What in the world are the leaders of the USA thinking? I was trying not to put a political rant up but…
Government manipulation of the forces of the free market in a capitalistic economy always have long-lasting, latent, negative effects on the market.
THE END!
Forgive me if I miss something or get something in the wrong order, I am not an economist. I am a computer programmer, but I do have a degree in business so I understand, if somewhat imperfectly, economic forces.
I have actually downloaded and read, as much as I can stomach, the American Recovery and Reinvestment Act of 2009. (2009 Economic Stimulus Package) As of this posting you can access this through the Library of Congress at H.R.1
The formal title is:
AN ACT
Making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes.
My reaction to this statement:
supplemental appropriations – Great this means spending in addition to the already deficit Federal Government budget.
job preservation and creation – How is the government going to preserve and create jobs. Does this mean that the government is going to be hiring? Face it the government can’t force a company to hire people, so if the government is going to create jobs it is in the public sector.
infrastructure investment – What? There are two kinds of infrastructure the government can invest in: (1) more government jobs (2) government maintained roads, buildings, cars, and equipment.
energy efficiency and science – That’s vague. “We here-by resolve to turn the lights off at night!”
assistance to the unemployed – OK, people have lost jobs not because of their own actions but because of the economy. We can throw a little their way to feed their kids, but I am not feeding the Octuplets forever.
State and local fiscal stabilization – Great! More government spending on government.
fiscal year ending September 30, 2009 – Well at least they put an end to when the money can be spent. Oh wait, no they didn’t these programs have funding that is available to use until into the next decade.
Division A starts with the statement “That the following sums are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2009, and for other purposes, namely:”. This kills me, “we want money that you have laying around not being used or earmarked for anything else” come on that has to be a joke, right?
As I read on through the appropriations of the bill it occurred to me that none of this is going to lead to more jobs being created.
They are paying farmers who did not have insurance on crops that they lost. I guess the farmers could then pay off the loans they have for this year but they will still be “gun shy” of taking out the same loans next year and will cut back on production because they can’t sell off what they produced this year.
They are putting more money into the digital TV converter box coupon program. How is this going to help stimulate the economy? Wouldn’t it be better to give coupons toward a new TV? Wait, The US doesn’t produce TV’s that money would exit the US economy faster than my 401K disappeared. But I don’t think the digital converter boxes are US products either, so I guess it doesn’t matter.
Putting more money into WIC (I am not saying that is bad), but I have done the math on this and with government programs like this there is no incentive to get off the program. Most of the time the program cuts the recipient off before they reach a level where they can support their family as well off the program as they do on it.
Increasing the amount that the oversight agencies can increase benefits for welfare and social security programs per year. These benefits are for people who are already out of the workforce and don’t count toward the unemployment rate because they are not able to, don’t want to, or are retired from working.
Giving money to NASA and Scientific research. I am all for space exploration and scientific discovery. There are many things including the computer I am typing on right now that would not exist except for government spending on research. The problem is that it takes years for civilian applications of government technology to become affordable and the economy needs help now.
Giving money to the military. OK. I grew up in a family supported by a member of the US Air Force. I have no problem with protecting my freedoms and doing anything to for the armed forces. But, it shouldn’t be part of a economic stimulus package. Again, it looks like the government is hiring.
Giving money to telecommunication companies to deliver broadband internet access to rural areas not yet serviced. How is that going to help?
States are going to get money to be used to bring their education programs funding up to 2008 levels. Well, I haven’t heard of a lot of teachers being laid off, so I guess this will help them keep their jobs, but it is not going to give states any money toward expanding those programs. Hmm, I think we shorted our kids on this one, and I think it may have actually created jobs if expansion of programs were allowed.
Then of course they have to setup a special oversight committee that gets funds needed to carryout the duties and responsibilities of the committee. No actual dollar amount specified just the blank check.
Reading through the tax breaks only makes me mad. There is a 4% tax cut for income over $70,000 or $140,000 married. Businesses get tax cuts. Any tax cuts I might receive don’t show up until next years taxes. How is that going to encourage me to spend now.
