I’m not an expert in economics, but I am trying to make heads or tails of the growing debate over what to do about our economy.  We’ve pulled back from the brink we were on early last year.  But now we’re stalled. There’s a non-trivial chance we’ll fall back for a double dip recession similar to what happened in 1937.  There’s also some chance the world confidence in the dollar will fall and we’ll go into full-blown collapse ala Greece.  Then there’s a large chance we’ll just languish with 10% unemployment and be dead in the water like the Japanese were through most of the 90′s.  Oh yeah, and there’s some small possibility we’ll actually get things humming along again so we can all see our 401k’s at 2007 levels and have lots of job prospects for us and our children.

Many are calling for fiscal austerity, arguing that large deficits are the road to ruin.  Many of those same folks are calling for the Fed to raise interest rates as a hedge against inflation.  On the flip side, others argue that more government stimulus is needed and that we need to spend our way back to prosperity.  Frankly it all makes my head hurt.

Let’s start with the common ground.  No one thinks deficits are a good idea.  Most can agree that there are times where you borrow money to make appropriate investments, but that running deficits year on year without ever seeing the plus side of the balance sheet is not a healthy thing.  As a minimum, I would very much like to see everyone remember this the next time we do have a thriving economy so that we actually raise taxes or cut spending such that we get to a debt neutral position.  But that’s water over the dam now.  The issue is figuring out how to get out of where we are.

The austerity folks are fond of making the analogy of the U.S. economy to your household.  That is, if you lose your job or otherwise are taking in less money, then you need to cut back your expenses such that you are also paying out less money.  Responding to a layoff notice with a spending spree at Best Buy would be pathologically stupid.  There’s additional rationale that if there isn’t a show of some fiscal discipline, creditors will lose faith in the ability to pay the debts and call the notes due.  This would effectively result in bankruptcy.

There’s an elegant simplicity to that analogy, but after careful consideration, I think it’s the wrong one.  The major missing element is that in the home analogy, your spending doesn’t have a relationship to your income.  But in the U.S. economy case, it does.  That is, if people are broke, if goods are not sold, then there are no tax revenues to collect.  But I think there’s a simple analogy that does reflect this relationship.

Consider a small family business, let’s say a local Bar & Grill.  The tavern falls on hard times because the factory up the road shut down and a lot of their regular customers no longer have lunch there or hang out there after work.  As the owner, you’re faced with a significant drop in revenue.  You have two basic choices.  You can try and restructure your business to fit within the revenue you’re making, or you can borrow and invest in things to attract new customers.  While there may be some things you can do to cut costs, many of the obvious things you might try will ultimately hurt your business.  Reduce the variety and quality of the food menu.  Reduce staff.  Reduce hours of operation.  Water down the drinks.  Sure, these things save you money, but they likely will also cost you revenue as additional customers will become disappointed and leave.  In general, this strategy is a death spiral.  Alternatively, you could gather a few local investors to finance adding a stage on the back and offering live music.  Do additional advertising.  Hire a top chef to create an exceptional menu.  These things have the opportunity to expand your business, and thus your revenue, which hopefully you’ll use to pay down your debt.

Yet even in this analogy, it’s important to recognize that there are no guarantees.  Yes, maybe in the austerity case you’ll get lucky and some new company will re-open the factory and your business will take off again.  Yes, in the investment scenario you might make lots of improvements, and still nobody comes to your establishment and you go under with additional debt.  The key difference for me is that the austerity case is entirely hanging your future on luck and prayer.  It’s outside of your control.  While the investment scenario gives you a path to drive your own success, or at least die trying.

Bringing this back to the U.S. economy, it means to me that the federal government needs to keep investing.  Not spending wildly, but investing smartly in things that have future upsides.  Green energy technology comes to mind as a great industry investment.  In general, loans to small businesses and start-ups.  Unemployment payments to keep people off the state welfare rolls such that they prop up consumer spending so that larger companies stop hoarding cash and go back to investing in their own businesses.  Not every program will work, but we need to keep trying.

There is a time to be frugal, but this isn’t it.  There is no indication this is a passing storm such that if we just hunker down we’ll be fine in a few months.  The storm has already ravaged the town.  We need to decide whether to rebuild or to decide to get used to living in the rubble.

We’ve ceased to care about substance anymore.  All we care about, or at least all we talk about, is what something looks like.  Perhaps because it’s easier to digest an emotional meal than an intellectual one.

This was brought to a head for me by the relentless coverage given to BP CEO Tony Hayworth’s recent yachting excursion.  Even the White House took a jab at him, despite the reality that Obama was out golfing at about the same time.  And the Republicans are ranting about Obama being out of the office as well.  The premise seems to be that there is a crisis on, and these guys shouldn’t be out of the office until it’s over.

