Why is our economy failing?

[speyfly]

Wanted to get some feed back on this topic. Do you think that our economy is failing? Here is a link that I found to be very interesting. LINK

[Thumper]

What makes you think our economy is failing? Do you equate a mild recession with failure? There have been economic cycles every few years since this country was formed. Recessions can be defined as a lack of growth of the gross national product for two quarters in a row. This recession has been especially mild. We seem to have emerged from this a few months ago and with the economic stimulus of the war we will likely see significant real growth again during the year.

So where is there any sign of failure???

By the way, the site that Speyfly highlights is an absolute hoot. :grin:

[ 04-12-2003, 11:52 AM: Message edited by: Thumper ]

Jack do you find a high unemployment rate, outrageous fuel prices,failed airlines and low consumer confidence mild? :whazzup:
Even McDonalds is losing money :shocked:
It might not be as bad as the ones back in the 80's but I doubt you could call it mild.

[CATCH AND EAT]

Jack I hope you are correct. However as a business person I still see it as a failing economy at this point. A cycle? Possibly. More like a dirrivitive of an overheated economy that imploded. And of course we can certainly attribute the act of 911 as a significant factor of the equasion.

As a republican voter, I do disagree with the Bush plan on cutting taxes. Definatly not the right time to tout this kind of foolishness. We have a very expensive war to pay for now and of course the rebuilding of two nations.

So in some aspects I agree with Speyfly (which is unusual ) President Bush now needs to focus on our nation and bring us back to prosperity. Doubtful he can do this in the next year and a half though. Even with his 77% approval rating I reflect back on his fathers term. Bush Sr. did plant the seeds of growth but the sprouted only after President Clinton and his gang slid into office. Clinton built upon these seeds but he let it get out of control unfortunately. Now Bush Jr. is suddenly to blame for the economic failure.

Folks this kind of failure is built over time. With the events of 911 and the falling of over inflated stock prices and greedy misreporting big business corporations who would have known.

[speyfly]

Thumper, do you think that if it really were a mild resection that we would see the lowest interest rates in 50 years to try to keep it going. How about the loss of millions of jobs and the job losses aren’t over yet. How many people are one or two paychecks away from bankruptcy with bankruptcy at an all time high up 50%? How about our state and local governments financial problems and lets remember our federal debt. Do you really think that the stock market can fuel our economy without manufacturing? Hmmm, I think that things are a little worse off than you think they are.

[Silver Hilton]

I'm with Thumper on this one. The economy isn't failing. It is not as vigorous as it has been. There are a lot of folks out of work, but most nations would love to have our rates of unemployment over theirs.

That said, it could be a lot better. Cutting taxes is not the way to make it better. Focusing on and investing in infrastructure, education, and health care is. All of those things make it easier for our businesses to compete and grow, and that's where jobs will come from.

One of the sad facts of economics is that there will always be poor people. That's why they call it the dismal science.

[El Shaddai]

For all of you Alan Greenspan fans, he had some very interesting things to say about our economy. Clearly it is not failing. In fact it is moving forward, just not at the rate people have come to expect.

Eliminating double taxation is not only a good economic move, it is the right thing to do. Why on earth should anyone pay taxes twice (and three if you die) on the same dollar earned.

Tax cuts stimulate the economy....that is a proven fact. The real question is how much to cut taxes. As for "a war to pay for etc" and running budget deficits that is a spending issue. This President and this Congress are overspending. Quite simply you don't give a drug addict more drugs to help them quit and you don't give the government more money. Cut taxes...cut spending.....it's really that simple.

[corrirod]

Speyfly, you really need to get out from under all these negative vibes. I'm curious to know what your day is like. It must be terrible to wake up every day thinking the world is crumbling and everyone's out to get you.

If they printed the information from that link on a roll of toilet paper I might be able to justify reading it, otherwise never. I tried to graze thru it but once I reached the terms of earth rotation and it's correlation to the worlds economy I had to stop.

