Is there a viable solution to stabilize this present crisis? Coming from someone not really familiar with details of US economics and politics, will a change in the presidency help the problem? When I heard some Obama campaign speeches in 2008, I thought I heard him detail a lot of solutions to the dwindling economy and I thought he had all the answers to the problems facing the US. Has he done what he said and what happened afterwards?
Is there a viable solution to stabilize this present crisis? Coming from someone not really familiar with details of US economics and politics, will a change in the presidency help the problem? When I heard some Obama campaign speeches in 2008, I thought I heard him detail a lot of solutions to the dwindling economy and I thought he had all the answers to the problems facing the US. Has he done what he said and what happened afterwards?
There are multiple solutions, there just isn't the Political will. First things first: No. In the US, Presidents don't write bills, they don't spend money. The House of Representatives, our most dysfunctional governing body, does that. So while presidents usually get the public blame for bad economies and credit for good ones, there is not a lot they can do about it either way. Back to political will:
The big money is in three places: Entitlements (Social Security and Medicare), military spending and tax reform. Cures? 1) Raise Social Security taxes, lower Social Security benefits, or a little of both. 2) Stop policing the world. And I mean a lot more than the unnecessary wars in Iraq and Afghanistan. 3) Reform the tax code to eliminate loopholes and shelters that keep corporations and individuals from paying their share, stop cutting taxes as a political tool.
Medicare? We really shouldn't screw with Medicare IMO. We are the only industrialized country that puts the burden of healthcare directly on our businesses and it isn't serving our international competitiveness or our national health. We should get the other problems fixed and then take another long hard look at a national healthcare program. The current, free market (sort of) system is contributing to our problems.
There are multiple solutions, there just isn't the Political will. First things first: No. In the US, Presidents don't write bills, they don't spend money. The House of Representatives, our most dysfunctional governing body, does that. So while presidents usually get the public blame for bad economies and credit for good ones, there is not a lot they can do about it either way. Back to political will:
The big money is in three places: Entitlements (Social Security and Medicare), military spending and tax reform. Cures? 1) Raise Social Security taxes, lower Social Security benefits, or a little of both. 2) Stop policing the world. And I mean a lot more than the unnecessary wars in Iraq and Afghanistan. 3) Reform the tax code to eliminate loopholes and shelters that keep corporations and individuals from paying their share, stop cutting taxes as a political tool.
Thanks for the inputs, Tim. That's very enlightening, at least from where I come from.
Of the 3 things that you mentioned that can be the solutions, No.2 is of course quite glaring to us here, and those from outside the US. I have friends who view the US as the protector of some parts of the world, specially us here in the Pacific and the South China Sea area. A few countries rely on the US for 'protection' - Taiwan, Japan, South Korea, and we in the Philippines included. It may be hard to stop policing the world just like that but I do agree that someday the US sure can use all that money saved from their military activities here and there and improve their domestic situation.
There are multiple solutions, there just isn't the Political will. First things first: No. In the US, Presidents don't write bills, they don't spend money. The House of Representatives, our most dysfunctional governing body, does that. So while presidents usually get the public blame for bad economies and credit for good ones, there is not a lot they can do about it either way. Back to political will:
The big money is in three places: Entitlements (Social Security and Medicare), military spending and tax reform. Cures? 1) Raise Social Security taxes, lower Social Security benefits, or a little of both. 2) Stop policing the world. And I mean a lot more than the unnecessary wars in Iraq and Afghanistan. 3) Reform the tax code to eliminate loopholes and shelters that keep corporations and individuals from paying their share, stop cutting taxes as a political tool.
Medicare? We really shouldn't screw with Medicare IMO. We are the only industrialized country that puts the burden of healthcare directly on our businesses and it isn't serving our international competitiveness or our national health. We should get the other problems fixed and then take another long hard look at a national healthcare program. The current, free market (sort of) system is contributing to our problems.
