Obama has the power to educate and explain the circumstances of this recession to the American people and to stand firm on implementing prudent policies to help America return to a sense of normalcy. Obama, from day one, should have made it very clear that America has been living in a period of unsustainable excess for many years now, and that it was time to wean us off of the teat.
What more can you say to people who refuse to listen? He didn't do everything right, but he doesn't deserve the blame for that.
What does healthcare have to do with anything? How can you justify restricting one commodity versus any other? If the public is willingly deciding to spend their discretionary income on healthcare - and demanding new procedures and treatments that are expensive to develop - why should the government step in and interfere with that free market process? Healthcare providers and manufacturers do not reap excessive profits, and much of the costs can be tied to necessary government regulation, research, and development. I believe there are pragmatic issues associated with healthcare in America that should be dealt on a moral and economic basis, but I fear that implementing a universal healthcare system would result in far reaching negative consequences to healthcare programs throughout the world and lead to an extended period of stagnant healthcare development. I certainly don't think it would assist our current economic situation, nor will our current version of healthcare reform boost our economy.
If we do not control the cost of health care, the country goes bankrupt. End of story. Whether you want UHC or not, does not matter besides the fact that we cannot pay for the current system on the trend that it is on. UHC provides outcomes at least as good, and usually better, than the US system for as little as half as much money. That means that at least half the money the US spends is simply flushed down the toilet. And it is bankrupting the government, the people, and the private sector employers. There are no known negative consequences of UHC. Just scaremongering.
We are up to 17% of GDP on health care, compared to 8% for Japan. How do you compete in business when you are simply taking 9% of your revenue and destroying it?
The US government's cost is out of control, more than on all other issues combined, on health care costs. The long run fiscal problem in the US is health care costs. Nothing else. It is ultimately the thing that trumps every other issue.
Choosing to not control health care costs is choosing bankruptcy.
If government spending is something you want to control, then you want to control health care costs. If you do not want to control health care costs, don't pretend that you care about government spending too much. You don't.
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I agree that not enough has been done to regulate financial markets. But I cannot help but examine your vision of a central bank that can directly lend to private enterprise with extreme trepidation. It's one leap to allow them to manipulate banking reserves to adjust interest rates, but it is a much larger jump to allow them to fully play God with our lives and our wellbeing. We've given the Fed the keys to the car for decades and they've driven it into the ditch over and over. How can we possibly trust an economic entity that is used as a political arm to function in a proper way? Furthermore, what right would such a bank have to play God with the laws of supply and demand? How do you determine who does and who doesn't get a loan? This sounds more like Soviet style banking that will inevitably end up accelerating contemporary economic problems that we face today, and that is, excess supply and too much debt.
Do you understand the difference between a crime of commission and a crime of omission? The difference between doing something that causes harm versus not doing something that might have prevented harm?
The Fed exists for one reason, and that is to prevent, manage, and mitigate economic crisises. That's why it was created. What is the alternative? A Great Depression once a generation. What that means is that, in the absence of government action, the US would have had at least 2 Great Depressions since WWII ended. Because, that's what the financial markets do. When allowed to.
The Fed's failures over the past 20 years were acts of omission. Greenspan, being a libertarian, chose to ignore those actions that the Fed could have taken that could have prevented this crisis. So people say gut the Fed because it did not act, but then if you gut it for not acting, then it cannot act in the future. Which mean that the mistakes that made this crisis become the policy that causes the next crisis.
Choosing to gut the Fed is choosing for this to happen over and over and over again, each time worse than the time before. That's your choice.
The alternative is a managed economy. You don't want the Fed playing god, but you are living with the results of Wall St. Playing god. The Great Recession is the result of Wall St playing god, and the Fed letting them do it. How is that a better result than the 80 years between financial collapses that having an activist Fed and government delivered?
