If you think about what the Federal Reserve said yesterday, it's not exactly an inspiriting message. It's that the economy is in such horrendous shape that it will keep interest rates at low levels at least through mid-2013. That's scarcely a vote of confidence in the future.

The pessimism is echoed elsewhere. The cover story in the new Atlantic basically says that the top one percent of Americans are doing just dandy and the rest of the population is headed for the skids. Either passivity or becoming a sansculotte seems to be the option. Meanwhile, the stock market's gyrations are enough to induce a sense of vertigo in all but the most seasoned investors.

Where to turn? Peter Passell, the effervescent editor of the Milken Institute Review, showed up for lunch in Santa Monica the other day and offered his thoughts. Passell is a former New York Times reporter, who headed out to California to be where the action is—or was. The golden state, after all, is not looking all that golden these days what with Gov. Jerry Brown instituting draconian cuts in spending as the California economy, once the pride of the nation, limps along, not to mention the state's once-proud educational system.

Passell, as near as I can recall, has been sounding the warning tocsin about the American economy for years. It's always satisfying for a Cassandra to see his worst prophecies confirmed, and he is certainly in that position. A shrewd observer of the American economy, Passell has been apprehensive about the perturbations inherently attendant upon the discrepancy in wealth between the middle and upper class that has grown exponentially in recent decades.

Passell once harbored hopes that President Obama might turn America around, but appears to have lost his faith in a commander-in-chief whom he sees as less than commanding. Obama, in his view, has been far too passive in educating Americans about the structural problems America faces, preeminent among them the burden of caring for the elderly, while population growth remains low. 

Cuts loom. In the Milken Review, Michael O'Hanlon of the Brookings Institution limns a number of cuts that he believes could be enacted in the sphere of military spending to save Uncle Sam a few dollars—$60 billion, to be precise. In "The Case for Cutting Defense," O'Hanlon advocates leaner management, command closures, selective modernization. He concludes, "there are risks in defense cuts. But there are risks to national security in failing to address unsustainable budget deficits."

This, brothers and sisters, is putting it mildly. Even $60 billion may look like pocket change in a few months. Adam Smith observed that "there is a lot of ruin in a nation," a proposition that America may be about to test. But for a sober look at righting the American state of ship that is currently listing in turbulent waters, Passell's quarterly is an excellent place to start.