I agree. I also want to address some points that Roger made. I am not sure I understand where you coming from. Especially your take on the Central Bank aka The Federal Reserve Board. Its policies are not made in a vacuum . Some of them, are responses to challenge its original mandate could not foresee. Globalization for one. How is it to react to this new paradigm? The USA have some serious problems right now and the Fed cannot simply cling to price-stability. It could even be said that Price stability can be counterproductive in a global economy where prices have a tendency to decrease as new economies (read producers) emerge. Prices are a function of several variables and many of them are not, can not be under any particular entity control, least of them a bank be it a central bank.
Last but not least is the reference to "the American Way of Life". Whatever it was or was thought to be, must evolve, change a bit and not necessarily for the worse. It must be sustainable. Was it before? Was the paradigm on which this ethereal (and romantic) notion was based sustainable? Those are real questions not rhetorical ones.
I also think that the revenues base must grow. Economy like anything in this universe has to fight entropy. Either it grows or it crumbles. For that to happen, there must be investment in the future. This means spending and this must be understood not fought like a disease. Must spending be controlled? Yes. Must it work in the sense of investment? Absolutely. We don't want to borrow to only pay our bills while not producing anything in return. There is a need to think about our future and model it. This requires serious investments in infrastructures and educations (among others) . Both have proven to produce revenues, to ease friction in any economy. The Federal highway System is a good example, The GI Bill another IMO. There are others. we can't for example NOT have high speed trains. The USA are a vast country and it would be well served by high speed rail system moving goods and people more rapidly and more efficiently thant the roads or the canals. This is a need the USA presently have and one which can generate jobs and revenues. We have to invest in our education. THere must be a way to think about reducing its cost impact to the individual. it cost too much to be educated to the individuals to receive an education in the USa. That is areal problem, one many here may be feeling right now. That is a serious problem that needs to be addressed and quickly.
Last Borrowing seems almost shameful for many Americans, as in the USA borrowing money from other nations... Well while the USA don't do that they sell their bonds and to me that is a very effective way to raise needed capital, a very effective way to boost one's economy. The USA must project and have plans that their future will be better than their present for this to continue and that requires, yes, investing in the future. Which really means spending. Bonds issuers and bonds owners are in a relationship. The relationship importance increases with the amount. It is in the bonds holders interest that the issuer be able to pay. Not the other way around. So as long as you can pay, and that is only done with generating revenues, issue bonds, you can and you should...
Long post I am done for now.
Well the markets are saying a lot of things this morning, but the big message is "we have no confidence". There is no confidence to take the neccessary steps to put our house in order. Too much corruption,no transparency,too much leverege,and the U.S. financial system is on the brink again.
After a serious decline in stocks,normaly you get a bounce of more then a few hours. This mornings action is terribbly bearish and is known as a "one day wonder". We will just have to see if yesterday's bottom holds. This is a world problem btw and has serious implications for everybody.
What we are witnessing is the (inevitable) end to the Wests' 100 year progressive experiment. The West suffers from a lack of confidence in it's own cultural inheritance and ability to manage its future. Indeed, we have spent our children's and grandchildren's future as we have attempted to prop up the social welfare state. It doesn't matter if you spend 25% of GDP like the US or 70% of GDP like Sweden, in the end, the government becomes the only part of society that grows and while private sector withers away.
Europe is probably a lost cause. Not only is it further down the road, it's probably already driven off the veritable cliff. In Europe we are witnessing the final irony of the communitarian impulse: that it ultimately makes people more indolent and selfish. Rioters message is clear: I don't care about my kids (let alone future generations) and I don't care about my country, keep my benefit checks coming! Of course Europe's demise is hastened by it's unique demographic problems, which are symptomatic of it's underlying torpor. The idea that the US should emulate this model is a fool's errand. Yet as we watch Europe go over the cliff, rather than pulling off the road, or better yet turning around, we press ahead and floor the accelerator.
