takes time. Have some perspective.

  • Report this Comment On September 22, 2012, at 5:01 PM, xetn wrote:

    CheshireJimmy

    I do understand economics very well. As a matter of fact I majored in economics and have read over 40 books in the last 3 years. What is your knowledge?

    All government related business such as what you have outlined overlooks the fact that it was TAX money that has paid for those jobs. That means that the jobs that were "created" (really mandated by government) was based on theft (taxes) and to a very large extent, debt. Debt that will be paid (if ever) by taxes. The government does not have any money of its own, it has to get it through taxes, or borrowing (debt).

    The Chinese have been a very large purchaser of U.S. debt and the money they earn in interest from that debt is almost enough to pay for its entire military!

    Perhaps you should read a few books on economics such as Henry Hazlitt's excellent book:

    "Economics in One Lesson" available for a free download (PDF) at:

    https://mises.org/document/6785/Economics-in-One-Lesson

  • Report this Comment On September 24, 2012, at 2:38 PM, ershler wrote:

    xetn,

    I would love to hear how POSCO doesn't contract your first statement.

  • Report this Comment On September 24, 2012, at 5:45 PM, Darwood11 wrote:

    Great article Alyce, and right on the mark.

    I'm a small business person, and I pulled out of the US Chamber of Commerce because I am of the opinion that they do more harm than good. I also shred those AARP solicitations about every other week for the same reasons.

    Our country is at an impasse, where so many of those who insist they "represent us" do not. I include Congress and even local politicians in this indictment.

    I've been of the opinion for decades that everyone was happy while the politicians re-distributed wealth in this country because the "pie" was ever expanding. The question I asked was "what happens then there are finite limits to the pie?"

    We have finally arrived, and now everyone seems to be fighting over the dregs and chanting "tax the rich." At present, that chant is based upon annual income. If things don't improve, I expect it will soon become something based upon "net worth,"

    Your comment that "There's no political will to really fix the economy" is spot on.

    All that politicians can do is tax and spend. It doesn't really matter what political party they are affiliated with. That's been the great diversion in this country for decades. IT IS OUR MONEY THAT THEY ARE SPENDING!

    This will only change when Americans take responsibility for their country. It 2012 the beginning of a new, better, invigorated America?

  • Report this Comment On October 04, 2012, at 12:11 AM, thidmark wrote:

    "The root cause of our economic malaise is automation."

    Yes, let's all go back to linotype, telegraphs, horse-drawn carriages, abacuses and leeches.

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