Browsing the archives for the Economic Policy category.



Nobody Cares About Life-Preservers!

Economic Policy, Economy, Election, Politics

House Speaker Nancy Pelosi recently commented that “You don’t get any credit in campaigns for what you prevented from happening”.

I brought up this same point in a post yesterday. People don’t feel as grateful for a person who straps the life preserver on…but they are eternally grateful to the person who pull them out of the water before they take that last gasp of life.

This is the way people are. Nobody is going to make people understand otherwise that the economy was saved. I’m afraid there will be Republican good fortunes brought on the backs of Democrats for years to come.

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The Difference a Couple of Years Makes

Economic Policy, Politics, President Obama

I was thinking about the current State of Anger we live in today, as I do on most days. I was thinking about what it is that has made everyone so mad. As is pointed out by me and many others, a large number of Americans aren’t thrilled there is a black man leading the country. But, I do think there is much more to this issue other than race. Racism and bigotry are much more prevalent when cultivated from unfortunate circumstances.

Every time, it seems, that the current recession is and has been discussed it is mentioned that it is the worst since the Great Depression. This point has seemed obvious to me. Also apparent to me has been the need to have the Federal Government do everything possible to improve the lives of Americans. To take care of us!

After reading the latest column from Frank Rich of The Times, I began to think about the country during The Great Depression. Americans sought the greatest efforts possible from the Federal Government at that time. FDR was not thought of as killing the American way. He brought comfort to a very uneasy nation because people knew he was doing everything possible to improve the lives of every American. Difficult economic conditions didn’t mean everyday, freedom-loving, patriotic, and hardworking Americans sought the demonization of the President. So what was the difference between then and now?

The difference was the country was hit by the stock market collapse and the onslaught of the Depression while Republican Herbert Hoover was in office. By the time FDR was elected, the nation was desperate for a savior. Though FDR enacted drastic changes, drastic measures were needed to change to course the country was headed on.

We didn’t get enough of a taste of what could have happened. The economy was headed south at the very end of the Bush administration. Barack Obama was elected and took those (not so) drastic measures to keep the country from from heading into a depression.

The country didn’t get to know despair. To the detriment of the current administration, it may require voters realization that the alternative, Republicans, will not improve their situation. Unfortunately, that will require the most likely failure of a Republican Congress and possibly Republican President.

A savior is not the person who puts the life preserver on you. A savior is the one who pulls you out of the water. The country will need to do a little more drowning before they are ready to truly be saved. Get your bathing suits on people…

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Positive Economic Reports….I’m going to be rich!!!

Economic Policy, Economy, Politics

Adam

I’m not sure where the broad publics’ head is at with recent positive news coming out on the economy. Some commentators I have read lately (and Senators Schumer and Reid) are talking about the economy turning around. The fall has occurred and its all UP UP UP from here… Well maybe there has not been that much optimism from them, but its out there. Does this kind of optimism worry anyone else besides me? Luckily I am not the only one who is worried.

The economy has been taking a hit on a regular basis for quite a while. There is a good description of where all of this positive movement is coming from, but I would rather relate it to a very likely scenario out there now.

Try to imagine that you are an employee at RSPC (The Really Smart People Company) and, in order for the company to continue operations with the existing workforce, all employees are asked to take a pay cut…lets say a 25% pay cut. Okay, you have your pay cut, times are tough, so you just deal with it. When a couple of things begin to go better RSPC decides to give you a 5% raise. The RSPC is ecstatic over the news that they are making a profit in the first quarter of the year and they believe things are turning around. Now, as the employee, are you as excited about that 5% raise, or are you still upset and wary because of the total 20% hit you are still feeling?

Good news is still good, but lets take it with just a little perspective.

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Why the Geithner Plan is Bad

Bailout, Economic Policy, Economy

Adam

Nobel Prize winning economist Joseph Stiglitz provides a solid and down to earth description of what will take place with the Geithner Plan in his NY Times editorial.

Its a worthwhile read and should help bring some clarity to the situation that will unfold.

I thought about running through the scenario for myself, but decided a comparison to a mortgage would be ridiculous. $12,000 on a $138,000 mortgage is a lot stronger than banks were accepting a couple of years ago. So I want to stay away from that comparison. Instead, lets say I am in Vegas and there is a heavyweight fight with 50/50 (never would happen, but lets imagine). Sure, I’ll put money down and see if I can double my money. But, what if there was a way for me to triple my money? Well, yeah of course I’ll take that. Even better, I can triple my money without taking on more risk. I just have to take a huge no risk loan out.

So, I take the loan, put up my 8% share along with the 92% loan and bet. If I win I can pay back the loan and take my tripled winnings.  If I lose, I lose the money I put up and forget about that l ever took out that loan.

Tough break on the guy who loaned me that money. Now, enough with betting on boxing, I’m off to the black jack table where the odds are REALLY in my favor…

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Can you fix a broken nation with a broken record?

Bailout, Barack Obama, Economic Policy, Economic Stimulus, Economy, Election, Infrastructure, National Infrastructure Reinvestment Bank, Obama, Politics, President Obama

Adam

I am going to say that it is probably difficult to fix our current situation with tax cuts.  I know…I know, the crazy liberal wants to raise your taxes and then spend all your hard earned wages. Not exactly.

I have a difficult time grasping the notion that the conservative chorus can only recite the same tune we have heard during a very recent 8 year administration.

“The only way to stimulate the economy is with lower taxes and tax incentives.”

Everyone is skittish now. Consumers, producers, and lenders. The argument that tax incentives will create job growth does not work.  Lets take a look at a couple of scenarios.