The sky is not falling, the world will not end anytime soon, the feds are not watching you(unless you're doing something wrong), yes the banks are trying to make money off of your money(interest doesn't just appear magically), our taxes are NOTHING compared to the freedoms we get for them, and the president doesn't have some hidden agenda to drive our country into the ground. Plug your ears, close your eyes, and all the bad things in your life will go away.

[Thumper]

Originally posted by corrirod:
Speyfly, you really need to get out from under all these negative vibes. I'm curious to know what your day is like.

<font size="2" face="verdana,arial,helvetica">Corrirod --- That is today's best line!!! :grin:

I am not saying that we have not been in a mild recession, or that there have not been difficult times for some. I am merely pointing out that the recession is over if you accept the common definition employed by economists. The sky is not falling. There is no economic "failure".

My glass is half full. Spey's may be half empty.

[speyfly]

Thumper, actually my glass is pretty full. I have done well in my life so there is not much that I have too or do worry about at this point other than the state that this country is in. That said I would like for you to show me any indicators that shows that the economy is improving. I sure can't find that rosy outlook in 2003’s first quarter reports.

corrirod, I said that I found that website interesting but did not say that I believed it word for word so please don't put words in my mouth or spin where you think that I may be because you don't know. I will issue you the same challenge to show me where you find the economy to be improving. BTW I like to get others perspective on issues that are of importance.

[ 04-11-2003, 04:38 PM: Message edited by: speyfly ]

[Silver Hilton]

Originally posted by El Shaddai:


Tax cuts stimulate the economy....that is a proven fact.

<font size="2" face="verdana,arial,helvetica">No, it's not. It is so far from a proven fact that over 400 economists signed a letter in the New York Times recently condemning the tax cut proposal as likely to be severely negative for the economy. Alan Greenspan even pooh-poohed it. It can be demonstrated that bad taxes constrain segments of the economy, such as the luxury tax on boats. But a simple across the board tax reduction, in and of itself, doesn't stimulate the economy. If a dollar is taxed away and then spent by the government, it creates a dollar of demand. If it is left with the citizen, it can create a dollar of demand. There is no difference in stimulus.

Further, since the tax cuts necessarily flow to higher income individuals, it is unlikely that their consumption will go up significantly. Most high income individuals save a higher percentage of their income than lower income folks. So putting a dollar back in their pocket is going to result in something less than a dollar of consumption. So if we reduce government spending by a dollar, and it goes into a millionaire's pocket, we probably have a net reduction in demand.

Cut taxes...cut spending.....it's really that simple.

<font size="2" face="verdana,arial,helvetica">Well, it's not, because of our ill disciplined legislatures. I'd like to see a lot of spending reduced, and to have that done before cutting taxes. The budget needs to be balanced, or down the road really bad things will have to happen. Like hyper-inflation.

Further, if Congress doesn't reduce spending, and they have NEVER shown an inclination to reduce spending, and we reduce taxes, that means the government has to increase it's borrowing. That pulls funds away from the private sector, increases interest rates, and further increases government spending on interest.

The problem is that congressmen and women don't feel the pain of the fiscal mismanagement of huge deficits. They get theirs, and are likely to be dead by the time the chicken comes home to roost. They have lost the will to say to the American people, "You can't have all the benefits and low taxes too. Which do we want?"


Tax cuts are emotionally popular. But the case for them is not economically sound. If it were, economists and the Wall Street would broadly support the plan. As it is, they don't.

It does make sense to not have dividends taxable, as it is a form of double taxation, and that creates a distortive effect. But we can't rationally take the dividends out of the tax flow without adding something else in. It's irresponsible.

[DanS]

Some say the glass is half full.

Some say the glass is half empty.

Some say the glass has 4 ounces in it and it DOESN'T MATTER what you call it.

[ 04-11-2003, 04:43 PM: Message edited by: DanS ]

[GutZ]

The policy to free the Iraqi's has failed miserably, too.

It's all George Bush's fault.

