In the movie, “Secretariat,” it’s owner, Chris Chenery, says to his daughter when she introduces the impressive young colt to him, “Let him run his race.” Chenery sensed the inherent greatness in the big red colt that would soon be revealed to the rest of the world. The rest, as they say, is history.
In 1940, during the darkest period for Great Britain, as it faced the full fury of the German Luftwaffe, an anonymous comment revealed the courage and character of the British people. Paraphrasing, the unnamed civilian said, “Er, what ya grousing about? We’re in the finals ain’t we? We’re playing at home, ain’t we?” As we know today, it was their finest hour.
Economically, the U.S. is in the finals. It’s the consumer against, well just about everything else. As evidenced by strong earnings at Wal Mart, the American consumer remains a powerful global economic juggernaut, despite trade wars, political polarization, and stifling bureaucracies.
It’s no surprise to me that consumer spending has remained strong, given record low employment and relatively strong growth in personal income. Recession predictions are now front-page news, yet it is far from a foregone conclusion. A fickle equity market adds to the uncertainty much more than it signals a predetermined path for the economy.
All this begs the question – why is the U.S. consumer seemingly the lone bright light in a dark global economy? Let me get back to that.
I’ve been having an ongoing debate with my oldest son about whether his generation will achieve a higher standard of living than my generation. My sense is most people in my generation think not. But, as he wisely pointed out, it isn’t up to my generation, it is up to his generation to decide their own level of economic achievement. This, to me, strikes at the heart of my previous question. The old grow cynical and less hopeful, as admittedly, I have. But the young remain hopeful and confident in their ability to shape their own future. Our country desperately needs that hopefulness and energy to solve the challenges we all face. Our job is not to over-parent or over-regulate, but to pass the torch, offer wisdom and support as needed, but to let them run their race.
The political and economic environment will certainly impact the potential of even the brightest, hardworking, and highly motivated of the next generation. There just is no denying that fact. Which path we choose matters and it matters existentially. Do we believe in free-market capitalism and should we work to restore it, or are we resigned to cede more control of our lives to political elites? It is the defining question of our time.
There a few things we must do if we are truly going to let the next generation run their race. First, we must reduce the federal deficit and commit to living within our means. Is that even possible?
Second, we have to right-size our government. Too little regulation can be problematic, but too much creates inefficiency, corruption, and stifles innovation and growth. Do we even have a clue how to do this?
Third, and despite the enormity of the first two challenges, this may be the most daunting. We must establish principles and core values we can all commit to upholding. This will require a balance between rights and responsibilities. A balance between the desire for individuality and a willingness to sacrifice for the greater good. Most of all, it will require a renewed embodiment of morality in public discourse. Where are principles, core values and morality being discussed openly and thoroughly today?
Despite all this, the next generation soldiers on. They spend, invest, plan for their future. They move at a pace my generation struggles to match. Are they more talented? Yes. Are they as discerning? Perhaps not as much as they should. Will they lead our country to a better future? Time will tell, but it’s soon becoming their race to run.
Michael Kayes, CFA