Monday, September 22, 2008

Monday Editorial: The Economy

This past week has highlighted the American economy in relationship to the coming election. I would not presume to speak with great authority on such matters. In the past, I have preferred Republicans in office to Democrats when it comes to the economy. I am sympathetic to the idea that Bush's first stimulus package had much as anything to do with pulling us out of the economic nose dive we were in when he took office. But I have no expertise to say so.

I attribute our current economic crisis (again, these are my hunches as a complete amateur) to:

1. The War in Iraq
On this one I feel confident. The Iraq War has cost us outrageous amounts that we have borrowed from the Chinese and others. I blame this war as a major cause of our economic crisis.

2. The Runaway oil situation
I do not at all buy the arguments (I haven't heard them lately) that gas prices are simply a matter of supply and demand. I blame investors in oil who have driven up the price of a barrel to their current levels.

3. Vast Deregulation
This is just a hunch, but I think we will find (and I assume the experts already know) that the Bush administration has taken a real libertarian approach to business, vast laissez-faire on the market. I'm not saying they began this approach, but I suspect they've taken it to new levels. I have great suspicion that they have not controlled capitalism the way it has to be controlled to keep Marx's predictions from coming true.

I am a capitalist, not a socialist by any means. But capitalism must be carefully controlled if it is to achieve the purposes that Adam Smith intended it to have. Even John Stuart Mills recognized this in the second generation of capitalists. Smith simply can't be carried forward to a global economy, even a contemporary national one, without taking on board the lessons of the nineteenth century. The key is as little government control as necessary to allow for true competition in relation to goods and services. This blind short selling stuff, on the other hand, does more harm than good, it seems to me.

4. The Easy way out
Here I am really out of my depth, but I suspect that Greenspan and the government might have been a little too soft on bailing people and businesses out for bad decisions. I am not opposed to some of this--I am not for the "let the economy crash; it will eventually right itself" approach. But I wonder if they have played with the interest rates just a little too much, created an environment where taking risks was, well, not risky enough.

5. Republican Entanglements
It is here where the candidates start coming into view. We're in Iraq. I imagine we will get out about the same similarly no matter who is elected because the Iraqis themselves are setting up a timeline for us. So perhaps our economic drain here will diminish some in coming years, although it may just shift back to Afghanistan (where it should have been all along).

Oil is going to be a problem until we aren't using it any more, even if we start drilling immediately everywhere. My strong hunch is that Obama would move faster away from oil than McCain, so I've already given Obama the energy vote.

On deregulation and speculation, it seems to me that a Republican president will have a really hard time going in a different direction than Bush has gone. Here is where I get to Republican entanglements. It makes no sense to me, for example, that oil companies be given massive tax exemptions with all the money they're making. It makes no sense to me to perpetuate Bush's tax cuts on the wealthiest Americans.

These were all tax benefits implemented by the Bush administration that weren't there before. I can see the argument of not taxing small business owners, but the people in the above paragraph are big business owners. I do know some people who earn in the 250,000-500,000 dollar a year range who are so in debt that they might struggle under Obama.

All of that is to say that I find Obama's proposed tax on the upper 5% of the population (much of which is a return to pre-Bush levels) reasonable in order to work on some aspects of American society that have suffered under the Bush administration--like education and social services. I am not for simply handing out money to the impoverished. Roosevelt's initiatives like the WPA created jobs for the poor. So the goal should be to get people working, go to them, empower them, rather than to pump money into the black hole of poverty.

I firmly believe that there are some people out there who are smart enough that, if they really wanted to and if the powers that be didn't get in the way, they could devise healthy systems for empowering those who are in a cycle of poverty and to enable health care for everybody in a way much better than what both those with and without have now. I believe we don't have this now because those who have the power to make it so don't want it so.

In terms of the election, my sense of who to vote for here is uncertain, although I think it leans Obama. I seem remember McCain making some comment in the primary season about not knowing much about economic theory. A week ago today he said that the fundamentals of the American economy remain sound but last night they were talking Depression--not even recession. I fear that McCain will simply appoint the same type of people in this area that Bush has--and thus that whatever the causes of our current crisis, they will simply be perpetuated. I suspect that any hope for change in this area would more come from Obama.

I'm sure some of you out there know a whole lot more about these issues than I do, so I now open up the floor for discussion.


Angie Van De Merwe said...

Perhaps I have a personal, as well as a political bias when it comes to economics.

Our grandson was born premature and had other difficulties than his prematurity. My daughter, who is a pedatric nurse, identified these problems as soon as he was born and questioned the doctors concerning her concerns. To make a long story short, he was dismissed, as was she, over his abnormalities. After 6 months, of difficult feeding, breathing treatments, two hospitalizations, one in which he almost died, he was finally seen by specialists...

Some would think that the aforementioned problem would justify universalizing healthcare. While this would alleviate the problem of favoritism to the underpriviledged, as it is now, it would hinder the quality of our healthcare. My daughter sees children who are quickly seen by specialists due to their "priviledged:" poverty status...She and her husband, of course, had medical expenses to take care of due to these circumstances. While the poor are taken care of, our grandson fell through the cracks because he had insurance. Medicare does take care of the underpriviledged. We are now waiting to see if there are any other complications due to the delay in his treatment.

