This little piggy went to the free market; after all, we were told to shop. Unfortunately some shopped “on the margin,” meaning there was no inherent value in the paper they were purchasing. Who can blame the Chinese for trying to cash out if they started to feel insecure about the lack of backing on their loans?
Comedian and juggler, with a doctorate in mathematics, Dan Bennett tells us, “One of the healthiest ways to gamble is with a spade and a package of garden seeds.” To those who have been “playing the stock market,” gardening, even at high altitude, might feel like a bit of bliss compared to buying DBS High Notes 5, Lehman Minibonds and Merrill Lynch Jubilee Series 3 LinkEarner Notes — a virtual “caveat emporium” to borrow a phrase from Rhett Butler.
Walter Leon, an economist, writes, “Once their ‘fictitious capital’ (Marx’s term for the capital raised purely by trading financial instruments, without any material basis) has been ‘flushed out’ and the share prices of these institutions have bottomed, they will be sold back to private investors at rock bottom prices and free-market profiteering will resume.” The bailout reinforced the concept of privatizing the profit while socializing the loss.
Even Henry Hazlitt, author of “Economics in One Lesson” and proponent of free market economies, states, “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
It doesn’t take an economist to see the connection between environmental emergency, ultra-expensive war against Iraq, and failed financial strategy. Long-term implications of our Western lifestyles ultimately harm the poor and third-world countries. Forecasts of mass starvation mean death to those at the bottom. Fortunes are made on the backs of workers. To solve the economic crisis, there are going to have to be some changes made. Economies won’t improve through selfishness. Conservation and cooperation are values for all of us. A new national responsibility coupled with conscientious individual changes will create a pathway for future generations to inherit a functioning economy.
A green revolution will provide considerable capital for our country. Creating sustainable lifestyles, developing alternative energy and its corresponding independence can kick-start domestic jobs as well as help halt global climate catastrophe. Consumer choices that favor local products will keep down the cost of living and save fuel. Reduce, reuse and recycle could become mandatory national programs. Conspicuous consumption and irresponsible population growth won’t contribute to economic survival. The seeds of President-elect Obama’s economic plan are about to be planted and can be viewed at www.barackobama.com.
It seems that the overriding consideration of voters on Election Day was the worsening state of the economy. Certainly any ballot measures that raised taxes or were alleged to affect jobs went down in flames, and most moderate or independent voters seemed to believe President-elect Obama on his promises to cut taxes for those under $250,000 in income (or $200,000 or $150,000, depending on when he was talking). The president-elect seems to be making the right noises regarding economic recovery, but will he really take the right steps? And what are the right steps, exactly?
The president-elect has quite an impressive economic advisory team, including Paul Volcker, the last Federal Reserve chairman, who had to bring the country out of the depths of stagflation and recession. What did Volcker and President Reagan, who appointed him, do with that situation? They cut taxes across the board, and they stabilized monetary policy.
Our current crisis has been caused by many things, but loose monetary policy and the regulated ignorance of risk are the two top culprits. Congress demanded that creditor risk be ignored in favor of extending the dreams of homeownership for all, and loosened restrictions on Fannie Mae and Freddie Mac while also ignoring their increasing corruption and losses. Congress and the SEC also loosened restrictions on bundling of subprime mortgages into securities that could be bought and split without regard to the underlying risk factors. These policies created the subprime mortgage loan expansion. At the same time, the Federal Reserve was pursuing a loose monetary policy, which led to the devaluation of the dollar, the increase in oil prices and movement of investment from dollars to subprime mortgage securities. Other factors also contributed, but these particular policies set the stage for the huge housing loan bubble that just exploded.
A stable monetary policy would go a long way to reassuring the world markets that dollars are safe to invest in again. The key here is to appoint someone like Volcker as Fed chairman who will pursue stable money. The other key is to extend the Bush tax cuts.
President-elect Obama’s supporters will scream here, because they are invested in an economic philosophy that states that only the government can create growth and, in order to do that, it must tax and tax progressively. However, the economic truth here cannot be gain said. Higher taxes take money out of the economy, skim off 20 percent and invest it in political priorities, which have nothing to do with efficiency. Progressive taxes especially hurt growth, since those income levels are the very ones that invest in capital creation.
The best thing the president-elect and the Congress can do to help the economy is to extend the Bush tax cuts, not raise any other taxes, and refrain from new onerous regulations in the health care and environmental areas. I think the chances of that are slim to none. So, here comes the recession!
More-of-the-same lost, Kelly. Your reluctance to read Obama’s carefully crafted plan and your eagerness for distortion is harum-scarum, so give it up. We won’t be taking The Right steps anymore. The last eight years have failed our country miserably. Still — President Bush’s tax cuts for the rich and trickle-down economics have been vetoed by the people. Even Alan Greenspan has had to admit that he “made a mistake” when he underestimated corporate greed.
Having addressed the benefits of a green revolution above, let’s look at Kelly’s other stay-away-from-it strategy, which just happens to be one of those pressing national agendas: health care. The Commonwealth Fund Commission states, “The U.S. spends twice per capita what other major industrialized countries spend on health care.” Improving outcomes, quality, access, efficiency, and equity can contribute to our economic recovery. Tax credits for businesses that begin to offer health care coverage and other cost-cutting incentives might halt recession in a more meaningful way than shopping. Kelly’s predicting recession, and I’m predicting she’ll blame it on Clinton or Obama.
Hannah B. Hayes is a small-business owner and an activist for peace and justice. A recent graduate of Leadership Evergreen with a master’s degree in education, Hayes has remained active in this community through her writing and organizing for 35 years.
This has been my week to talk to a lot of small-business people. They’re worried. Small business is the middle class, and they know that new taxes will kill them. More importantly, it will mean that they have to lay off their workers. Increased health care costs, new taxes on small business and on people making $150,000, and the threat of onerous union regulations have them retrenching. They are quickly ending health insurance programs, planning layoffs and paying down debt in order to ride out the storm. It’s “batten the hatches” time.
Hope and change may make Hannah and others warm all over, but they don’t pay the electric bill. Neither does the government. Government can only create jobs by creating new agencies, and those agencies don’t actually produce anything. Tax incentives for new hires means that older workers get laid off, and younger workers who cost less in salary and health insurance are hired. The best thing government can do for the economy is to do nothing, except maybe cut spending so as to reduce deficits. You won’t hear this from President-elect Obama’s policy wonks, but they know it’s true.
Attorney and political activist Kelly Weist has served on the board of directors of the Colorado Federation of Republican Women and is the co-founder of Mountain Republican Women. She is an adjunct professor of political science at Metropolitan State College of Denver.