On Some Economic Questions

The US economy is mired in a slump, the European economic crisis add to the woes, and Americans are wondering, “Jobs, jobs, jobs – where art thou job.” Americans have lost over 8 million jobs, yet the economy has created on 2.5 million since the upturn.

For starters, the private sector (not the public sector) is the main job source in a capitalist economy. No matter if consumers are individuals or corporate, increased consumer demand for goods and services is the main fuel for hiring and investment. In other words, regardless of all the partisan talk, government can only do so much. Therefore, it is time to ask some questions.

Reducing payroll taxes for employees increases the money available to workers, but what if workers save more because of the uncertainties in their life?

Tax credits to companies hiring those unemployed for 6 months is a noble thought, but this would primarily fill a vacant existing position – thus not a new job. Do you think any company would create a steady stream of hire-to-fire so can get more credits?

Why should a company expand payroll if their demand for the good or service has not increased?

With demand driving growth, how do reduced regulations increase demand?

Companies are achieving more with less, and are using offshore workers to lower costs. Even with the GOP talking points of lower taxes, less regulations, loosened lending practices, and increased demand, what guarantee do the taxpayers have that the companies will invest in American workers?

A strong financial sector is the foundation for a capitalist economy. With a large reason for our economic troubles directly aimed at the roulette nature of the financial industry and their pseudo-promotion of the housing industry, how can returning to the less-regulated casino environment be good for the economy?

If the housing/building industry drives the demand for much of the economy, what is the plan to stimulate this industry?

Taxes decreases must increase revenue to federal, state, and local governments. What if they don’t?

Infrastructure projects increase the demand for materials while putting more people to work, which also returns money in the form of tax withholdings. However, where/what is the funding source for this investment – and at the expense of doing without what?

Do our leaders construct trade agreements to increase demand?

We have a federal government struggling with the opposing forces of deficit reduction and stimulating demand by providing aid to financially struggling public sectors in order to help local public workers keep their job. Of course, one’s position directly correlates with a concern about the next election.

Meanwhile, as consumers drive demand, three main factors act as significant forces acting on their psychology: high unemployment, a depressed housing market, and a political atmosphere consuming all the oxygen in the room with their battle between the inept, the misguided, and the knowledgeable choosing to be inept or misguided.

With another round of budget ideology ahead of a September 30th deadline, count on Washington lowering not only consumer confidence, but the confidence of the business and banking sectors, thus promoting consumers, businesses, and lending institutions to keep more money on the sidelines.

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4 thoughts on “On Some Economic Questions

  1. You bring up a whole raft of questions, and hence the causes of our current problems. Unlike the Great Depression, we can’t seek growing demand overseas – except for China, who has us beat on labour costs. We can’t pump money into the economy from an over-stretched government, but private business won’t invest until the government gets its’ house in order. Everyone is scared, and scared people, be they citizens, businesses, or governments, would rather save for uncertainty than spend ON uncertainty.
    The only real possibility I can see is moderate investment from the government on infrastructure to “prime the pump” – but with a recalcitrant GOP and the 2012 elections in the offing, can Obama and the Democrats push through such spending, on top of finances already under attack?
    And to add a little bit of dank to the gloom, here’s what will happen to our military if there’s no budget agreement by September 30:
    — DEFENSE SPENDING would be at its lowest point as a percentage of federal spending since before World War II
    – THE ARMY AND MARINES would shrink by 150,000 troops beyond already planned reductions in end strength
    – THE NAVY’S FLEET would drop to 238 ships from the current 285, including the loss of at least two carrier battle groups and amphibious ships needed for the Marines to keep their forces forward deployed.
    – THE AIR FORCE fighter force would drop from 1,990 to 1,512, and bombers from 135 to 101.
    All this, on top of planned cuts due to the “peace dividend” from the drawdowns in Iraq and Afghanistan.
    I wish I had the answers, I could make a mint selling them to … well, the Mint. (Guv-mint, dat is. :) )

    • John,
      You have also given reason why I think that the defense budget should at least not be cut … as a matter of fact, actually grow. I keep saying “think supply chain!” Thanks for sharing.

  2. i think the main problem we have in this country and its economy is greed. corporations are sitting on money, firing americans to send jobs overseas, and padding the campaign coffers of politicians who will cut their taxes, because they don’t want to make less profits, and their upper management don’t want to cut their exorbitant salaries. i understand that corporations are supposed to make money. that’s their reason for being. however, those at the top could choose to be better citizens and get this country back on track again. instead, they’re just biding their time until their political hitmen take over completely and turn this country into a corpocracy or a plutocracy.

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