Falling stock market; massive credit market stress; bankers reluctant to lend; bank defaults; companies cutting back investment / plant expansions; large budget deficit; large trade deficit; falling currency; stagnant economy; rising unemployment; high cost of food, energy; and a large portion of the public stating that the nation is on the wrong track, economically.If you think the U.S. economy is presently mimicking that of a third-world country in the 1970s, you're right.
The United States, after nearly a decade of policy errors and business / consumer mistakes, is in its worst condition economically since the stagflation-plagued 1970s, but with credit market problems that dwarf that era's financing challenges.
In a time like this, when new, negative data points occur almost daily, it's difficult to pinpoint when the turning point will occur. But one may occur in as little as four weeks. Are there economists out there who are doubling as soothsayers? No, it's merely the U.S. Presidential and Congressional election, so says economist Richard Felson.
The first order of the day is financial market stabilization. If the U.S. House of Representatives goes along with the U.S. Senate and approves the rescue bill, that's step one toward financial market stability, Felson said. Add ons / companion public programs will further bolster lender and corporate confidence that the credit markets are not going to go the way of the Edsel, he said.
November 4: Voters chart U.S.'s direction
With the credit markets stabilized, if not with favorable credit rates, the American people can pitch in on Tuesday, November 4, Election Day. Felson says, "by making a definitive statement one way or the other what they want is: a) more, mostly-market-based solutions or b) more intervention to get the nation's economy moving again." Divided government, where the public elects one party to the presidency, and the other as the majority party in Congress, would be a mistake as it would more than likely lead to policy paralysis. "Gridlock in Washington is not what we need now," he adds.
Then, provided the government is unified, it can go about solving the nation's 'third world' problems: 1) cutting the budget deficit by cutting non-essential spending or by raising taxes; 2) cutting the trade deficit via tax policies that encourage saving or by strengthening trade agreements; and 3) creating jobs via cultivating new sectors or by allocating public funds to improve the nation's infrastructure, education system, and basic research capabilities.
Then there's energy policy, with a veritable treasure chest of possibilities. Here again Felson believe the American people will be given a clear choice: mostly drilling for more oil, complemented by alternative energies or alternative energy solutions given roughly equal attention as oil.
Some argue that there's not much difference between the U.S.'s two major political parties. Felson disagrees, seeing two, different economic stances in the Republicans -- mostly the private sector -- and the Democrats -- the private sector, with an activator role for government. "In a very pivotal way, Election Day will help chart the nation's path to recovery," Felson said.
Economic Analysis: Few would deny the importance of U.S. Presidential and Congress elections in charting the nation's path, but the financial crisis, and the impact of public policy decisions made now, only magnifies that importance.
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Reader Comments (Page 1 of 1)
10-03-2008 @ 10:30AM
James Connor said...
Any Senator or member of the House adding "pork" to the economic recovery bill should be held not only in contempt of Congress but of the whole American people. This is no time for "pork".