Category Archives: Economy

The Simple, Obvious, But Nonetheless Powerful Way To Get People Back To Work

Friday, September 16, 2011

What usually happens when we have downturns is that our President and elected representatives, Democrats and Republicans alike, flail about while they wait for the economy to get better on its own, not because of and often in spite of the billions we may have wasted with misdirected, ineffective policies and programs. Whoever’s in office when the recovery occurs takes credit for it, and we move on. That’s not happening this time, that is, the economy isn’t recovering fast enough on its own because there are structural issues, big things wrong with the economy which will take time for it to fix, time we don’t have.

Every now and then, I take myself way too seriously. I find myself facing what appear to be difficult, complex problems, the kind that make your head hurt when you think about solving them. But then eventually, thank goodness, there comes a moment. You know what I’m talking about. It’s the one when I blow my diet on the grounds that stress is more harmful to my health than fat, after an hour or two of mindless TV, followed by a pass-out nap on my couch. It’s the moment when I realize that the problem wasn’t that complicated after all. I strip the problem of its extraneous detail and focus on its core elements, and a simple, reasonable, often elegant albeit sometimes radical sounding solution presents itself. This is one of those times.
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Unemployment Benefits: Too little to be effective.

Tuesday, December 22, 2009

Unemployment compensation has been a tool for reducing the impact of any downturn since the 1930s. The idea is simple. In a consumer driven economy, when employers feel the need to lay off workers, one of the most effective tools at your disposal is to continue to pay the unemployed for humanitarian reasons, of course, but also so that their demand for goods and services will not decline so substantially as to make matters worse.
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The Supply Side Economics of President Obama

Monday, December 14, 2009

President Obama is hell bent on helping the small businesses of America. “Better late than never,” some would say, but they would be wrong.

His idea is simple. Too simple. Make more money available to small business by leaning on our banks to make loans they really would prefer not to, and give those small business tax incentives to hire more people… Wait a minute. Just stop for a second. Why would any business, particularly a small, scared business with limited resources, a tiny drop in the ocean which is the American economy, expand its operations without knowing it can sell the additional goods or services it produces? …I’m waiting. …”On spec?” you say timidly. Hey! Who said that?! Maybe in a strong, surging economy, but not in the midst of the most serious economic downturn since the Great Depression. No way.
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The Bass Ackwards Economics of Bailout II

Wednesday, December 9, 2009

Ours is a consumer-driven economy. Everyone knows this, including our government, which is why it keeps extending unemployment benefits. Do everything you can to keep people spending, even while they’re unemployed and looking for work. It is the most, and possibly the only really effective thing the Obama Administration and Congress have done to prevent an already horrendous recession from being even worse.

The same logic should apply to the design of any bailout. If you want to generate jobs in a hurry, give every dollar you (the government) can spend to the people who need it most, whose propensity to spend it is the highest, preferably 100%. What you shouldn’t do is give it to business, large or small, hoping they will use the money to hire more people. That doesn’t work. Particularly during a recession, companies are reluctant to hire people unless they have a proven market for whatever product or service they sell. As for public works projects, they take forever and don’t hire nearly enough, fast enough – directly or indirectly – to lead a recovery. (Funding public works projects in a recession is all about politics, and is not good economic policy.)
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What to do when monetary and fiscal policy aren’t enough: The third tool for economic recovery and growth.

Saturday, October 17, 2009

Economists are worried that the jobs we’ve lost in this recession are not going to be coming back when the economy recovers. Unfortunately, the economy is not going to recover until the people who have lost their jobs find new ones, and that’s the rub. How are we going to get all these people back to work if the jobs they had are gone for good?

Traditional monetary and fiscal policy aren’t going to help here, nor will our government’s fixation on the stock market and solving large company problems. Continue…

The Nutball Economics of President Barack Obama

Monday, August 3, 2009

First things first. I know that “nutball” is not one word, but it should be. Now, what was my point? Oh, yeah…

We are a consumer driven economy in the midst of one of the most serious recessions in our history. Reported unemployment is approaching 10% and that doesn’t take into account the extent of underemployment and its devastating impact on family income.

