Mr. Leonhardt offers up an explanation as to why Barack Obama has been unable to kickstart our 'spent' economy: because we, the American people, have finally stopped spending...
If you’re looking for one overarching explanation for the still-terrible job market, it is this great consumer bust. Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future (and many have discovered that they don’t need to buy a new car or stove every few years). Both consumers and executives are easily frightened by the latest economic problem, be it rising gas prices or the debt-ceiling impasse. ...
Now, the economic version of the law of gravity is reasserting itself. We are feeling the deferred pain from 25 years of excess, as people try to rebuild their depleted savings. This pattern is a classic one. The definitive book about financial crises has become “This Time Is Different: Eight Centuries of Financial Folly,” published in 2009 with exquisite timing, by Carmen M. Reinhart, now of the Peterson Institute for International Economics, and Kenneth S. Rogoff, of Harvard.
Surveying hundreds of years of crises around the world, Ms. Reinhart and Mr. Rogoff conclude that debt is the primary cause and that the aftermath is “deep and prolonged,” with “profound declines in output and employment.” On average, a modern financial crisis has caused the unemployment rate to rise for more than four years and by 7 percentage points. (We’re now at almost four years and 5 percentage points.) The recovery takes many years more.
THE notion that the United States needs to begin moving away from its consumer economy — toward more of an investment and production economy, with rising exports, expanding factories and more good-paying service jobs — has become so commonplace that it’s practically a cliché. It’s also true. And the consumer bust shows why. The old consumer economy is gone, and it’s not coming back.
Well, of course we've stopped spending. There's not piles of 'easy' money laying around to be blown on such things as minks and diamonds, because we're funneling much of that cash into our gas tanks. Those of us who have jobs are likely looking over our shoulders, waiting to see if there's an unemployment monster overtaking us. Those on Government dole? Why, they are out canvassing with Barack Obama's 'Organizing for America' for votes so as to keep the flow coming for as long as possible. Nothing new there.
I'm not sold on Leonhardt's notion. It's easy to see that consumer spending is down across all sectors, but when my refrigerator goes out, I'm buying a new one. Dittos for other major appliances. And those things do go out. There's more to our prolonged malaise than just consumers not buying. Perhaps we are sick of socialists ?
Show me one job that's created by taking more tax money from anyone. NOT a government-worker job, either; they don't count. Their jobs are make-work (recall the hiring of the census workers who gave the unemployment curve a little tweak last summer, a tweak that disappeared soon enough).
This...
The biggest flaw with the past stimulus was that it imagined that the old consumer economy might return. Households received large tax rebates, usually with little incentive to spend the money (the cash-for-clunkers program being the exception that proves the rule). People did spend some of these across-the-board rebates, and kept economic growth and unemployment from being even worse, but also saved a sizable portion.
A more promising approach could instead offer a tax cut to businesses — but only to those expanding their payrolls and, in the process, helping to solve the jobs crisis. Along similar lines, a budget deal could increase funding for medical research and clean energy by even more than President Obama has suggested.
A tax cut to businesses to hire...why should they? What would you have businesses hire people to do? If there's no consumin', there's no need for manufacturin', or sellin', or shelf-stockin', or broom-pushin' now is there? A businessman hires an employee to fill an immediate need. If there's not an immediate need for an employee, that employee doesn't get hired, because s/he won't do enough to earn his or her salary. We in business are not in business to pay people to stand around fingering their pockets or surfing the internet - or to make Barack Obama's re-election any easier. If an employee can't do enough for me to earn it's keep, then there's the highway.
Fund more medical research, you say? Read this nice article by Brooksie, also at the NYT, where you'll find him imploring people to stop trying to live forever, spending monies this nation needs to stay alive in pain and misery. We've thrown enough money at medical research over the decades; likely until there's massive breakthroughs in nanobot technology, traditional medical research isn't going to provide any new superhighways to health, or pay for itself. No one lives forever, sorry.
Oh, my. "Clean Energy". Well, sure! let's get started on 100 new nuclear reactors. That would mean shutting down the EPA, and enacting major tort reform, so businesses can get busy creating these necessary new nuclear plants...in my and your backyards. Every damned major metropolitan overpopulation 'burg needs a new source of grid power; nuclear energy fits the bill. Any other ideas for 'green energy' are busts, as they can't scale up to meet demand.
It might be a good thing that excessive consumption is waning; we aren't going to go back to those heady days of buy and toss, buy again and toss again.
Here's a growth industry for you: repair and refurbish. Reclaim and salvage. Let's recycle old products instead of bringing in new 'junk' from China.
The 'new' growth-business model for our future ?
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