Whenever Obama talks about how bad our economy is, he always compares it to the Great Depression. According to him, the economic turmoil we’re going through now is the worst since that of the Depression. He is exaggerating just how bad our economy is. According to the Schiller article, our current economy is most similar to the economic recession of the ‘80s, not the Depression of the ‘30s.
By exaggerating, Obama is scaring consumers, lowering their confidence, and potentially stalling economic recovery. People are afraid to spend their money because of the economic woes. This is stalling a “spending pickup,” which would possibly help stimulate the economy (Schiller). Without consumers helping the economy, Obama is taking things into his own hands. He recently signed a stimulus package totaling just under $800 billion. Was this the right move? It will take time to truly know, but there may have been some better alternatives for him to take.
With the economy the way it is, maybe it’s not the best idea to be handing out hundreds of billions of dollars to failing businesses. We’re already in trillions of dollars of debt, yet Obama thinks that handing out another $800 billion is a good idea. If he’s wrong, we’ll just be left with an even larger debt. By giving money to these failing businesses, he is not investing in things that will benefit the country in the future. We are focusing on what will benefit us now, which may not necessarily be good for the future. Economics continually change, so things that work now might not be good ten years down the road.
What we should do is give some of this stimulus money to programs that have been in place for years. There are currently unemployment public aid schemes, bankruptcy courts, and the FDIC, which “has been dealing with bank failures for more than 70 years” (Bhide). If we invest in these things, we won’t have to spend such huge sums of money like we are with stimulus packages.Changes may not come about as quickly as they do from stimulus packages, but in the long run, it may be better. We need to proceed cautiously amid such economic turmoil. Throwing money at the problem won’t solve anything.
http://online.wsj.com/article/SB123457303244386495.html
http://online.wsj.com/article/SB123482908053095381.html
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I agree with the author’s idea that the government should not be injecting billions of dollars into failing companies.
According to Fox News, 67% of Americans believe that it is not the government’s job to rescue financial institutions. Apparently they side with responsibility. That idea is reinforced when asked whether or not they agreed with the following: "Americans are starting to rely too much on the government and not enough on themselves." 76% did. Capitalism entails that we are both free to both succeed and fail, and by rescuing businesses, the government has eliminated the latter. By keeping these banks alive, what happens to the small businesses that are not receiving government money and having their taxes raised to pay for their competitors’ debt? The answer is that they fail, creating monopolies and reducing competition. That eliminates the next potential BOA or Citi from ever existing, a true tragedy. While Obama is concerning himself with the failures he can see, he is ignoring the wonders that are now invisible but might rise up if given a fair chance.
While some may disagree with that on the ground that we would lose many jobs, they are mistaken. Sure, a short term recession may ensue, but the long term picture looks a lot rosier. For instance, a large issue with the financial institutions is that people cannot trust their money is safe. Requiring government money, however, does not make a bank more trustworthy but just the opposite. If these banks were to fail, the FDIC is in place to respond, as the author notes. It also may open the eyes of consumers that they may have to spend more time selecting a bank than they do a computer. If American companies cannot survive, then they should be allowed to fail. We, as a nation, should focus our resources on those things which we can do better than anyone else: the creative industries. Companies like GM are not the future of America. It si the firms like Google that will lead us into a better future.
Sources:
http://www.foxnews.com/story/0,2933,496546,00.html
President Obama is overstating the predicament of the economy when he compares it to the Great Depression, but he does make a valid point in that the economy may end up at that point if nothing is done to stimulate the economy. Unemployment is up to 7.6% as recently as last month, and some experts predict that it could reach 10% before the recession is completely over. It is unfathomable to imagine the United States as a country in which over 15 million fully capable people are without jobs. This is the reason why President Obama has had to exaggerate the condition of the economy, not because of the present but because of what it could become in the near future.
Automobile jobs make up a large proportion of employment, especially in the large automobile centers in the Midwest. People that live in the Northeast may not feel the recession as harshly as those that live in cities such as Detroit because most jobs in the Northeastern United States depend on the service industry rather than manufacturing. Looking at other sectors of the economy, healthcare actually has had a positive job growth in the last few months, which may have something to do with the fact that we do not feel the deep effects of the recession that those whose livelihoods and cities depend on the growth of industry.
Obama’s decision to spend $787 billion on the stimulus package is necessary for the health of the economy, as the massive amount of public works project should be able to create enough jobs to stop the economy from ending up as bad as the Great Depression. The problem with the economy now is the credit crunch, which is terrible for economic growth because it does not allow businesses to borrow money to expand, limiting the amount of jobs that can be created. The United States is currently paying about $500 million in interest on its current deficit, but the only way to eventually reduce the total amount owed to other countries is to stimulate our economy through a series of public-works programs. Otherwise, President Obama’s analogies to the Great Depression may actually come true.
