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Friday, March 06, 2009

The Economy, Continued

George W. Bush handed off a bad economy to Barack Obama. I believe we can all agree on this. However, after that, the perception of economic reality between conservatives and liberals diverges. For example, Bush took the wrong step--after cutting taxes during the '01-03 recession--of attempting a massive government bailout/intrusion into the economy. The '08-'09 recession has been the result of a collapse in home prices, credit, and some of the financial and industrial concerns that depended on the credit markets. The bail-outs under Bush and Obama, administered by the Secretary of the Treasury, have not worked. Credit remains tight, more mortgages are failing, and credit remains tight. Enter Barack Obama.

It is time to stop blaming George W. Bush for the economy. This economy has been Obama's for a month now. Gone is the soaring rhetoric of "hope" and "change." Now we are treated to grim reality, "It's going to get worse before it gets better," and more excuses for the government to intrude into the private sector.

A jolt of government spending on private-sector products and services could temporarily juice the economy, though John Maynard Keynes himself said that incentives were necessary to encourage businesses to invest and expand. Those incentives generally include tax cuts and reductions in regulations. The Obama stimulus plan has not done this. It has focused on government spending on government-focused activities that increase the federal bureaucracy but does not increase private-sector productivity, which has always been more dynamic and profitable than government activity. It has increased taxes on the people with the most money, who would be the ones paying the most taxes and investing in the most profitable businesses. He has proposed a massive new dose of federal spending that the nation cannot afford, foreign investors do not want to subsidize (or want concessions to support), and which could inflate the currency in the long run.

Furthermore, President Obama and his party in Congress have attached regulations and strings to their version of the bailout money. President Obama has criticized CEOs for flying in private jets or going on business travel to expensive places, potentially damaging businesses and jobs in those industries. The more the government interferes, the less businesses are likely to take risks, for fear of being targeted or criticized for their attempts at success.

Obama has preached about a new "era of responsibility," but the government bailing out businesses and individuals who made bad decisions guarantees more irresponsibility in the future because somewhere, somehow, people believe that the government will always bail them out if they screw up. Indeed, the bigger the screwup (billions of dollars lost), the more likely it is that a company will get a bailout!

Obama wants more Americans working, but extending unemployment benefits or upping the benefits is an incentive to stay home and let the government take care of you. And so forth.

In short, I believe President Obama's policies and public statements are making the economy worse, not better. I want my country to be rich. Heck, I want to be rich! I want my 401(k) back. I've been told I need to "give Obama a break." At what point can the voters make him accept responsibility? When the Dow doubles down a couple more times? When unemployment hits 10%? 15%? 25%, as it did under Roosevelt? At what point can we stop blaming Bush? And saying things like "Well, Bush did X worse" is not helpful, nor is it a terribly effective defense of Obama. Bush is not president anymore, Obama is, and I want him to know what he is going to do that will be good for the economy.

I want the president to cut taxes. I want him to ease up on the private sector. I want him to stop telling businesses that it's not appropriate to travel to Las Vegas or Orlando for conventions. I want him to stop criticizing anyone able to afford a private plane. I don't want him to spend more in one year than most of the most expensive years-long projects in American history. If he's going to spend taxpayer money, let it be for basic infrastructure, basic research and development (including space exploration), quality academic and trade education, and temporary relief of economic hardship. If he really wanted to kick up the economy, he could cut the number of the federal regulations (and the bureaucracy responsible for increasing their number), bypass bailing out banks and other companies, and send every taxpayer $10,000. We would probably still come out ahead...plus, he'd stimulate consumer spending like nothing anyone has ever seen! I could get behind a program like that.

Heck, if he did all that, I might vote for him in '12!

1 comment:

Rolando said...

I have to respond to this because 1) Economics is one of my past times 2) I disagree with some of your comments 3) You seem to be smart enough to have a educated debate 4) I simply don't understand the rationale behind certain stances .

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Re: It is time to stop blaming George W. Bush for the economy. This economy has been Obama's for a month now. Gone is the soaring rhetoric of "hope" and "change." Now we are treated to grim reality, "It's going to get worse before it gets better," and more excuses for the government to intrude into the private sector.

