Whose economic policies will fix our problems?
If we have the discernment to separate the political wheat (economic policy) from the chaff (media-hyped social issues) we should be able to see that our economic woes are structural: 1) We have been on a credit binge for decades. We had enough credit to buy what we wanted. 2) Then the real estate market bubble burst and our easy credit dried up when our home equity disappeared. 3) The barely regulated banking system nearly collapsed. The banks who begged you to borrow their money, stopped loaning to anyone. By this time, we had pre-consumed as much as 30 percent of our annual GDP, leaving a gaping hole in consumer demand. 4) American corporations don’t live or die on profits made in the U.S. They’re global and they don’t like paying a 38.5 percent tax on repatriated money. So much of those profits stay off-shore. 5) The mega-rich don’t invest in job producing projects. Instead they put their money in financial instruments. 6) The government has decided that we need to cut deficit spending. This strategy has caused even more job losses resulting in less consumer demand. Less consumer demand equals fewer jobs. Fewer jobs equals less consumer demand. 6) Because of the loss of consumer confidence, even those people with jobs are holding back, which results in even less demand. Which means even fewer jobs. The result: We’re caught in a vicious cycle.
More recently from Robert Reich, “The answer is in front of our faces. It’s because American consumers, whose spending is 70 percent of economic activity, don’t have the dough to buy enough to boost the economy – and they can no longer borrow like they could before the crash of 2008. If you have any doubt, just take a look at the Survey of Consumer Finances, released Monday by the Federal Reserve. Median family income was $49,600 in 2007. By 2010 it was $45,800 – a drop of 7.7%.
The earnings of the great American middle class fueled the great American expansion for three decades after World War II. Their relative lack of earnings in more recent years set us up for the great American bust.
Starting around 1980, globalization and automation began exerting downward pressure on median wages. Employers began busting unions in order to make more profits. And increasingly deregulated financial markets began taking over the real economy.
Between 2007 and 2010 (the latest data available) American families’ median net worth fell almost 40 percent – down to levels last seen in 1992. The typical family’s wealth is their home, not their stock portfolio – and housing values have dropped by a third since 2006.”
So who has the most effective policy? (From CNBC) “On planet Republican, the economy is backsliding, and the president is to blame. His stimulus spending did more harm than good, and his big-government rules are strangling businesses. The answer is repealing health care, energy and financial regulations and cutting taxes. That should spark investment and create jobs. Tackling the deficit requires huge spending cuts, just not at the Pentagon. The unsustainable guarantee of Medicare and Medicaid must change.
In the Democratic universe, the economy's slowly improving, thanks to government spending that helped fend off a depression. Another dose of targeted spending will help. Republican policies in the Bush administration — cutting taxes and eliminating rules — brought on the financial crisis and budget deficits. The rich should help dig us out by paying higher taxes. The Pentagon's budget must be cut, but entitlement spending can be controlled without drastically altering the social safety net.”
I guess it boils down to which economic policy we think will get the great middle class back to work. When we figure that out, we’ll know how to vote. Unless of course, we’ve already decided based on media-hyped social issues. If so, we’ll get what we deserve.
Robert DeFilippis
More recently from Robert Reich, “The answer is in front of our faces. It’s because American consumers, whose spending is 70 percent of economic activity, don’t have the dough to buy enough to boost the economy – and they can no longer borrow like they could before the crash of 2008. If you have any doubt, just take a look at the Survey of Consumer Finances, released Monday by the Federal Reserve. Median family income was $49,600 in 2007. By 2010 it was $45,800 – a drop of 7.7%.
The earnings of the great American middle class fueled the great American expansion for three decades after World War II. Their relative lack of earnings in more recent years set us up for the great American bust.
Starting around 1980, globalization and automation began exerting downward pressure on median wages. Employers began busting unions in order to make more profits. And increasingly deregulated financial markets began taking over the real economy.
Between 2007 and 2010 (the latest data available) American families’ median net worth fell almost 40 percent – down to levels last seen in 1992. The typical family’s wealth is their home, not their stock portfolio – and housing values have dropped by a third since 2006.”
So who has the most effective policy? (From CNBC) “On planet Republican, the economy is backsliding, and the president is to blame. His stimulus spending did more harm than good, and his big-government rules are strangling businesses. The answer is repealing health care, energy and financial regulations and cutting taxes. That should spark investment and create jobs. Tackling the deficit requires huge spending cuts, just not at the Pentagon. The unsustainable guarantee of Medicare and Medicaid must change.
In the Democratic universe, the economy's slowly improving, thanks to government spending that helped fend off a depression. Another dose of targeted spending will help. Republican policies in the Bush administration — cutting taxes and eliminating rules — brought on the financial crisis and budget deficits. The rich should help dig us out by paying higher taxes. The Pentagon's budget must be cut, but entitlement spending can be controlled without drastically altering the social safety net.”
I guess it boils down to which economic policy we think will get the great middle class back to work. When we figure that out, we’ll know how to vote. Unless of course, we’ve already decided based on media-hyped social issues. If so, we’ll get what we deserve.
Robert DeFilippis
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