-  We create an incentive where an employer gets tax breaks for hiring new employees. (Currently part of the Obama plan, but really done for the purpose of appeasement)

So, under this theory, a company will hire a new employee for the purposes of expanding production of a good that a consumer is buying less of. Does not really work out in my mind.

- We lower taxes…

Well, with all of that extra money from lower taxes, companies will be able to expand production. Okay, so they expand production after borrowing to purchase what is necessary for the increase in productivity. They have to borrow because lower taxes do not mean available cash. This also seems to be a difficult challenge due to the well publicized reluctance of banks to give our money.

So why is it that the party that got a strong message from the American public this past election is grasping hold to its oldest idea?

I would like this cartoon to be an exaggeration, but right now it doesn’t seem to be.

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Finally…A Movie on Current Events

Economic Policy, Economy

Adam

I can’t believe how long it has been since I posted. It has been distracting…difficult for most people to catch their breath and understand what is happening. I think its either that everyone is so excited for Keanu Reeves new movie The Day the Earth Stood Still or because it seems that the world is literally going to stand still in the near future.

It seems that you can’t go anywhere without hearing someone talking about layoffs (either their story or someone they know).

It used to be that listening to the news could induce depression, but now a visit to Starbucks provides a feeling a despair to go along with a jolt of caffeine.

Despite the abundance of despair in the world today, take heed that things could be worse…Keanue Reeves could come to our planet (or back to our planet) and announce the end. We’re not there yet….

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Can You Stimulate Me Economically?

Barack Obama, Economic Policy, Economic Stimulus, Economy, Infrastructure, Obama, Politics, President Obama, Public Policy
Adam    

I heard a crazy thing the other day; things are not going in the right direction for our economy. Actually, I think I heard that a couple of years ago. You remember those days don’t you? There was a housing bubble still, sub-prime mortgages were parts of conversations, and the positions on the wars in Iraq and Afghanistan would decide the next U.S. President.

Today, we have a President-Elect whose stance on the wars most likely did not help him get elected.  The call for change of the way things have been going brought him to victory. Now, what change is going to take place is a couple of months away from being realized. One issue that is absolutely necessary is an economic stimulus package to go into effect as soon as possible.

The potential second economic stimulus package has been in the news for a couple of months now.  There are opinions flowing at both ends of the discussion. That being stated, I thought it was important for me to throw my thoughts out there.

First, checks being handed out to citizens should not happen again. That was like my cup of coffee at 1:00 pm after a late night…I’m still going to crash.

Second, Federal spending on infrastructure is necessary and has always been necessary. Its not spending for the sake of giving money back to the poor. Its an investment in the future.  I racked up a lot of student loans, which was an investment in my future prosperity. I didn’t go out and buy a bunch of stuff with credit, which I would say is not an investment.

These two scenarios are the way I see the two sides of the argument over the economic stimulus.

The current number most commonly being suggested is $150-$200 billion in economic stimulus. This should go heavily towards infrastructure investment. Liberals and conservatives are calling for this type of Federal spending. But why so little?

The United States’ GDP for 2009 is projected to be at $15 trillion. The package being talked about would only amount to roughly 1% of GDP. This past week China unveiled an economic stimulus package in the amount of $586 billion, 16% of their GDP. 

Some economists (liberal) are calling for more spending to make up the gap in output. Paul Krugman thinks the stimulus package should be 4% of GDP, or $600 billion. Similarly, Robert Reich states “government may have to spend $600 or $700 billion next year to reverse the downward cycle we’re in.

Now, to assuage any fears that the federal government is going to throw money at anyone who asks for it, there are actual needs for funds. The American Society of Civil Engineers puts the needed expenditures over the next 5 years to bring the nation’s infrastructure up to good condition at $1.6 trillion. This number is what is needed for “improvements”. What about the new investments that are needed for the world economic leader to continue to grow throughout the 21st Century?

We need infrastructure improvements, we need new infrastructure investment, we need economic stimulus, and we need jobs. All of these needs can be met with a strong economic stimulus package. The money needs to be spent at some point, so why not have the government spend that money when everyone else is hoarding their own money?

 

 

Robert

There is one basic flaw in your plan, Adam:  America is broke and it is time to start acting like it.  No one is talking about where this $200 billion dollars is going to come from.  “Oh, just skim it off the top of the GDP.”  It is important to realize that that money is going to have to come from somewhere and it will not be from the Defense budget (sorry, liberals!)  Who is going to fork it over?

The bottom line is that the last thing we need right now is for the government to meddle with the free market.  Their manipulating is what got us into this problem in the first place.  Though I may have slept through most of my economics courses, I know that basic supply and demand is the ultimate balancer of prices.  All that the government’s proposed stimulus package is going to do is continue to artificially inflate the economy.  Well, my friend Peter Schiff* and I have a better idea: bleed the pig.  It is time for us to let things get bad.  The economy is absolutely decimated and the only way that it is going to get better is if we let things occur naturally.  Save some money.  Tighten our belts.  Why is everyone looking at this like it is a bad thing?  It is a chance for America to get out the filth that has been poisoning the economy for so long.  We have got to go back to the fundamentals of our founding fathers: hard work, dedication, and savings.  This is how we are going to save the United States of America. 

The last thing we need right now is for the government to pump a bunch of cash into America’s infrastructure.  You do not buy new shoes right after you lose your job; You make do with the shoes you have until you are in a comfortable enough position to get a new pair or until your old pair is completely destroyed.  Same goes for the infrastructure.  Let the market dictate when the roads are improved, not the government.  There is no overnight fix and until the government is willing to stand aside and let nature run its course, Americans are going to continue to suffer. 

 

*Disclaimer: I am in no way an acquaintance of Peter Schiff.  He is the ultra successful CEO of Euro Pacific Capital, as well as a best-selling author and I am writing for a blog that even my mom won’t read.

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