[ 04-11-2003, 04:33 PM: Message edited by: GutZ ]

[Thumper]

Originally posted by speyfly:
I would like for you to show me any indicators that shows that the economy is improving. I sure can't find that rosy outlook in 2003’s first quarter reports.

<font size="2" face="verdana,arial,helvetica">Again, I would refer you to the definition of the term "recession". We were, by that definition, in a mild one a year ago. We are not in one now. I guess I would have to call that an improvement. Wouldn't you agree?

[El Shaddai]

There are a variety of economic theories that vary widely in their conclusions. The fact that 400 economists signed a letter to the NY Times is somewhat meaningless because there are many leading economists who disagree with them. The fact it was sent to the NY Times does further discredit to their assessment (opinion). Wall Street is another very questionable source of economic credibility as it pertains to our economy. Emotion is as much behind Wall Street as good old fashioned profits and cash flow.

Theories aside, Reagan (and I believe Kennedy)cut taxes and federal government revenues grew. It is a fact that consumer spending has a much broader and far reaching effect than government spending, so to equalize their value is misleading. The premise that tax cuts tend to flow to higher income individuals is accurate.....why do you suppose that is? Maybe because they bear the bulk of the tax burden. The premise that "rich" people will be less likely to spend the dollar in tax cuts due to a higher savings percentage is very distortive for two reasons. First of all, they (especially businesses) will be more likely to re-invest that dollar in a manner that will create greater stimilus to the economy. Second, it is the actuals dollars flowing through economy, not a scaled percentage that drives or slows its growth. In other words, spending 10% of one million dollars would be more beneficial to the economy than spending 50% of one hundred thousand dollars.

As for spending, I wholeheartedly agree with you with the exception that I believe it is possible to maintain a high benefit level with the same or lower tax base....whether it will ever happen is another story.

[Lepper]

It's a cycle... Ya get a republican in office and all hell breaks loose, He finally gets things on the up ward swing and gets voted out, to be replaced by a democrat who brags he fixed it all and then at the end of his 8 yrs they have to elec another rep. to fix the problem.. a vicious vicious cycle..

:tongue:

Originally posted by Lepper:
It's a cycle... Ya get a republican in office and all hell breaks loose, He finally gets things on the up ward swing and gets voted out, to be replaced by a democrat who brags he fixed it all and then at the end of his 8 yrs they have to elec another rep. to fix the problem.. a vicious vicious cycle..

:tongue:

<font size="2" face="verdana,arial,helvetica">Dang! We should have those republicans in office all the time then huh?

[Silver Hilton]

El S,

Reagon had an economic boom, not because he cut taxes, but because he increased government spending massively, and because he got lucky, just as Clinton did. There is no doubt that increasing government spending stimulates demand, and he did it, through the military buildup. He talked a good story of fiscal restraint, but the fact is that he spent more money than all preceding democratic adminstrations in the history of the nation, and gave us our first and second trillion dollars of accumulated deficit. That is a great way to stimulate the economy, but it's questionable if it was either fiscally prudent, or honest.

There were a lot of other factors that stimulated the economy during that time. Killing inflation, which Paul Volcker (Chairman of the Federal ReserveBank) did, in SPITE of Reagon's resistance, was pretty important. Ending the oil crisis didn't hurt. Reducing world tension through ending the cold war didn't hurt. Invention of the PC economy didn't hurt. But very few economists in the world will credit tax cuts. Laffer will, but he is basically the Lyndon LaRouche of economics.

I don't cite tax cuts flowing to higher income individuals as a criticism, merely an observation. Others will critise this as a social flaw, I merely point it out because of the likely economic effect. In previous posts, i have pointed out that tax cuts won't effect investment. People invest when they think it will make them money. Taxes only figure in when there is a profit. Capital is nearly free today at today's interest rates, as it was in 1933. Yet, we see low investment, because entreprenuers see few opportunities. Tax rates won't effect that.

