With a wave of the hand.. there is a big attempt going on to redirect the populace to think fatcats, big banks, and such are at fault or should be punished. Whether they should be or not, is a whole different discussion. The problem is, by spending time and energy on punishment, we are taking our eyes off the ball of the most important thing right now which is jobs and job creation.
Small business creates something like 65% or more of the jobs in an upturn. Small business creates their financing from credit cards and equity lines in their homes. Current new proposals and laws restrict the ability of individuals to receive new credit cards, reduce rates on cards and limit by law lenders ability to determine the creditworthyness of home buyers.
These proposals sponsored primarily by Democrats, attempt to shield their constituents from getting into debt beyond their ability to pay. This is another step away from self determination, and deciding yourself how much you should borrow. The problem is, by reducing the availability of credit, to those that cannot prove “sufficient” income and assets, takes away a primary tool that small startup business people have used for years to start or grow a new business. If you had “sufficient income and assets” you might not be trying to start a new business. Often the person on the street sees opportunities that a banker cannot see. And the very same government through the FDIC is telling the bank examiners to let the banks know that they should be increasing their reserves and cutting back on lending, reducing their exposure to existing clients, much less lending to new ones. The only money being lent out is through SBA Small Business Administration guaranteed loans.. hmmm.. Federal government supervision again. So its unlikely your local or regional bank is going to give you a loan.
A very interesting development as of the last few days. Hillary Clinton and Bill Clinton within just a couple of days of each other both took some aim at President Obama’s current policy of punishing the big banks. Hillary said that foreign countries do not have as much respect for us, or do not have the inclination to follow our suggestions if our economy is weak. This is quite a bold statement, coming from a Secretary of State. And quite different than typical remarks from a person in that positions. One wonders if she is distancing herself from the President, and might take a stab at running against him in the Democratic Primary coming up in a couple of years. And husband Bill said, that in his opinion Goldman Sacks did not violate the law, and that we should be working on growing jobs and business with calm forward looking policy rather than backward looking punishment. Interesting that those two statements came out very close together. These two do not say things they have not thought out thoroughly.
So, the gamble is, will blaming push down the markets, and regulations push down credit availability, sparking a second down dip in the economy. He might be popular, but how long will people buy the idea that it is the Banks fault. After all even if it was, and we prevent it from happening again, will that increase jobs and hiring? No. I do not see how creating regulations that hinder banking and trading will create new jobs in the private sector.
It’s easy to blame the last thing that occurred before and event for the event.
In my opinion I think 20 years or more of having a poor economic and energy policy, creating most favored nation trading status for other countries without product standards for imports is what moved us into this long term downturn in middle wage and manufacturing jobs.
That is the issue that needs to be discussed, rather than real estate and banking.
We cannot just start creating import duties, because now after the fact that will create a trade war and limit our ability to sell treasury bills to finance our expansion of benefits to those that are not paying for them.
This is just what is happening now in Greece, Portugal, Spain and Italy.
The reason the Euro currency has tanked is because there is a limit to how much you can borrow to pay for things. At some point people lending you the money say, I need more interest to pay for the risk of lending to you, or at a further point, I am not going to lend to you at any rate of interest.
China is spending their cash that they own on infrastructure and growth and other job creating areas. The US is spending money it needs to borrow to primarily continue benefits to constituents of those that are voted in.
At some point there is a tipping point. Greece cannot borrow more, and risks default on what they have borrowed so far, because the money was given out to people, not used for improving the jobs and the economy. The people like that and vote in more representatives that will borrow more money, and this goes on until the people they are borrowing from say, you are too high a risk.
Sounds like California, Illinois and a few other States.
It cannot happen here.. hmmm.. It’s different here. We can just raise taxes on the rich.. except there are not enough of them even if taxed 100% to pay for the budget deficit we are not adding to. That will not work.
And, people and Corporations, especially people with money and Corporations with money have choices. They have a choice to take their assets or business and move them to another country. If we act as if we as a government can just keep taxing and increasing rules and regulations forever without them reacting we are very wrong. There is a tipping point. What happens first? Jobs are lost, money and capital are lost, unemployment rises, companies move to other countries. Is that what is happening here?
I read a Chinese paper today online, the growth their is stunning compared to our contraction. We are getting used to high unemployment and a failed economy like we have no choice but to live through it. When you read about their employment rates and growth it jogs your mind.
China’s economy expanded 11.9 percent year on year in the first quarter of 2010. The growth rate is 5.7 percentage points higher than the same period last year. They are clearly kicking our butt. Double-digit GDP growth indicates that the country’s fixed-asset investment and domestic consumption have together generated even more growth momentum in the first quarter of this year than they did in previous quarters, when the country was going all out to fight the worst global recession in decades.
