Why I’m Cautious About Economics in 2010

It’s very simple:

  1. An economy can’t overcome hundreds of billions of dollars of debt in one year.
  2. An economy can’t recover in one year when “real” unemployment is over %10.

By “real” unemployment, I mean people who are capable of working and want to work for compensation or who are on any significant form of tax-backed support;  but excluding people who have sufficient non-tax-backed income-generation by other means to support their household (such as “trust fund babies”. I also put “homemaker” as “real” employment. It’s a job like any other, and strongly affects income (negatively or positively). If it weren’t, housekeepers, baby-sitters, pre-school, and day-care would all be non-profitable.

(That’s a complicated way of saying: Real unemployment takes into account only people willing and able to work. It excludes people who have their own means of self-support – like being independently wealthy, or owning your own gold mine.)

So far, our elected officials have done what I’ve expected:

  • The party in power has taken some good steps, and screwed others up royally. Sometimes both at the same time.
  • The party out of power is whining about it. Really: What would they have done any different, and how would that have been an improvement? Be specific. I say that if the party in power was reversed, we’d still have the same basic set of problems, only with a slightly different attachment of complications.
  • Financial institutions that received a lot of cash bailouts – and put us tax payers further in the red – are handing out bonuses again. Those commitments to cut or give back bonuses? Yup. Worth the paper they were written and signed on.
  • The wealthy, as a whole, are getting a lot of blame. Most of it (not all) is unjustified. Is it really Warren Buffet’s fault that he was ridiculously rich before the bubble burst, and is still ridiculously rich? Hardly.
  • People who bought too much house are still losing their homes.
  • People who stayed sane are still losing their homes, too.
  • The government still can’t figure out what to do about small businesses (businesses employing 50 or fewer people).
  • Neither can the financial institutions.
  • Which means they really don’t know how to run a production-based economy; only a consumption-based one.

Issues that our elected officials are wishing they could ignore:

  • Tax increases. Someone’s going to get hit to pay for all these stimulus packages. There is a strong argument to increase the taxes on those who benefited from or received stimulus packages.
  • Ridiculously low Fed rates. They can’t keep loaning out money at near-zero interest forever. The longer this goes on, the harder – and longer – the recovery will be.
  • Government waste. Stories I could tell. Stories other people are telling.
  • Transportation Security Administration. TSA – a new acronym for Boondoggle. Gun-toting trained guards, with no bullets, has proven to be very ineffective during an actual crisis. Ask the military about Lebanon. And this is only one example of the public theater travesty that is TSA. Full body scanners in airports are useless, when one can rent a repairman’s uniform, drive around back, and wheel an unmarked, heavy package through the employee’s entrance.
  • Federal Emergency Management Administration. FEMA – the last Boondoggle. Katrina disaster. Hello? What was the National Guard for? The Reserves? Just how are they going to sell all those mobile homes that are rotting in the countryside? But don’t worry. They have a plan…
  • Infrastructure. Power grids, bridges, water, waste treatment… Are any of these things going to get repairs, maintenance, or upgrades?

These are only a few of the problems.

Playing “What If?”
Let’s play make-believe. Consider the consequences of the following ideas, if actually implemented. I’m not talking about a rose-tinted perspective where everything works as intended; but a realistic approach instead. Remember, in a capitalism-based economy (make no mistake: The U.S. economy is NOT pure capitalism, but is based on those principles), the main goal of businesses is to maximize profits. This leads to many unintended consequences, as companies and individuals find ways around restrictions on their ability to maximize profits. So consider the following ideas:

What If: To receive a stimulus derived from tax funds you had to do 20 hours (or more) of community service – picking up trash, sorting recyclables – any of the basic grunt work that a person with two arms, two legs, and a few brain cells could do? Well, you’d have to pay for equipment, transportation (buses and trucks), tracking, management… sounds like generating some jobs to me. It would also be nice to see some of the so-called Wall Street Fat Cats (deservedly or not) out there picking up trash with us common folk, even those of us who foolishly took on too much debt.

What If: Companies received a tax benefit for each employee they trained to industry certification in a job? Specifically, the same jobs that are going to H1B visas. We train our own, improve a person’s earning power, increase the overall tax base (higher income = more paid in taxes), and the company gets the tax benefits, morale benefits, PR benefits, fills a business need, AND retaining someone with good institutional knowledge.

What If: For every job outsourced overseas, the company had to train two employees in a new career, or to a higher level and certification in their current profession?

What If: Regulatory requirements regarding banks and investment firms that were relaxed since 1995 were re-instated, while keeping any new regulatory requirements put in place since 1995? In other words, restore the old restrictions, and keep any new restrictions, for a more — wait for it, this is shocking — CONSERVATIVE financial approach?

What If: We created two categories of corporate income taxes? One for income generated within the U.S. borders, say 15%, and one for income generated outside the U.S. borders, say 30%?

What If: It became illegal, punishable by a mandatory hard-labor 10-year jail sentence, to redirect funds from infrastructure to ANY other purpose… in every state? Would the the flood-prevention infrastructure in Katrina-hit areas have held up better? Would transportation routes be in better shape? What would that do to the economy?

What If: Our elected officials actually discussed some of these ideas, point-by-point, with real research and analysis by accredited professionals, instead of mindlessly screaming at each other while trying to protect THEIR OWN paychecks?

Please do NOT fall into the trap of thinking that I support all of these thoughts and ideas. I don’t.

But they do make for some interesting consideration.

3 Responses to “Why I’m Cautious About Economics in 2010”

  1. hola estoy haciendo 2º de la eso y quiero saber si a los 18 años ya puedo presentarme para guardia civil sin ningún titulo solo el graduado en eso. me valdrá. he leído por ahí y todo lo k pone no lo entiendo soy español y mido mas de 1,70.

  2. Jessica says:

    Better save it for retirement, if there is any, becasue this law is going to hurt the funds available for Social Security, and the Republicans plan to put the final nails into the coffing during the next congress. It was nice while it lasted.Better set up some cots in the garage for grandma and grandpa .

  3. Lucio Pannone says:

    stimulus package are really needed right now since the economoy is quite slow these days. ..

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