Even in the best of times, there will be some minimum level of unemployment, somewhere around 3%, associated with people who are, let’s say, temporarily between jobs. Subtracting this 3% leaves us with approximately 7% of our workforce which has been a casualty of the recession – plus the underemployed who are still working, but not making enough.

Candidate Obama promised us he would not raise taxes paid by regular people, that he would increase taxes for only the wealthiest of Americans. Now President Obama has apparently been transported into a different reality. Faced with budget deficits of biblical proportions, his closest advisors are test-marketing the potential of increasing taxes on the “Middle Class,” broadly defined to include almost all of us. (See, for example, “Geithner Won’t Rule Out New Taxes for Middle Class” by George Stephanopoulos, August 2, 2009.)

So, let me get this straight, which is what I usually say when there’s a long sentence coming… We’re a consumer driven economy in a severe recession in reaction to which the President and Congress (mostly Democrats) have spent kuh-billions of dollars we don’t have to help certain financial and automotive sector companies – which the economy would have handled just fine without our help – leaving most of the economy to fend for itself. (Break.) But now, concerned that he’s going to be presiding over the Obankrutcy of America, and that the effect of his reckless spending will have adverse consequences far beyond his one term Presidency, he’s considering raising taxes which will further curtail consumer spending and actually impede our recovery. It’s perverse Robin Hood economics, “Robin” from the many for the benefit of the relatively few.

That’s right, he’s considering raising taxes which will reduce consumer spending to help pay for programs, many of which were/are intended to slow the downturn and protect consumer spending. Hmmm?

Here’s an alternative. Stop spending so much money!! Put every dollar you’ve got directly into the pockets of the consumers who have been most affected by the recession and who will put those dollars into the economy, immediately.* Otherwise, stay out of the economy, and put major programs on hold until we can afford them. Just because you can print money, doesn’t mean you can spend it.

The impression I keep having is that of a President who talks well, but has no idea what he’s doing, who is overwhelmed by circumstances beyond his control, moving way too fast and whose naïve, overconfident intellectualism hasn’t prepared him to contend with real problems of this severity.

*If you have time, you might also want to take a look at Occam’s Economics: A simple, back-of-the-envelope plan to regenerate consumer spending – immediately, posted Thursday, July 9, 2009 on the WordFeeder.

-wf


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President Obama’s Hurricane Katrina

Friday, July 17, 2009

Running for President is one thing. President Obama is a superb campaigner with an exceptional campaign management team. Managing the government is something else altogether.

Rightly so, President Bush was lambasted for his slow and horribly inept response to the devastation caused by hurricane Katrina on New Orleans and in other communities throughout the region. What’s stunning is that President Obama – clearly President Bush’s intellectual superior – has proven himself no better, and perhaps worse at delivering government support in a crisis of much greater magnitude.

Despite his popularity and majority ownership of Congress, despite his stated need for a stimulus package on an emergency basis, here we are, 154 days since the stimulus package was passed by Congress on February 13, 2009, 5 months later and the Obama Administration has so far managed to spend only $90 billion of the total $787 billion approved – and much of that $90 billion has yet to hit the street, is still categorized as being “in the pipeline.”

The stimulus package was never necessary or appropriate. The way the money would have been spent wasn’t the most effective use of those funds to blunt a serious downturn and facilitate recovery. We didn’t have the money, and the economy is recovering on its own without it. That having been said, there’s just no excuse for President Obama’s not having spent the money Congress approved. He’s in charge. It’s his fault.

Please, save me from one more speech where a politician accepts responsibility for his or her failures. I don’t want an apology. It’s the last thing the American people and the economy need. What I want is for him to step up to his teleprompters, tell us they’ve missed the window of opportunity they had when the bill was first passed and cancel the stimulus package. “That’s it. It’s too late. We’re not going to spend the remaining $687 billion as originally planned. I’m sure we can find something else to do with it. Sorry, I blew it.” (That last sentence is optional.)

Better yet, let’s deliver the $697 billion directly to those consumers who have been hurt the most by the recession and who will put these dollars out there in the economy where they need to be, immediately.

Suggested reading… “Occam’s Economics: A simple, back-of-the envelope plan to regenerate consumer spending – immediately.” which I posted Thursday morning, July 8.

-wf


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