I always have to chuckle when people refer to government spending as 'investments'. If government spending was an 'investment' Sweden would be the world's biggest economy. Ironically, as the social welfare state grows it subsumes the other core functions of government such as defense and crowds out programs that could be considered an 'investment'. Currently greater than 60% of the Federal government's budget goes to SSI, Medicare and interest on the debt. These programs will soon consume greater than 100% of the budget. This isn't investment, it's redistribution of wealth from a shrinking productive class to a dependent class. Of course, as Herbert Stein once noted, "If something can't go on forever, it won't" and clearly the situation is unsustainable. BTW, when talking about sustainability why doesn't anyone talk about financial sustainability?
You can't change the trajectory of this process without recognizing that government subsidized healthcare is the primary driver of the spending curve; the one where spending goes literally of the right side of the chart in a few years. You won't make a difference by closing all tax loopholes other than the business deduction for providing health care benefits. We need to return provision of health care responsibility back to the individual.
One last comment, the US spends twice as much per student on education as the EuroZone, yet at best we rank in the middle in educational results. Does anyone really think we are getting a good return for our investment? Has anyone noticed that outstanding student loans now top $1 Trillion!
Agree with you 100%. To add.. Ever since my very first job as a newly immigrated teenager in deadly hot summers of NC in the 70’s, I had been paying into the Social Security system. However, I have hard time these days understanding why US government is paying for elderly immigrants with SS and Medicare benefits even when they had not worked a single day in US…
Ki
Would you suggest that the elderly immigrants should be left to fend for themselves or simply be kept out of the country?
@jazdoc
I'll come back later on the $1 trillion loans later ... and the state of Europe and the rest of your points ...
Poor Sweden. When American conservatives go looking for the butt of a Euro-Socialism joke, Sweden gets picked on a lot. But if they subscribe, on any level, to the notion that an economic system should serve the economic conditions of the nation under its influence, they might want to do a bit of homework and pick on somebody else. A bit of data for you:
GDP growth (2010) Sweden - 7.3% US - 2.8%
Unemployment Sweden - 7% US - 9.2%
Average gross income Sweden - $63,312 US - $46,320
Credit rating Sweden - AAA US - well, we know this one, don't we?
Taxes? It's hard to figure. I don't doubt for a moment that Sweden's taxes are higher than ours, but ours are so broadly dispersed among state, local, federal, corporate, capital gains, sales, fees, yadayadayada, that frankly it's pretty hard to get a meaningful number nailed down. Well, the Heritage Foundation seems to think US tax revenue as a % of GDP is about 26%. Me and my accountant beg to differ. In any case, whatever the Swedes are doing, it seems to be working out fairly well for them. The Economist's "Quality of Life" index puts them at #5 with a score of 7937. The US, by contrast, is #13, with a score of 7615.
Hmmm...not so sure about this one either. The most recent I found quickly was 07-08, but then, according to the National Center for Education Statistics (US Department of Education), per child expenditure in the US was $10,441. Do you have numbers for European spend jazzdoc? And a source?
Have you been to Sweden? Just got back from a trip there recently, have worked there several times; even got engaged there. They've had their troubles like everyone else, but now are in pretty good shape. And the people are by and large happy there and in favor of their govt.
Am very curious about that education # too.
Update, charts -- let's assume they're in the ballpark. I don't know where your 2x as much on education vs. Eurozone comes from. A huge problem in this whole debate is numbers are constantly mangled or ignored.
Chart PF1.2.A: Public Expenditure on Education by level, per cent of GDP, 20071
Countries ranked in descending order of total spending on education as a percentage of GDP
Anytime the market can't rally after a large swift decline,that is troubling. Today's action does not bode well as traders are still trapped and unless sold out on yesterdays pop up,can only sell into a declining market. The only thing positive is the market is severely oversold here,but that is also when the most severe declines happen. Tonight's Futures action will be critical for tomorrow. Just an older trader sharing his thoughts.