The highest marginal tax rates this country has seen came in the 1950's when the marginal tax rate for the top bracket was in the 90 percent range. That coincided with what most would agree as the pinnacle of economic success in the nation. So it is just not evident that high tax rates, a priori, kill economic growth, or that low tax rates are necessary to increase growth.

I don't understand why you discount Wall Street's opinion. The Wall Street Community has more money, to buy more talent, than any other community in the world. They are incredibly motivated to pay attention, where Congress is not. The A students from Yale go to Wall Street, the C students inhabit 1600 Pennsylvania avenue. You're going to tell me that Wall Street doesn't employ the best economic minds in the world? Please pardon me while I demur.

I won't argue with you about maintaining the benefits base at a lower level of spending. It would be foolish to say that government couldn't be managed better.

[Stratocaster]

Its curious the seeming indifference the market has had on the quick fall of Baghdad. I for one was expecting triple digit increases in the following days and then level off. Talk about anti-climactic.

[corrirod]

Reagon had an economic boom, not because he cut taxes, but because he increased government spending massively, and because he got lucky, just as Clinton did.

<font size="2" face="verdana,arial,helvetica">Sounds like we just solved the problem. We're just having a bit of bad luck right now.

That's probably the most brilliant revelation I've heard come out of this whole topic. You think I'm kidding? I don't think we give luck enough credit.

What would you call the investors that socked money into Enron right up till the last minute because their Wall Street Financial Experts told them "of course it's a Buy, what could possibly go wrong"? I'd call them unlucky. Let's not forget the monkey and the nuns that consistently outperform their Wall St. counterparts, skilled or lucky?

[img]graemlins/stupid.gif[/img]

[Thumper]

The stock market (Dow) is up 700 points since March 12. Geez, what do you want?

[Snapset]

I tend to agree, luck has a huge part to play in the economy.(Unless a democrat is in office during a recession, then it is obviously fiscal incompetence. ). I think if there is a root cause, it is the price of energy. Anytime the price of gasoline or electricity goes up significantly, it seems like soon there are all kinds of productive people without work.

[Silver Hilton]

If you want to get depressed about economic prospects, consider this.

Our economy has been driven for the past 20 years on the growth of the technology sector. Much of this growth has been driven by information technology: computers, software, informations systems, network, underlying telephony. This provided huge amounts of profit and growth.

That sector is heaviliy overinvested and underutilized currently. There is something like 3 times the needed capacity of fiber cable laid in the US right now. It will be years before the industry needs to lay more capacity.

The router market is saturated by used gear from companies who bought it and then didn't need it after they went belly up.

PCs are now faster than needed for the underlying apps. The consumer market is becoming saturated. My house has three. The PC is becoming close to being as common as a TV.

Data server growth has slowed, slowing the business for comapnies such as Sun and Dell.

New information system installations have stalled, as companies are realizing that the last generation of ERP and CRM systems aren't generating the payback that was promised. CIOs are increasingly sceptical of the cost benefit claims being made for new systems.

You will note that no mention of government or political party has entered this picture.

The point is that the overall view for the technology industry is relatively grim. There are small areas of brightness, but it would be foolish to think the tech is going to be the wind behind our sails that it was in the 90's.

So, where, America, is our next source of growth?

Joseph Schumpeter, an early 20th century economist, believed that growth comes in cycles, as certain innovations enter the economy and become fully exploited. Such innovations include the railroad, standard manufacturing, electricity, and the semiconductor. It is possible that we have played out the current cycle of growth, and are due for stagnation until the next one. And it's not a given that there is a next one.

If that were true, it implies very different policies than the past policies of trying to stimulate growth. It would imply the need for managing the existing economy for balance, and making sure that everyone got a piece of the non-growing pie. Our current strategy assumes that pie can continue to grow, so that people can improve their lot by latching onto that growth.

To tie this back to the original topic - our economy could be winding down, and it could have nothing to do with the government. It could be an inevitable characteristic of the ending of a cycle of innovations.

[Silver Hilton]

Originally posted by fisherdan:
Its curious the seeming indifference the market has had on the quick fall of Baghdad. I for one was expecting triple digit increases in the following days and then level off. Talk about anti-climactic.

