Did Someone Say Stimulus?
It is fairly plain to see that the $700 billion stimulus has not worked. At least not so far, and in light of the planned executive bonuses there is a fair chance we can take that statement to the bank. This is good in that at least we have something to take to the bank considering all they are taking from us, but I digress.
As an economist, I take this seriously. I realize the government is trying anything to get the economy back on track, but seriously folks in D.C. Did you really think that money would find its way down from Wall Street to Main street? A trickle down theory of economics is good, and has at times been successful; however, not when greed and corruption are rampant. This is where my common sense becomes inflamed. The government knew very well that corruption had caused the banks to crumble. Why then would they pour $700 BILLION into a corrupt institution?
Did we need a stimulus? Yes. Do we still need a stimulus? Yes, because main street is still suffering. Unemployment is quickly approaching 16% in places like Michigan, but even in California it is continuously creeping up. According to the Bureau of Labor Statistics it rose again to over 12% in September. In fact, that is only “registered” unemployment and not actual figures. It does not account for those that are underemployed or are not eligible for unemployment compensation such as the formerly self employed. If we counted those workers the numbers would more than likely approach at least the 20% – 25% level. As of the latest September statistics, long term unemployment (those unemployed more than 27 weeks) rose to 5.4 million people. Does this sound like a recovery? Does this resemble a successful stimulus?
Although I was not a fan of the previous administration, I am also one to give credit where credit is due. The decision to give a stimulus to the people, in the form of a $600.00 check, was a step in the right direction. It was designed to “stimulate” consumer spending, but it did not do the trick and was therefore deemed a failure. That was also part of the design. The administration needed to be able to point to a failure of the trickle up theory of economics. The failure was in the fact that the amount was ridiculous. If anyone thought that $600 in a person’s hand was going to do anything but pay a bill or two they were sadly mistaken. Very few people ran out and went on a shopping spree with a paltry $600, and thus consumer spending continued to drop. See, trickle up doesn’t work so let’s try trickle down and give big business billions said the guys in charge. Whew, aren’t we glad they tried? Don’t we feel better now?
Why not try this President Obama? How about taking the beginning amount of $700 billion and divide it by the 250 million adults in the U.S.? MAYBE, even add another $700 billion to the mix, which is probably closer to the amount that will actually end up being poured into our failing economy. Divide all of that by 250 million adults and watch how they spend their $5,600 windfall. Yes, people will pay down a bit of their debt like they did with the $600, but they will definitely go out and spend some of that much larger check. How do I know this? Because it is human nature. Sociology 101 for a consumer nation, and especially with the holidays right around the corner.
Trickle down did not work. What do you say we give trickle up a “real” try, and watch our economy start to right itself with a genuine stimulus?!
BLS (Oct. 21, 2009), Regional and State Employment and Unemployment Summary. Retrieved Oct. 23 from
http://www.bls.gov/news.release/laus.nr0.htm
I’ve been reading along for a while now. I just wanted to drop you a comment to say keep up the good work.
I agree that we are not experiencing the vision that was sold to us on a number of occasions during Bush and Obama (who inherited the problem…). My theory is that the $600 check was received by the public, but it was not received with the intended result. why? an inherent distrust of the administration and ‘the man’ as of late. Folks have no confidence in the government as it is. Yes, this was a fine excuse to attempt the trickle down theory of economics, and on paper it should work… unfortunately, we have humans working the administration of it all…
The Bailouts were a mistake from the beginning… It sends the message to those misbehaving that they can continue to misbehave and still receive sustenance. what message are we sending here, people? Stimulus? Bailouts? Top Down, Bottom Up? What is it really, to have a free market? Does it truly include the World Bank and the IMF? So many question, so many theories, so few answers that would satisfy a global economy working towards world democratization.
Trickle Up may work, but I fear that it may be a case of too little too late. The world is in a loan/repay/restrictions cycle and it is a merry-go-round that is never ending. The IMF has tried a failed experiment. Lets allow for real market competition, and see where the profits land.
Just simple thoughts from the dark side… at the end of the day.
Good points Lori. The problem is that there is an inherent error in a free market economy such as ours with regards to corruption and where the power lies. It is utopia on paper, but we don’t live “on paper.”
The other issue is that people mistake capitalism and free market with democracy. One is a form of economics and the other a form of government. There are many successful democracies that operate in mixed economies.
I guess there are a couple of ways to infuse money into the economy to get it going. However, the bottom line is, until we stop outsourcing our work around the world, we will never recover. When people work, they pay taxes. When they pay taxes, it goes to pay for various services. When we pay for services, more people are employed and pay taxes.
If you’re a small business you were thrilled when no one stopped you from outsourcing software programming to india, or call center support to Brazil. Hey, you don’t need to pay social security taxes on them. Look at how much money your business saved. But, it means that many more skilled Americans without work.
What we need to do is provide incentives for businesses of all sizes to employ people HERE, so they pay taxes here (i’m tired of carrying the tax burden for all of the unemployed) to support the services and education of our children. Every dollar sent to another country to pay for labor is a dollar that no longer supports our infrastructure here.
my 2 cents.
inga
More good points Inga. I can understand outsourcing for small business being a necessity of maintaining competitiveness, but there most certainly should be incentives to keep jobs here. There are many things that can and should be done, but as mentioned in the previous blog, this is no longer a democracy. We live in a plutocracy, and until that changes we will never see the needed reforms.
Morissa,
An excellent overview of our present economic situation. Like the $5,600 approach to our citizens who deserve home aid rather than the US providing foreign aid which never gets to the intended targets.
What also is necessary is to fight our terrorist war militarily and not politically. We must remove the rules of engagement and when necessary retaliate with extreme force killing all who are involved or who act as suppliers to the enemy. If not done now we will ultimately extricate ourselves from what may be politically determined a failure (without letting the military do its work) and we will have lost those soldier’s lives (5,000+) for nothing. Let alone be considered soft to all enemies, current and potential. We must take Patton’s and Mac Arthur’s stretegic approach to managing a war. They learned from history. We do not in DC and more potential enemies will become emboldened. Let’s get with it now.
Nikita K knew how to beat our democracy through realizing he could win by getting us from within (the drug problem is another way to destroy the USA). Just reflect upon what is going on now with our economy and the way we are “not” respected globally. Let’s talk.