Okay, on the one hand I get that from a public relations standpoint it’s risky to be seen having fun while others are suffering.  It’s perhaps emotionally tone deaf.  But practically, it’s irrelevant.  The CEO, whether of a company or a country, is not playing an active minute-by-minute role in resolving a crisis like the oil spill in the Gulf.  Even having them in the area for moral support is logistically intrusive.  Their role is limited to making strategic decisions that others actually implement.  This happens on a time scale of days or weeks and can occur from anywhere.

While I certainly don’t have anything close to the scope of responsibility of a CEO (nor the paycheck or the support staff), my boss knows how to find me pretty much 24×7.  If something requires my attention, you can be sure I’ll be hunted down with little effort.  Are we to believe that these executives are completely out of pocket while on the links or the high seas?  Not a chance.  This is just about how it looks.

And it doesn’t really stop there.  Whether it’s the latest sex scandal or who said what into a live mic, there is a relentless coverage of minutiae that has some emotional resonance to it.  Is this because it’s what people want?  I think the answer is no, but it is delivered in the package people want.

As a nation, we have become the embodiment of the short attention span.  If you can’t express it in a sound bite or a Tweet, we don’t have time for it. Yet this by itself isn’t so bad.  Absorbing a lot of bits can be just as informative as digesting a comprehensive analysis.  Perhaps even more enlightening in that you are getting more diverse points of view.  But the bits by themselves don’t naturally coalesce. And most people don’t spend the effort to ever sit and reflect on the plethora of info bursts they are getting to try to distill any larger coherence out of it.  So the reality is they are just left with the individual bits.  And therein lies the rub.

If you need to communicate something quickly, you don’t appeal to the intellect, you appeal to the emotion.  You can spend all evening explaining the dangers of touching a hot stove to a young child.  But if you’ve only got two minutes to teach him, you can take him over and stick his finger briefly on the burner.   Lesson done.

Now politics isn’t so black and white as touching stoves.  (It’s hard to find pundits willing to stand on the side of scorching hands.)  It’s not strictly good vs. bad.  Both sides of an issue get boiled down to emotionally charged tidbits.  And without additional data or the time and motivation to seek the data on your own, you’re making judgments not on the issues, but on the emotional resonance of the sound bite, or perhaps the perceived trustworthiness of the speaker or source.

But wait a minute… isn’t that just marketing?  The “Mad Men” of the 50′s and 60′s created modern marketing.  Ignore the head, play to the heart.  Will Geico really save you $500 in 15 minutes?  Do you really not believe it’s not butter?  Will Axe body spray really cause hot girls to throw themselves at you?  A wise consumer is more than a little skeptical.  In recent decades we’ve come to somewhat distrust ads by default.  We assume everyone is overplaying their hand.

But now news and politics are being marketed using the same techniques.  Yet we’re still in that naive phase where we largely assume what they are telling us is true.  Yet maybe this gives us some hope after all.  We learned to distrust product ads and do our own research.  Maybe we’ll mature to that point in the realm of news and politics as well.

In the last couple of days I’ve heard a lot of complaining about the failure of Obama to waive the Jones Act. My initial reaction was, “The Jones what?”

I finally got a chance to do a little homework, and I must admit I’m still scratching my head a little.  The Jones Act is pretty simple.  It’s a 1920′s era protectionist policy that only allows American ships, staffed by US workers, to move goods between US ports.  Apparently Bush waived the Jones Act following Katrina.

Conservative commentators and pundits have been raising a fuss lately, claiming that Obama is refusing to waive the act to preserve his good standing with Labor Unions.  Meanwhile, foreign vessels with lots of badly needed oil cleanup capability are ready to be deployed, but forbidden to help.

This would be horrendous if true, which of course it really isn’t.  It’s true Obama hasn’t waived the act. But somewhat importantly, there are no requests for him to do so.  Further, several government officials are on record saying that if needed, the act will be waived.  No muss, no fuss, no bother.

If you think about it, this doesn’t even pass the sniff test.  The Democrats and Labor are increasingly at odds as demonstrated in Labor’s actions in last Tuesday’s primary.  And the Dems are completely unapologetic about it.  Yes, Labor helped get Obama in office, but they’ve been widely reported as feeling snubbed by him since.  So we’re to believe Obama is finally going to throw them a bone, and the bone he chooses would make him responsible for increasing the devastation and suffering caused by a disaster that threatens to tank his whole term in office?  Really?

This is politics, plain and simple.  But then this isn’t so plain and simple.  This isn’t just spin.  This isn’t just over amplification of the inconsequential.  This is outrage over a manufactured problem.  And that to me, is a problem.