I do not want you to think I am a pessimistic but believe it not there will be no full economical recovery until after 2010.
Why?
Because the people in the “know” are ignoring one major component of a free market system. Actually, they are ignoring many basic fundamental laws of microeconomics and macroeconomics but that is another blog. What are the economists working for the government missing? They are missing and ignoring the “household.”
A quickie:
1. Household = Workers/Employees = Consumers = You
2. There are “no” needs in the market only “wants.”
Do you have that? You do not have to understand #2 just remember it.
Financial Institutions make their profit from loaning out money and charging their customers fees for the privilege of hold their customers’ money that they loaned out. Consequently, many types of financial institutions do not make money unless their clients are in debt to them. In truth, it is a little more complicated then that but that is a core statement.
The issue: The consumers cannot conduct their fiscal life like the government. What does that mean? It means that consumers can borrow (used credit cards, loans, and mortgages) only so much before they have to cut back on their spending to pay off their debt. Businesses cannot survive without the consumers spending. Is that a true statement? That depends on your present situation in this “recession” that we are in or not in.
Before we go any further, please understand. That any time the government tries to help businesses it is capitalism but anytime the government tries to help the consumers or small businesses it is called socialism or communism. I must make it clear I am not hear to promote capitalism, socialism or communism…I am here to promote taxpayers, all businesses, consumers and the growth of this country.
The Federal government sent out an incentive check to the majority of the Americans citizens awhile back in hopes that they would “consume” and build the economy. In fact they plan to do it again and even offer some projects that promise some “jobs.” Answer these two questions and you will understand a little about how the “government” economists are thinking:
Scenario #1 (Pocket money)
You earn $200,000 or more a year. You receive an incentive check for $1,500. What do you do with it?
Scenario #2 (Less than Drop in the Bucket) You earn less than $35,000 a year. You receive an incentive check for $1,500. What do you do with it?
Scenario #3 (Not FDR era)
The government offers you a job to build highways, railroads, building cable networks and other National and State infrastructures.
Is this being realistic? Out of 1000 men/women at your present job now – how many are qualify for this type of work?
Scenario #4 (six months recovery)
Every US citizen 18 years or old receive a $250,000 (net) check after the 30% tax on the incentive check.
What do you do with it? What does the government do with tax revenue?
Scenario #5 (Long-Term)
1. Cut military spending on equipment acquisition by 15% for the next two years.
2. Increase Higher Education Spending by 15%
3. Increase aid to State’s Public Educational System by 20% cut from Iraq budget
4. Pass a tax-break bill for all businesses
5. Lower household taxes
6. Introduce and pass the infrastructure plan but include research and development
7. Cut civilian contract by 50% and increase governmental hiring up to 20%
8. Ensure that the incentives to business are loans are paid back and are not given away.
9. Raise minimum raise
10. Get the government out of the business of choosing industry leaders.
11. Renegotiate the North American Free Trade Agreement (“spaghetti bowl”) into an Americas Free Trade Agreement to include Central and South America. (2030)
12. Open up the borders by providing a Worker Visa for “all” friendly nations (maybe we should include Mexico too who has never supported the USA in any war or conflict throughout their history)
13. Add scenario #4 and the Global crisis will not be so bad – at least from the U.S. consumer and small business point in view.
Think about it. We all know that the Trickle-Down Theory does not work yet the economist keep pushing it. How about trying the Trickle-Up Theory or better yet why not try both Theories simultaneously? A double edge sword is aways better than a single butter knife when it comes to a battle.
Until there is consistent demand and a better plan there will be no quick recover. I believe that the current suggested recovery plan as suggested will take 24 to 30 months before any sign of recovery and the average person will be no better off.