I would disagree with the author of the articles, as some major figures in business already consider us to be in a depression. Although I do not bwelieve that we are currently in a depresssion, I do not think that the American economy is close to recovering. The unemployment rate rises every month, with more and more companies laying off workers in mass amounts. I do agree to an extent that it really isn't the governements job to keep companies such as GM alive. Fox News's stat of 67% of American's not wanting the government to bail out private companies is also interesting. I would bet that the hundreds of thousands of Americans who work in the auto industry and banking industry would disagree. One reason the governement has to intervene is simply so that all of these jobs are not lost. At the same time, if the governement were to split up the $800 Billion among the workers who would be laid off, I am sure that they would all be more than compensated. In other words, I believe that the bailout is neccessary to keep some core American companies and industries alive, and keep the jobs of millions of workers, yet I do not think that $800 billion dollars is needed to do this. Another problem is that there is really no regulation on how the goverment will check to see how this money is being put to use. All of this money may just go straight to the executives bonuses, and we would never know. I would like to see a detailed report made public on how every single dollar was spent. Only then would I be satisfied with the bailout.
In conclusion, the Dow is at a 6 year low, which does not indicate that the economy is recovering. The markets will only continue to go down from here, and we are at least a couple years out before we see any sign of recovering. As one technical stock market analyst said, 2009 will be a year of survival for businesses. There is no way to make money, just try to survive.
I agree that we need to give President Barack Obama time with this issue; we are not in the position, nor do we have enough information as consumers, to judge quickly, and say that the insurgence of $800 billion dollars is a good strategy or not. I think that with politicians in general, especially presidents of the United States, people of the nation are turned off quickly when results do not materialize right away. We, as the people, tend to give that initial grace period too short of a lifespan for presidents, and then, we are quick to judge and quick to decide whether their strategy and plan for action was right or wrong for the country, where in reality, we have no data to back up our claim.
And for reasons why no one is spending in the market, they are simple; uncertainty has taken hold of every household in this country, and that uncertainty has affected spending in ways that could not have been predicted. People have no trust right now in the economy, and even the slightest chance of the government failing at bailing out these major companies and pulling this country around, is the enough reason for people to halt their spending. It is the government that is creating this uncertainty and distrust among the people; the bailouts, the money that is being flushed into the market, leaves people nervous, thus making them less willing to spend. It is a vicious cycle, and the people of the United States will need to visually see the effects of this new stimulus package in order to work in gaining the government’s trust, faith, and confidence back.
Days after September 11th, the great President George Bush said that the best thing the American People could do to help the country recover from such a devastating terrorist attack was to go shopping. He referred to it as being "American" and "Responsible"; turns out he was right. Economic viability depends heavily on the psyche of the consumer. When consumers shy away from spending money, cash flow constricts and gross national product declines. A few reasons why consumer would shy away from spending: inability, uncertainty, and fear.
President Bush encouraged American consumers to go out and buy trucks in order to prevent the economy from stalling. He worried that such an attack would scare people from carrying out their day to day activies and from spending money. As history has shown, we took quite the economic hit from that attack, but not as large of a hit as we could have taken.
This is where Obama should channel some good old fashion economic principle and Bush matnra: Do Not Scare the American People. A good way to do this is to not liken our current economic situation to the worst economic crisis in our nation's history. As supported by the original article, our situations resembles that of the 80's as opposed to the 30's.
I am not saying that he should sugarcoat economic developments, but rather that he should exercise more care in his comparisons. Becasue the last thing we need is to give the American consumer more reason to hide their money under the mattress and keep them away from the stores (car dealerships would help, peferabley American).
In response to rjsabasteanski, I have to say that I completely agree. You bring up a good point about the idea of capitalism. This country was founded on capitalism and the belief that everyone is free to succeed and fail. By helping all these banks and companies, Obama is moving us away from capitalism. By helping them, he is taking away their ability to fail. Failure is a basic part of capitalism. Those who fail under capitalism should be held responsible. Those who succeed had to deal with the possibility of failure too, so why should those who didn't make it be propped up? You're right in saying that he is eliminating the next potential great bank or great company. The smaller companies and entrepreneurs aren't receiving nearly the same help from the government as the big corporations are getting, so they are put at even more of a disadvantage. How will corporations and banks who already failed somehow succeed in the future just because they received billions of dollars from the government? They've already proven that they don't know how to properly manage a business, so there is a good chance that the money could go to waste. Hopefully I am wrong about this.
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