Sorry for the slow response. I'm visiting my dad in Kansas City. One of our stops today was at the Federal Reserve Bank of Kansas City. $210 M, 600,000 square foot building with enough marble and large offices to make a rapacious corporate raider envious. Walked out with a bag of (shredded) money. Couldn't help but chuckle that the exhibit entitled "Why You Can Trust Your Bank" was 'unavailable'
I spent a couple weeks in Sweden ~15 years ago and had a lovely visit to Stockholm and Malmo. The Swedes are nice people but somehow I don't think the Chinese are really doing a lot of long term planning around their economic rivals in Sweden. And of course, visiting Malmo is a little more dicey these days...
Yeah, it pays to look at the sources, and sometimes it's hard to figure out what is what. Even seemingly independent, scientific, statistical sources will often be suspect because their funding is far from independent. But thinktanks, advocacy organizations, anyone with an investment in the outcome is highly suspect.
Sorry for the slow response. I'm visiting my dad in Kansas City. One of our stops today was at the Federal Reserve Bank of Kansas City. $210 M, 600,000 square foot building with enough marble and large offices to make a rapacious corporate raider envious. Walked out with a bag of (shredded) money. Couldn't help but chuckle that the exhibit entitled "Why You Can Trust Your Bank" was 'unavailable'
I spent a couple weeks in Sweden ~15 years ago and had a lovely visit to Stockholm and Malmo. The Swedes are nice people but somehow I don't think the Chinese are really doing a lot of long term planning around their economic rivals in Sweden. And of course, visiting Malmo is a little more dicey these days...
My apologies, I thought you were comparing US/European costs of public education. You're talking about higher education? I'm not sure why the cost of a college education is rising so rapidly in the US, but I had to guess I'd go with the states' inability to subsidize it to the levels they once did. I have some friends in academia and I assure you it is not the bonus structure.
I don't think the Chinese are really doing a lot of long term planning around their economic rivals in Sweden.
No, I don't think we'll be considering Sweden a major economic rival either. And I don't think we have for a hundred years or so, if ever. The happy, healthy, relatively affluent Swedes seem oddly unconcerned by the fact that they're not a leading global economic power. Perhaps they asked themselves: Is the objective of a nation's economy perpetual growth and global economic power, or is it to create sustainable prosperity for its people? Perhaps they came to a diffferent conclusion than we did.
Your references. although it is a stretch to construe the Schumpeter blog post as a reference point toward the high cost of education and that is a fact. Higher Education is exceedingly expensive in the USA and put higher education out of the reach of many desiring it. Worse it almost guarantees that the student out of college will be saddled with loans...
Don't you think education is a necessity and something the government must invest in? I must tell you that the rest of the world is not standing still and is actively investing in their people education. So far this has been fruitful.. More than 50% of the software you are using right now to power your PC (I don't know about Macs) comes in great part from one of these countries who have invested heavily in education (India) and that is currently reaping the benefits of such investment. Let's talk about China .. Do the USA wants to pull from this race and revert to what ...? The returns on the investments on education may no tbe what they should , it does not make the investment no less important. it demands however that the results be commensurate with the investment .. A whole different notion , that of accountability.. It remains however that in this new world order the more educated nations will reap the. That demands investment in higher education in whatever form this (Higher Education) may take: Regular, Brick and Mortar Institutions of Higher Learning or their virtual counterparts ... I wouldn't expect this to come from the private sector .. Would you?
This country is founded by immigrants young and old. I am an immigrant as well. There is a process where all potential immigrants have to prove that they have the means to support themselves or will be supported by someone who is already living here. All immigrants who can contribute to the society without being burdens should be welcomed even the older ones. ;-) I am old BTW. My point was the immigrants who receives government handouts today all must have gone through the screening process and yet they are living off of other working people. I am sure their free money has contributed to the current US deficit problems...
