Whatever Happened to Personal Responsibility?

Published: Tuesday, 18 Oct 2011 | 11:41 AM ET

By: Ivory Johnson
Scarborough Capital Management, Inc.

The sagacious soothsayers of capitalism once preached the gospel of personal responsibility as a means to improve one’s condition in life. America’s middle class, awash in the salvation of free markets and easy money, became disciples to a religion that many have now come to despise.

Consumers once reveled in their good fortunes during the housing boom, a time when nine percent of disposable income was the direct result of home equity extractions. Some who previously took issue with the welfare queens, demanding that they take lemon and make lemonade, now point the finger at Wall Street, as if the gangster element of the investment banking community somehow forced them at gun point to buy things they couldn’t afford.

The Baby Boom generation enjoyed low tax rates and unprecedented deficit spending, fabricating economic growth and a false sense of success. Vague lines separating self-worth from net-worth became less pronounced, if not eliminated altogether.

Everyone wanted to live like a rock star, even if few could play the guitar. Two market crashes and a couple of recessions later, 25 percent of all boomers don’t have anything saved for retirement and now find themselves in dire need of government services and potential bailouts of math defying pension plans.

Meanwhile, those in the working class who mistook hard work for job security, thought being born in America was enough to paint the picket fence white, have recently discovered otherwise. Corporate earnings have increased by 200 percent since 1990, but wage growth has surged by just two percent during the same time frame. Even as many households struggle, CEO’s from the largest corporations expect their incomes to rise by 28 percent in 2011.

Some have drawn parallels to the Occupy Wall Street protests with the Tea Party, noting that each is a grass roots effort to turn a backwards system upside down. The notion that government spends too much money, that the cards are stacked against the common man and Wall Street is the dealer at the black jack table is both veracious and inconsequential, the sort of testimony a judge might admit into evidence before ruling against the plaintiff.

As it turns out, the rank and file of both movements were the unsuspecting benefactors of what they now protest against, if but only for a minute. Most citizens prefer less government to more, even though entitlement benefits are 42 percent of the federal budget and government jobs account for 15 percent of the labor force. The gravy train that once provided automobile financing, student loans and extravagant credit card limits through CDO’s and complicated derivatives now stinks like meat that hasn’t been fresh for some time.

Politicians and big business may very well be guilty of false advertising – let’s agree that it was a bait and switch – but services have been rendered and the bill has come due. The sinuous relationship between Wall Street, Washington and its constituents is indeed complicated, and like a flawed marriage between two wealthy socialites, would be expensive to dissolve.

The free markets can be violent, even hostile, to the unlucky and unprepared. Those who ignored the carnival and pushed the rock up the hill may have a sore back to show for their efforts, but they still got the rock and the hill ain’t going nowhere. Unfortunately, a lot of Americans wrote a check with their rhetoric that their balance sheets can’t cash, and according to the news, they couldn’t have picked a worse time to do it.

Ivory Johnson, CFP, ChFC, is the director of financial planning at Scarborough Capital Management, Inc. and has over 20 years of investment experience. Mr. Johnson attended Penn State University, where he received a Bachelor of Science degree in finance. He can be followed on www.IvoryJohnson.com.

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