What are the bumps on the road to recovery?
Many on the right, laughing and mocking the President , will, without context, point out that the President told an interviewer that rising unemployment was caused in part by the invention of ATM’s and airport kiosks.
Many on the left will unequivocally state “Bush caused all the problems we face today” and from the right a response of “it’s been 2 ½ years shouldn’t Obama own the economy, the good and the bad, by now?”
Voices from the left tell us that President Bush basically doubled the national debt and the responding chorus from the right resounds with the fact that President Obama is on pace to add more to the national debt in four years than President Bush did in his two terms.
Fiscal hawks on the right trumpet “out of control spending” is causing our woes and the response from the left is that “two unfunded wars, lasting nearly ten years, have brought us to the edge of the abyss.
The left proposes tax the rich, increase stimulus spending, pass a jobs bill, increase the social safety net, punish the corporations, put tariffs on imported goods, the Affordable Care Act, increase regulatory control of oil companies and go green as solutions.
The right responds, create a business atmosphere conducive to expansion, lower corporate taxes to stimulate the expansion and hiring process, less and or more reasonable regulations, cut unnecessary and duplicate spending across the board, shrink government.
Both sides seem to agree that subsidies to businesses are no longer needed, but there is not an agreement on ending all of the subsidies or which of the subsidies to end – oil subsidies, farm subsidies, green energy subsidies, public funding of NPR, NEA, Planned Parenthood and many other organizations are in the discussion.
Both sides seem to agree that we are on an unsustainable path to fiscal ruin, with continuing and growing annual deficits, national debt rising to a dangerous percentage of our GDP, a stagnant economy showing no real signs of expansion that will significantly ease unemployment in the near term and an ever increasing trade deficit that could be the real death spiral of our economy.
Well that explains, in general terms, where we find ourselves as a country economically and views from the right and left as to how we got to this point. I tend to think, as many others do, that the answer to the question “How did we get here?” is probably in the middle, a combination of all the opinions of the right and the left.
That is a snapshot of where we came from and where we are from both sides.
The more important questions, in my opinion: Where are we headed, what does the road to recovery look like and what can we do to accelerate the recovery while causing the least hardship possible?
Let’s look at some key economic challenges we are facing.
No other issue is close to unemployment in importance to the breadth of the U.S., because in one way or another it affects every citizen in the country. To a recently unemployed person, a person who has been unemployed for months or years or to a recent or soon to be college graduate finding a job is an almost singular focus.
In the past, most job applicants have been able to weigh and compare multiple offers, but that is no longer the case. Job opportunities draw hundreds, if not thousands of qualified applicants and if offered a position many accept it regardless of the details of salary or benefits.
That is not the American dream, not even close.
Unemployment is hovering around 9%, with no real indications of changes in the near future that will spur hiring and get America back to work. Unemployment was growing as President Obama took office and to give due credit, its rise has slowed during his administration. However, he (or more to the point his administration experts) assured the U.S. that passing the stimulus bill in 2009 would insure that unemployment remained below 8% and obviously that has not happened.
Unemployment is only part of the crisis facing the country, under-employment and the vast number of people who have simply quit looking put the total number of the employment challenged closer to 20% than to the 9% unemployment rate.
The Democrats and the Republicans each have simplistic answers to the unemployment problem: the Republicans say lower corporate taxes and ease regulations and the private sector will start hiring and he Democrats say pass a “jobs bill” (with no clear explanation of what that is) and raise taxes on corporations that have off-shored jobs in the past.
Neither of these solutions will solve the unemployment problems we face as a nation.
We need a bipartisan solution that includes corporate tax code reform that eliminates loopholes, credits and deductions that allow big corporations to make large profits and pay little or no taxes. The actual tax rates may actually be lowered in this process. We also need responsible and focused regulation that protects our workers and our environment, but that is reasonable in the cost and effort required to meet the requirements of the regulation. Corporations should not regulate themselves, but if a group of CEO’s say “that this or that regulation is going to cause us to cease doing business here”, someone in the government needs to listen before enacting the regulation blindly.
We need responsible and fair trade agreements with our foreign trade partners that level the playing field and make our exported products as competitive as the products we import from our partners. We need a reasoned approach to government and private sector partnerships in R&D and infrastructure projects that result in current investment by the private and future payments and tax credits from the government, thus easing the fiscal pressure while moving the nation’s manufacturing platform forward.
We need corporations to create partnerships with schools, vocational schools and universities to invest in the work force of the future by funding training, development projects and new technologies and insuring themselves of a steady stream of qualified workers.
The Debt Limit
No politically or financially aware individual believes that not raising the debt limit is a possible outcome of the political theater going on in Washington. And those same people, regardless of political affiliation, realize that spending cuts, changes to long term spending patterns and revenue enhancements will be attached to that bill.
I am cautiously optimistic that VP Biden’s group will come up with a bipartisan bill that will cut spending in an amount equal to the amount the debt limit is raised. Tax revenue enhancements and a bending of the spending curve for the future will insure that added revenue realized from taxes or spending cuts can be applied to debt service, without totally crippling needed programs.
The acceptance from both sides that tax revenue must be increased and that spending will be cut, including programs important to many Americans, is crucial to our return to economic stability and growth.
Gasoline (Energy) Prices
We need to decide as a nation what our energy policy is going to be.
Proclaiming that we are going to decrease our dependence on foreign oil and maximize use of renewable energy sources in the U.S. is not a plan it is a vague philosophy. Setting goals for 15 to 30 years from now in certain areas of energy technology use is noble, but not really important to the majority of citizens.
John Q Public (and Jane too) is worried about how much it is going to cost to fill up his car this weekend, how much it will cost to cool the house this summer and to heat it this winter. If we are content to pay nearly $4.00 per gallon or higher in the future for gas, so be it, but regardless more control over speculation that artificially manipulates the market is needed.
Alternative energy is important for the future, but it must be made affordable and the accoutrements to using those sources need to be made in the U.S. A program of “cash for caulking” is artificial and temporary and not simulative to the overall economy and should not be implemented.
The housing crisis, enormous numbers of foreclosures, dramatic drops in home values and the doubtful fiscal survivability of Fannie Mae and Freddie Mac are a continuing cloud over our economy. Artificially low interest rates have done nothing to ease the dwindling numbers of new home purchases.
There is a thought in some corners that renting is a sign of failure and that is simply not true, many people rent for years, while saving to purchase a home.
Responsible lending and responsible borrowing, rather than elaborate “finger in the dike” fix-it programs are the key to stable housing market in the future.
A Weakening Dollar and Inflation
The Fed has flooded the world market with printed money (QE1 and QE2) and it has had minimal positive effect, but it has greatly weakened the value of the dollar on the world market. This has resulted in inflated prices for imported goods and commodities across the board and the threat of more inflation and even hyper inflation if the process is continued.
There is also a danger that the U.S. dollar would be replaced as global exchange currency, which would be a huge blow to the economy.
In closing, a couple of quotes (neither of which is original but both of which are relevant):
“If you do what you've always done, you'll get what you've always gotten” and “Insanity is doing the same thing over and over again and expecting different results.”
The first is from Anthony Robbins and the second is attributed both the Albert Einstein and the Ben Franklin.
I welcome your feedback and comments and would appreciate an emphasis on proposed solutions to these “bumps in the road” rather than rehashing who is more to blame for the problems.
Thanks and mind the COH