Well I differentiate between getting an well rounded education (which is good) versus marking time until so that you are credentialed in "[Fill in the blank] studies".
In a 2003 study (http://www.oecd.org/document/24/0,3343,en_2649_39263238_43586328_1_1_1_1,00.html), children of many countries were asked if they were good at math. 72% of US students said 'yes' while 25% of Hong Kong's students responded in the affirmative. Yet when actually tested Hong Kong's student's finished 3rd while American's finished #35 (but they felt good about it).
Does anyone really think that outsourcing K-12 education away from local governments to Washington DC has been a good thing? Isn't this really a core function of local and state government?
I'll share you one personal anecdote. My oldest son is almost 17 years old and attends public school at a high school which is consistently ranked in the top 100 nationally. He's certainly not an academic superstar but carries a 'B' average. He will be eligible to vote for President in 2012. This year he will take his first civics class. One evening while his mother was helping him study for his class in 'World Cultures', I casually asked him if he know the three branches of government. He thought about it for a moment and then responded "I know that one! The CIA, the FBI and I forget the third".
Well I differentiate between getting an well rounded education (which is good) versus marking time until so that you are credentialed in "[Fill in the blank] studies".
In a 2003 study (http://www.oecd.org/document/24/0,3343,en_2649_39263238_43586328_1_1_1_1,00.html), children of many countries were asked if they were good at math. 72% of US students said 'yes' while 25% of Hong Kong's students responded in the affirmative. Yet when actually tested Hong Kong's student's finished 3rd while American's finished #35 (but they felt good about it).
Does anyone really think that outsourcing K-12 education away from local governments to Washington DC has been a good thing? Isn't this really a core function of local and state government?
I'll share you one personal anecdote. My oldest son is almost 17 years old and attends public school at a high school which is consistently ranked in the top 100 nationally. He's certainly not an academic superstar but carries a 'B' average. He will be eligible to vote for President in 2012. This year he will take his first civics class. One evening while his mother was helping him study for his class in 'World Cultures', I casually asked him if he know the three branches of government. He thought about it for a moment and then responded "I know that one! The CIA, the FBI and I forget the third".
We get it, you don't like the government. Before we break our crayons let's remember the total volume of DOW Jones was under 400 when it crashed in 1929. Having bad credit may be a good thing. We may no longer be able to borrow money to convince the electorate that we can engage in unlimited spending and cut taxes at the same time.
Does anyone really think that outsourcing K-12 education away from local governments to Washington DC has been a good thing? Isn't this really a core function of local and state government?
When did this happen? I'm not aware of K-12 being run by the federal government, and I have a son in the 8th grade. By the way, that son is 14. He suffered some developmental delays in speech, language, processing and more. Didn't speak until he was almost 4. For awhile, we and his doctors believed he was in the autistic spectrum. Ten years later, in his public school where, yes, they have "competitions" in which everyone is able to come away feeling like a bit more than a failure, he now gets, well, not straight As, but let's just say a B is unusual enough to draw attention. Is all of this because the school's standards are low? I guess that depends on your standard, but he's way ahead of where I was in the 8th grade, and the work he is expected to do is difficult, rigorous and demanding. How do I know this? I know because my wife and/or I work with him most nights, every night when necessary, because we not only know his curriculum and what is expected of him, but we know every one of his teachers, and they know what we expect from them. I can assure you he knows what the three branches of the US government are, and can probably tell you how they relate to the democracy of ancient Greece. He's not the student my daughter, now 27, was, but he's pretty good. And he's not much different than his peers; a little slower, but he gets there. I'm sure these weak examples of America's decline that I keep reading about are out there, somewhere, dragging their knuckles and scratching their sloped foreheads, but I'm not running into them in the humble middle class circles I run in. The only thing I can think of that might differentiate the kids I know from all those listless, unengaged slackers I hear about on the news is parental involvement. It might be something else, but that's my best guess.