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Do you understand inertia? Obama has ONLY been in office 1 month. If you were trying to stop a speeding car it would take time to slow it down, and vice-versa.

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Re: A jolt of government spending on private-sector products and services could temporarily juice the economy, though John Maynard Keynes himself said that incentives were necessary to encourage businesses to invest and expand. Those incentives generally include tax cuts and reductions in regulations.

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The RIGHT "incentives" make the economy better. The RIGHT "reduction in regulation" and the RIGHT "tax-cuts" help make the economy better. Giving tax-cuts to companies who outsource the work, does not "maximize the opportunity of [American] citizens". It does not create jobs.

One thing that many people who lean conservative don't seem to understand is that the American Market is not very lucrative for investment. We are too expensive in comparison to other countries such as China and India. They are just as just as bright as we are and they are a fraction of the price. If my goal was to maximize profit, I would not hire Americans. I'd sell to them, but I wouldn't hire them. Now I am an American, so MY thoughts are for Americans -- but hardcore business executives are ruthless AND the best strategy when pursuing MONEY is to hire outside of America. Hence, tax cuts for very large organizations is not necessarily good for Americans because when these business people invest they won't invest in America.

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Re: Obama wants more Americans working, but extending unemployment benefits or upping the benefits is an incentive to stay home and let the government take care of you. And so forth.

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I agree (to an extent). I think that providing people with benefits is important to prevent these people from making the mortgage problem worst, but I agree it motivates people to not work. That is why if I were setting the rules I would require these people to do a minimum of 10-15 hrs of volunteer work per week. This way, the people have enough time to find a job and they are giving back to the community in a positive manner.

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Re: Obama has preached about a new "era of responsibility," but the government bailing out businesses and individuals who made bad decisions guarantees more irresponsibility in the future because somewhere, somehow, people believe that the government will always bail them out if they screw up. Indeed, the bigger the screwup (billions of dollars lost), the more likely it is that a company will get a bailout!

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Company bailouts makes me cringe. These company CEOs are either incompitent or highly dishonest -- both possibilities upset me. However, if these companies go down - then many people will lose their jobs -- and it isn't an isolated event -- there is a domino effect. I hate it -- Do you have a better approach? -- I would bailout these companies, but arrest the upper management -- have them help fix their mess in prison. Unfortunately, these people have ALL the politicians in their pocket books -- this isn't a Democratic or Republican issue -- they are both corrupted.

I don't think helping people who were mislead by predatory lenders is wrong. I think it is a very good and proactive idea. It is either this, or you let them foreclose and we pay for it through another method -- by bailing out the banks again :).

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Now here is where I need your intellect to get a better understanding of things from conservatives.

Now you don't talk about the positive things that Obama is "spending" on like Education, Green Technology, Infrastructure and Lowering Health Care Cost. All these efforts, if done correctly, provide jobs now AND make us more competitive tomorrow. Now how can this be bad? I really want to know what the grievance with these type of "investments" from the conservative side. I mean the "teaching someone to fish" is at the very core of conservative beliefs (I know I was brought conservative and I am an independent not a democrat) -- why then is investing in education labeled as "spending"? -- I simply don't understand.

Why is investing in new industries like "Green Technology" labeled as "spending" when it is known that we are running out of oil reserves? It creates jobs NOW and it is an investment for the future.

Why is investing in the Health Care technological infrastructure in order to Lower Health Care Cost considered spending? It lowers long term costs and it creates jobs NOW. (Now I think that there is support for this on both sides -- so I might be misspeaking.) --
However, to play the devil's advocate the conservatives are going to try and deregulate the Health care industry in the name of "competition" (being advised by people in the health insurance industry -- of course) and the only thing that is going to happen is health care costs is going to increase. Now to be fair I am certain that the Democrats will F'it up too, but I think that their approach will be more conscientious -- so I expect it to be slightly better -- I hope.

Now I agree that some of the things that are on the bill are wasteful -- That is politics -- you work at NASA so you should understand politics. However, the PLAN in general is not bad. The litmus test is for stimulus items is 1) Does it create jobs now? 2) Does it create more opportunities or lower long-term costs? If both these things are yes, then it is a good stimulus item. If it does not it is pork.