Is This an Economic Crisis?
Well, is it? Unemployment is currently at 9.1%., and according to the National Bureau of Economic Research, the United States has been in an economic recession since December of 2007. So, this sounds like a crisis right? But then we take into account that this is the fourth recession in the last three decades, yet also the highest decline in GDP. Though it sounds like a ‘crisis’, the current economic state of the United States is simply: a recession.
Government Intervention Slows Progress
One thing that we all have to remember is that this is a capitalist society; we are here to make money. We do have social programs, such as Social Security, but overall we are a capitalist country. Let me just throw out there that I tend to favor socialistic views; with that being said, government intervention is not always the answer, especially when we’re talking about the economy. Let me give you a few examples:
- When the government stopped regulating telephone lines/companies, rates decreased dramatically. Not to mention now we have caller ID, call waiting, etc.
- It is these same capitalist corporations and organizations that everyone is accusing of being greedy that created the PDAs, smartphones, HD televisions, tablets, etc. Without government regulation, these companies are able to constantly upgrade and update their products.
- Ultimately, it is the consumer that pays the burden of any taxes. For example, President Obama signed the Dodd-Frank bill, which places a “leash” on banks. Personally, I agree that they need this ‘leash’. After all, this whole recession you can argue began with their high risk loans. However, then I remember that this is a capitalist society, and it is the consumer that pays the burden. Have you noticed an extra charge on your debit card recently?? Perhaps the $5 charge just to have a debit card for Bank of America cardholders? Yes. This is a direct effect of the Dodd-Frank bill.
So, what should we do to get out of this economic recession?? Well, for one, the government should stop intervening in the market. Recessions occur naturally, and the economy fixes itself just as naturally. When the economy is stable, government spending (social programs, unemployment benefits, stimulus, etc.) is at about 18-20%; it is currently between 33-35%. (Please excuse the lack of cited resources. Most of these notes I took in my macroeconomics class this semester and I did not write down the sources). Next, the income tax bracket for the wealthy should be raised or tax breaks should be restricted. The whole ‘trickle-down’ scenario where a big business firm makes a big profit, and then sends money down the ranks doesn’t always happen. At least with higher taxes, the poor community that is “living off of the system” will be able to see some of this money that was meant to ‘trickle-down’.
The most important thing, however, is that consumers gain their confidence in the economy; with the media throwing the word ‘crisis’ around here and there, consumer confidence is at an all time low. Consumption is 67% of GDP; half of consumption is the consumer’s trust in the economy. When consumer confidence is low, consumers tend to spend less money: with less money going in, even less money comes out.
Let’s Talk About the Jobs Plan
So, President Obama recently proposed a plan that would create $447 billion worth of jobs. That sounds like an easy fix to the economy right?? Well, it’s not so easy. First we have to realize that to create a SINGLE job in this plan, it costs $200,000; this is for a job for which the salary might only be half this cost, or even less. So where is the rest of this money going?? An even better question is where is this money coming from?? There is a lot of inefficiency involved, and this inefficiency is costly. Now, let’s talk about these jobs. Many of these jobs involve infrastructure, and do not last very long. Not to mention, the inefficiency is ridiculous. It took an entire 3 years to redo an intersection around my job; this seems too long. Prof. Ben Powell discusses that when creating jobs, it is important to create meaningful jobs versus just work.
Financial Literacy
Okay. So let’s talk about math classes in high school. When have you actually used any of that information? Exactly. I have yet to use any formula I learned in calculus 4 years ago. Not to mention Trig, Stats, Algebra… Instead of or along with these classes in high school, a financial literacy class should be required. Half of the blame for the bank bailout crisis goes to those individuals who signed onto a loan that was well beyond their means; this is where financial literacy comes in. Those individuals would have known the high risk that came with these loans and would have had the necessary knowledge to make an informed decision. A financial literacy class will help to avoid these situations in the future.
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