The key words there are that they were successful because they invested in fixes- asset investments. I can remember the talk in the US about a stimulus package that was supposed to invest in fixed-assets, but in the Congress it got shifted over to a majority of the spending being on payments to constituents.. primarily States to spend on employees, and public benefits like foodstamps and unemployment benefits.. hmm.. yes that creates a good economy. See the difference? Its huge. The Chinese have professionals running their economy and we have politicians that pander to the people who elected them who want more for less. Or more for nothing, and have “somebody else” pay for it or its ok to borrow the money. I have not seen any articles about increasing payments to public workers or the like in Chinese newspapers as their response to a slide in their economy. So which policy worked. Theirs did. Are we changing ours yet? No. Whats the path then, continued more of the same, until we change our path to one that works.
We actually have an example that we can see of what worked and what did not. But I do not hear about that in the news.. we are discussing punishing the Banks and the fatcats instead of figuring out how to grow the economy.
Ok. What can we do.
1). Elect people who understand economics and business and employment. And no that is not a blanket approval for Republicans.
Peter Schiff is an interesting Senate candidate. Look him up for some unique reading.
2). We can implement a standard for products that are sold in the United States. All countries that import and all companies that manufacture here in the US will have to meet the product standard. How is this different from what we have now? California just passed a law implementing energy usage requirements for new televisions sold in California. Where ever they are made they have to meet that standard. Now lets think about carbon caps and things like that. The US, no Obama and his followers want to implement carbon output caps for only United States manufacturers. This will allow “developing” countries to not comply, which increases impairments on US companies, and not imports. This is a continuation of the failed 20 year trade and economic policy (or lack of one) which is causing our median wages to tank. If we created a product standard, instead of a manufacturing standard just for U.S. manufacturers, we could reach the environmental goal without losing too many jobs. All impairments cost jobs, but the job loss can be discussed and debated and decided if it is worth the benefit. We should not hide our head in the sand and say that new impairments will increase jobs because it never has.
3). Do not borrow to pay for social programs and payments to people, including benefits for public workers. If we cannot pay for it with cash, which includes taxes, do not increase wages and benefits. We most likely need to decrease obligations and payments for public workers and entitlement benefits until we have a balanced budget again. Increasing taxes, is not going to work, because it will cause a further loss of jobs, or delay the creation of jobs, as people move their money, their companies and families to places that have less impairments.
Public Unions have resisted pay cuts and prefer to have their workers fired or laid off and have the public suffer the resulting cut in public services. At some time we move past the tipping point. The Unions themselves should see that it is in the best interest of their workers to allow the economy to stabilize and grow again. If we cut public workers pay 5 to 8 percent, and required copays for medications, and medical care, and cut retirement benefits, to where our current taxes would pay for the expense we will have a good start.
This would be better than wholesale layoffs and firings. Most of the public sector has taken a bigger pay cut than that in the last few years. Many people have taken a 100% pay cut, so it’s hard to listen and agree with those that are paid for with tax and borrowed dollars that they should not have to receive a cut in pay.
In Oregon, the PERS system ( the public employees retirement system) still allows by past contract of our legislature and Governor, that they get a minimum guaranteed payout of 8% per year on their pension and retirement plan, no matter what the market does. So if the market goes up 25% in a year they get a 25% gain, if the market goes down 25% in a year the still get an positive 8% gain. And the taxpayers have to fund this !! We need to remove public employee Union negotiations from the Legislature and turn it over to an appointed board. The PERS board that supervised the plan was also appointed by a Democrat Governor, was made up of a majority of about 80% of union members. Some oversight. This is why taxes are going up and the jobs and economy are going down. It is not the banks. But I can see how it is in Obama’s interest to shift the discussion to the fatcats and the banks.
We can and should be looking at economic policies that will grow the economy so that all workers, public and union and private can grow their salaries and incomes and benefits again. If we tax and borrow to pay for public workers it will kill the private sector.
Look at the things that Greece is going to do in order to be able to borrow more money. Cut pay and benefits of government funded payouts. Increase taxes.
It is better to cut pay and benefits now to avoid having to raise taxes and cut benefits and pay.
Summary.
1). Cut benefits and pay for public workers, and entitlements until our budget is balanced. Grow these pay levels back through improvement in the economy not by borrowing.
2). Pass Product standards for all products sold in the United States to bring a level playing field back for US producers.
3). Elect knowledgeable representatives; Democrats and Republicans that know about economic growth, business and capitalism. It is the best path to economic prosperity for all.
4). Teach our kids about capitalism and free markets and economics.
The Chinese have it figured out, and while we argue, they have a planned capitalist economy humming along. They do not have lawsuits, and blame, and backwards finger pointing. They do not have elections and pandering and paying out benefits for votes. They spend cash on infrastructure instead of borrowing for public entitlement programs. Which economy do you think will win if we continue our taxing and borrowing and not only does it not stimulate job creation in the private sector but diminishes it?