You and your buddy Paul are wrong about your stimulus theory. My position isn't rooted in arcane theory; it's rooted in thorough analysis. You are choosing to limit your analysis to only those observable effects of some policy or phenomenon on one very visible constituency, and failing to analyze the effects elsewhere (to say nothing of the absent analysis of the intervention which you advocate). Falling home prices and rampant foreclosures obviously put downward pressure on profits, businesses, the banking industry, and throughout the economy as a whole, and margin compression means that some businesses and banks will go belly up. But falling prices are a net positive for those consumers who continue to purchase, produce, and act responsibly, as they now have more discretionary income with which to either consume or save (increasing the margins - and thus, eventually employment - of the producers whose output is now newly consumed; or adding to the stock of loanable funds, reducing interest rates and increasing capital formation, in the case of saving). This is why I believe that your baseline assertion, and the assertion of the self-proclaimed economic gurus in the other thread, are dead wrong about our future without a stimulus and quantitative easing. I also raise questions about deflation being explicitly terrible for an economy.
Wages fall with falling prices. So the net is negative. And Paul is not my buddy.
As for the housing industry and other bubbles that foment under this economic madness. The solution is clear. Anybody with a brain knows what the solution is. But like I said last night, we don't want to meet the man in the mirror.
If a surplus is not affordable and it's just piling up, guess what? Prices need to fall until they become affordable. This is an unavoidable reality, and any attempt to fight it politically only ******s the inherent economic healing process and broadly reduces the general standard of living for everyone. This would only be exacerbated by your government bank loaning directly to producers. Our economic model becomes unsustainable when political entities try to suppress the price system so that it stops reflecting real scarcity and incentives.
The reason banks are not lending is twofold: their balance sheets are impaired, and would-be borrowers are either not interested in taking on more debt or are already so indebted that banks are unwilling to risk loaning them money. The money supply in a credit-based, fiat model is the sum of all assets that lenders are both willing and able to borrow against. The nominal value of most assets is falling, reducing both the willingness and ability of lenders to lend, and quantitative easing does not address this very real matter. Your Keynesian bank would not take into account the depreciation of asset values due to surplus and excess - and given the current economic circumstances - would not be providing loans with necessary collateral to render the transaction as economically sound. All we'd be doing is building the house of cards even bigger. It would just be another political mechanism for kicking the can down the road.
The natural market mechanism to reflect an economy that is over-spending and under-saving is the interest rate. Like all prices, it coordinates economic decisions and allocates resources in a way no legislation ever could. Manipulating it - the domain of the Federal Reserve and the Federal Reserve alone - has consequences, many of which were felt in the 1930s and many of which are being felt today. The grim fact is that as the market as presently configured - and as configured in the late '20s and early 30's - can collapse. Such is the nature of capital markets based on the pyramiding of assets and the expectation of perpetual exponential growth.
This system misallocates resources by communicating to individuals incorrect information about the relative health and capacity of the economy by broadly manipulating interest rates. Because this then produces an inherently unsustainable economic boom, it then too produces an inevitable bust, the costs of which are real, tangible, and very human. I'm of the opinion that wrenching booms, busts, and capital misallocations should be minimized, and that the current nature of money, banking, and capital markets is fundamentally flawed. But even if one disagrees with that conclusion and endorses the current capital edifice, it's clear that the reallocation of capital takes time, and that any political attempt to jigger with that reallocation - by virtue of its zero-sum nature - only ******s the necessary and cleansing reorganization process and exacerbates the human costs associated with an economic downturn.
So just accept Great Depressions starting every 20 years after the last ends?
The alternative is to allow the market to work, allow those costs to be borne by those most responsible for them (and, yes, some who aren't), seek to more fully understand the nature and mechanics of phenomena that tend to create economic dislocations, and - to the extent possible - pursue policies that if not eradicate said phenomena, at least minimize them.
Actually, your way maximizes them. Mine minimizes them.
Unfortunately, life isn't always puppy dogs and ice cream. I object to the notion that we should - let alone can - attempt to insulate individuals from unpleasant realities. I'm advocating for the minimization of those controllable, endogenously caused economic shocks because, by its definition, it's impossible to minimize uncontrollable, exogenously caused economic shocks. A codified social safety net and unending stimulus programs distorts behavior by introducing societally corrosive incentives, moral hazard, and adverse selection. It's not the worst thing in the world for a bit of adversity to intrude on insularity.
If you actually were "advocating for the minimization of those controllable, endogenously caused economic shocks", then we would be on the same side. Because my side does that. Your side maximizes the scope, scale, and frequency of economic dislocation. It is the liberatarian principles that caused 2007-2008. It was the liberal principles that prevented that from happening 1945-2007.