Moving on to what I think might have worked…
What caused the economic down turn?
A. Greenspan was praised for decreasing interest rates and spurring on a growing economy. By lowering interest rates it encouraged people to borrow more money, and spent it. Housing costs shot up as people who previously could not afford housing got into the market. Demand went up so prices went up. Investors, primarily banks, came up with riskier and riskier loan programs to get people into the house buying market. Interest only loans, ARM’s of every shape and form, balloon loans all geared to get Marry and John Citizen into a house they could barely afford. Some people were smart and didn’t leverage the buying power to the max but instead chose moderate houses that they could afford and traditional mortgages. Then something happened, more houses were available than people looking for houses the market flipped on its ear and house prices started to go down. Home construction didn’t stop because the bubble hadn’t completely burst.
Speculators in the commodities markets, specifically crude oil, started to buy oil futures with no intent of actually taking delivery of the oil. Refining companies in order to protect their production levels bought large amounts of futures, further driving the price up. This increase in price had to be passed on to customers so pump prices increased. Suddenly, it wasn’t as cheap to ship items, the shipping industry was losing money. Growers of perishable foods were forced to pay higher and higher costs to get their goods to market. They had no choice but to pass the costs on to retailers who passed it on to customers.
Now there where forces pushing consumers to spend less because it costs more to drive to work and eat. We quit buying large cars, we didn’t drive on that summer vacation, we shortened the vacations we did take. We had to, our house’s value was starting to soften, we were mortgaged to the hilt and some of us had to fold under the pressure. Consumers started to declare bankruptcy and get foreclosed on. Banks started to lose money to lend to business. Demand for gasoline went down as we adjusted our habits. The price at the pump started to go down as a result of the less demand. Oil futures didn’t look so appealing and the price of crude fell. Speculators started to lose money. Less spending, lower prices and less profit. Corporations started to feel the pinch and slowed down operations and laid off some workers. And the spiral was in full force.
So how do you reverse it?
If you look at what started the whole mess it was when the pseudo-government known as the Federal Reserve Banking System lowered interest rates in fear that they would slow down the economy. The housing market became artificially inflated. They lowered interest rates too far, so now they can’t go down anymore when it might actually help. The Federal Reserve Banking System needs to be opened up to public scrutiny. The federal reserve chair person should not be elected to perpetual terms and should serve one 6 year term that starts on odd numbered years so that they never coincide with presidential elections or term lengths.
In order for the housing market to recover the federal government needs to let banks that made bad loans or invested in the commodities markets fail. Let the stronger banks and credit unions consume these company’s assets and debts. Sell them off piecemeal, that is what the government would do if I became insolvent and owed back taxes. Then provide money to the banks that survive to provide refinance options to get people out of the non-conventional loans. These banks have proven that they have good business practices. I think longer term, 40, 50, and 60 year loan programs should be made available only for refinances out of current non-traditional loans. New home and current traditional home loans would not be eligible for the longer term traditional loans. This would prevent the houses from being foreclosed. Theses houses will not end up on the market continuing to drive housing prices down. Some stability will return to the housing markets.
Commodities trading needs to be regulated so that speculators can not artificially inflate the cost of commodities futures. Banks and other financial institutions should be banned from investing in the commodities markets and let those businesses that actually consume those goods compete over the supply. I can’t refine oil why should I own futures in oil? or Beans, or hogs, or corn? Let these markets regulate themselves again and get the speculators out!
The biggest problem is that the confidence of the worlds consumers is gone. I have no good way to restore that. I know bigger government and deficit spending wont help, but neither will higher taxes.
I am one of the people who is cutting back, trying to reduce my debt. I wont feel good about the economy for a while and will only be making necessity purchases. Any tax refund or stimulus check I receive will be going toward getting me out of debt, and that will be my mantra for the next few years.
I am still glad I live in the USA and I think we are still far better off than the people I have seen in my trips to China. Good luck to you all and I hope to see you on the other end of the ride.
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