<font size="2" face="verdana,arial,helvetica">We may get a pop if they find pieces of Hussein. But I think we've seen our war rally. Worked nicely for me.

Get thee to the biotech sector...

[Thumper]

Those familiar with the market pretty much know that the market anticipates news rather than responding to it. We got our "good news" spike just before the war got going, and it produced the 700-point net gain over the following 30 days (March 12 to April 12). Next up are quarterly earnings reports due out this next week, and the market has already dropped in anticipation of bad news there. You gotta be pretty quick to beat the pros.

[OldRedSled]

how could anyone claim that bretton woods was un-constutitional....? [img]graemlins/dork.gif[/img]
obviously they dont understand the bretton woods confrence nor do they understand the constuition..
bretton woods was a international trade agreement between the WW allies, it was not a domestic law..... how does that become unconstutitional? someone needs to tell this person that constutionality only applies to Domestic LAWS.

as for the "Privately owned federal reserve".... i may take some time to stop laughing... who is the Private owner.. what is their name....

[lost_sailor]

It's not failing yet, it just sucks.

[Tilla]

It is getting better and will continue to do so through 2004. But...the economists see some tough times in 2005. Apparently the interest rates will be doing some catching up and put a damper on many market fronts. [img]graemlins/berry.gif[/img] Anything wood related will do poorly. High tech will do pretty good. :grin:

[Silver Hilton]

I wouldn't bet on high tech recovering real soon, at least from a stock market standpoint. Too much capacity, not enough demand. I'd love to be proven wrong, however...

[Albacore Tuna Captain]

The sky is not falling, the economy is not failing. For crying out loud, in any free market you will have ups and downs. How the heck can you tell when you are having a good time if you don't have the bad ones? No one can expect an unending rising growing economy without an occassional down swing. Accept the fact that the economy has to make adjustments, that some days there will be more unemployed than other days. Talk of "failing economy" does nothing for the good. It is only for the stimulation of argument and serves no productive purpose. This country has had some extremely difficult economic times and has recovered very well, in fact, better than any country in the world ever could. This present economic down turn is about if not already over. Question of whether the glass is half full or half empty depends on whether your pouring into or drinking from it. OUR ECONOMY IS DOING WELL AND WILL GET BETTER. YOU CAN COUNT ON IT!

[Snakebite]

Originally posted by GutZ:
The policy to free the Iraqi's has failed miserably, too.

It's all George Bush's fault.

<font size="2" face="verdana,arial,helvetica">Eight years of Billy Clinton and his publicly adulterous behaviour and blatent disrespect of his responsibility, and scoffing at the american pulic have a lot to do with it. Billy's attitude about terrorism didn't do anyone any favors either. He should be given a fair trial and hung. Gee, Uh, we didn't free IRAQ? What tv station are you watching?

[crabbait]

He was being sarcastic, Snakebite. Not to worry: I am pretty sure that he has the same vein popping, eyes rolling back in his head, teeth clenching, slathering, mind numbing, blind with rage, shaking from head to foot, rabid hatred for President William Jefferson Clinton that you so clearly do.

By the way, the military that so many were certain that Clinton had stripped to the point of ineffectiveness sure seemed up to the task.

[Lured In]

Is the economy failing? Not IMHO.

I lost my job 8 months ago and have been looking intensively week in and week out. I was formerly employed in the tech sectory and it still is in the dumps by all counts.

Many businesses are cranking so hard they cannot come up for air. Anything that has do with real estate, new home construction, mortgage lenders, title, escrow, etc. That is just one industry, but there are more that are doing better than even during the Dot Com boom of the late 1990's "super econonmy"

Actually I see it as quite the opposite of failing. It is working to bring itself back into reality after all the stock market gambling and venture capital flurry that took place around technology companies. I believe that the economy and the country as a whole is position for a solid and positive growth in the years to come. Hopefully, that means more jobs in the tech sector or I am going to have to go back to school.