Womack said he viewed the situation as an economist and historian, separate from any Republican or Democratic party philosophies. Party views change over time, and have done so recently over the question of debt. Womack's topic was can competing political perspectives find common ground.
"Everybody's got debt," Womack said, from individuals to the federal government. "This country runs off debt."
The concern is not so much that debt exists, but who holds it. Womack said after banking interests in 1999 got the U.S. Congress to repeal the Glass-Steagall Act, put in place in 1933 to prevent a recurrence of the bank collapse in the Great Depression, risky debt held by banks soared back to levels seen in 1932.
Debts became risky when the housing market tanked. When loans surpassed the value of the houses, banks sold off the debt to bigger banks that ended up with too much bad debt, creating the "too big to fail" scenario.
Womack said the $440 billion buy-out of the banks proved to be one of the best investments possible. The government bought into the banks when bank stock was at its lowest. The banks have already paid back $425 billion of the debt.
If the banks were allowed to fail, Womack said farmers who need annual loans to operate would be forced to negotiate with farm implement producers and other suppliers with crops, an unworkable scenario.
"This country would stop dead in its tracks without banks," Womack said.
Shift in wealth
Just as debt has become concentrated, so has wealth, even in the banking business. Womack cited Thomas Hoenig, past president of the Federal Reserve Bank in Kansas City and a sharp critic of the banking business, who said little has been done to rein in bank recklessness. While there were 21,000 commercial banks in 1913 and 14,000 in 1980, by 2010 there were 7,000, and 20 of those hold 86 percent of the assets. Several of those 20 triggered the last economic downturn by their actions.
The trend for the concentration of wealth by individuals has been equally sharp. Womack said the 1 percent held 60 percent of the nation's wealth in 1929, before the great stock market crash. By 1980, when debt had reached what is now seen as a manageable historic low, the 1 percent held 20 percent of the wealth. By 2010, the total had grown to 35 percent.
The 1 percent cannot spend money fast enough to reverse the current economy, Womack said. Even millionaires are worried about where to put their money. If consumer spending is the only thing that can reverse the situation, current trends suggest it will take at least 10 years to catch up.
A depression is defined as one out of four people out of work. Womack said counting the marginally and part-time employed, there are presently one in five seeking jobs.
With unemployed and under-employed people counted, 8 percent unemployment really means 16 percents, with four people looking for every available job. The current job growth rate only accommodates the number of people entering the work force each year and will not push the jobless backlog back to the minimal 4 percent.
The current situation is not a depression, but more than a recession, Womack said, a stagnant economy with deflation in the value of assets. Low interest rates have also extended the time it takes to retire debt, stretching out the stagnant economy. Low taxation rates have extended the time to retire the federal government's debt, and political gridlock has lawmakers to a standstill.
Past successful solutions
No matter what current opinions are about debt, Womack said history provides very distinct examples of how to recover from bad economic situations.
The national debt was considerably higher than it is now at the end of World War II. According to figures from the White House, President Harry Truman directed a $25 billion recovery package for Europe in the Marshall Plan, representing 9 percent of the nation's gross domestic product (GDP), which measures real income in the country. Loaning to European countries proved a good investment and cut the U.S. debt in half by the time Truman left office.
President Eisenhower followed with the most expensive government undertaking in history, construction of the interstate highway system as a way to put people back to work. The $119 billion project represented 32 percent of the nation's GDP.
Womack pointed out while the federal government does not create jobs, it can create the right environment. Private businesses built the highways and hired workers so that by the time Eisenhower left office, the national debt was nearly back to pre-World War II levels.
The Kennedy era space program cost $20 billion or 4 percent of GDP. Womack said in the process of sending a man to the moon, a telecommunications satellite network was put in place. Revenues from those satellites in one year paid for the entire space program. The invention of the micro-chip made possible the rise of Microsoft and Apple decades later.
The national debt did not begin to rise again until the Reagan administration. Womack credited lower taxes, deregulation and Reagan's build-up of the military as a way to bankrupt the Soviet Union to pushing the national debt back to mid-1950s levels. Though Reagan's spending plan did not generate revenue, Womack said there is no way to calculate the value of ending the Cold War.
With the political heat coming from the current stimulus package of 6 percent, Womack said Eisenhower would have had trouble getting his plan through Congress today.
Womack asked numerous experts how to get out of the current situation.
A billionaire banker said staying the course a long-term decline in the standard of living and serious wealth destruction would continue. He expected more of the same for the next 20 years until the next bubble.
A panel of businessmen wanted to see an Eisenhower-style package to stimulate job growth. They wanted to see the United States become the most energy efficient country in the world in the next 20 years, to the point of installing a new delivery system to power electric cars. The cost of energy alone, now at a high level, has been enough to trigger past recessions. The businessmen proposed driving oil prices down not by getting more oil, but by replacing it with reliable long-term alternatives.
The businessmen also wanted to see a balanced federal budget and controls on the banking industry. They recommended pursuing a rebalancing of the nation's wealth. Achieving a more equal exchange rate of dollars with foreign countries could lead to a confrontation with China.
Womack asked what would happen if the Chinese wanted repayment on the $14 trillion of U.S. debt they own. One leading analyst told him the U.S. treasury should simply print more money and pay them. The Chinese invested in U.S. Treasury bonds and have an interest in the value of the dollar. The worst thing that could happen is interest rates would spike to 7 percent.
The U.S. and Europe represent half of all the world's annual wealth as measured by GDP. Womack said that if countries and parties can put aside their political differences, there is enough strength in the robust economies to solve the financial problems. None of the equations have factored in human capital, which represents enormous resources in effort and insight.
Womack works with the University of Missouri's College of Agricultural Food and Natural Resources. "We have the most complex models you can build," he said. "If you turn them loose on an energy program, they will solve it. I'm very optimistic."