Why tell you this long story? Because "minority rights" and "poverty rights" have become a way to discriminate against the average middle class family. While I understand the "cause" of minority rights and poverty rights, I do not think that it is a just way of handling prejuidice.

On the other hand, univeralizing healthcare has its pros and cons, and I won't go into those, as most everyone knows what those are. Besides, this has run long.

As far as Iraq, I disagree that our economy's dependence on China is due to that war. Our dependence is primarily due to the greed of business well, as government's inability to live within its they sell our "land" out from under our feet.,so to speak...

As far as regulation, that has bred more harm than good, as nationalizing companies is just a step away, which breeds all kind of havoc on prosperity. I think that we must concern ourselves with the culture of our country, as far as values. Our country's strengths have become its biggest weaknesses...

We will hear more, I'm sure in Friday's first presidential debate. Stay tuned....

Bob MacDonald said...

Bishop Alan Wilson suggests the US is in " ...a new form of “socialism” that, having privatised the profits is now socialising the losses."

Anonymous said...

I don't like either of the two main candidates. The situation with oil prices is due to our overconsumption as a nation and nations such as India and China which want a better life. I believe that free trade makes the world(and our country richer) but that it must be tempered by integrity, honesty, and moral behavior. We as a nation must also provide for better education for all and allowances for relocation and retraining of workers(not simply white collar workers but blue collar workers also). We can't hide from the world. Both Democrats who resisted regulation of Fannie and Freddie in 2005 and Republicans who were too entangled with business are to blame. Ultimate blame, however, lies with all of us as greedy sinners. We wanted as a nation services from government that we have been unwilling to pay for by increased taxes or offsetting spending cuts in other areas. One only need examine the massive budget deficits and cumulative federal debt. Additionally, we have become a nation of spend and borrow(in both the public and private spheres). All of us are sinners and bare some responsibility for these fiscal matters. The next President(whomever it will be) will not have the resources to meet the very promises that he is making. We need to realize that we are like Great Britain during the 30 years after World War 2. We need to get our fiscal house in order, end responsibly these two foreign wars over the next 2 years, and be more realistic. Since Christians believe in both the reality of sin and grace we should leaven our American optimism with prayer and our actions with Christian responsibility and prudence. Our national economic sin is to saddle the next generation with higher taxes to pay for our current profligacy.
John Gardner
Onalaska Wisconsin

Anonymous said...

An obscene public debt caused by the "borrow and spend" mentality. McCain used to take a bold stand for fiscal responsibility, but no longer.

Anonymous said...

When we, as a (supposedly) Christian nation begin to cast our vote for the leader which will make our pockets feel heavier, considering only the easing of our economic burden, instead of voting with our conscience, we are in trouble. It is only a matter of time until this nation implodes upon itself. Get ready - we are living in Rome, my friend...

Ken Schenck said...

This piece suggests that neither candidate has yet sobered up to the implications of last week economically: New Landscape, Same Proposals.

Hope things are well in North Carolina, Stacey. I haven't been this nervous about America's future since 9-11.

Angie Van De Merwe said...

The economy is not going to be able to stand another "bail-out" but the train is coming down the track anyway.
I think that the banks in their greedy need to incur mortgages that were not wise...give money to those who haven't proven themselves trustworthy...means that we all pay. This is why I am against hand-outs...and the Democratic platform as a whole.
But, as has been said, Republicans are too entangled with big business, and now both parties will be hit with lobbyist like never seen before from Wall Street! We needn't think this is a Representative Republic anymore and certainly not democratic..

Elizabeth Glass-Turner said...

Completely randomly, Huckabee's tax plan would've actually been helpful and intriguing. My husband loves it.

John Mark said...

I probably know less about economics than anyone here. I do know we are in trouble when a big company like AIG is basically nationalized; this seems a sign that we are inevitably headed for socialism. And neither party is doing much to stop it.
As for Universal Health Care, I have always been generally opposed to it. Still, the few people I know who have lived in Canada and Great Britain liked universal health care and never saw anyone wait for catastrophic services as I have seen reported by Mark Steyn and others.
As for increasing taxes on the "very rich" why not reduce waste in Washington? Simplistic? Yes. This is anecdotal, but I was told in Canada two years ago that if you make a six figure income (the guy was making 135k a year) your tax rate is 51%. That seems excessive to me and not out of the realm of possibility if we continue toward collectivism.

Unknown said...

Whatever political party gets in, any policy they have will only treat the symptoms of the crisis, not try and cure it.

What would Adam smith have surmised had be been around now ? This financial crisis is revealing how interconnected and global our economy now is. How reliant on each other we really are.

What caused the crisis? Mans failure to control his greed and self interest. How do we overcome our egoistic nature though ?
I have been reading Michael Laitman's blog who has some intersting insights and predictions on this crisis.