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Wednesday, March 21, 2012

Is America's Economy Getting Better?

      Lately on the news many of the forecasters are saying the economy is getting better.  Is it?  What has been fixed.  Nothing really.  Jobs are improving, but not at a level to stimulate the economy.  Everything is barely holding itself together.  Every time there is even a breath of bad news the market slides. Some big companies are trying to manipulate the market to their advantage.  A good example of that is Apple.  They are going to start paying dividends on their stock.  They are going to buy back $10 Billion shares of stock.  Is that a benevolent act.  No it is their way of stimulating sales and getting even more money.  They are already the richest company in the world, but at what cost.  They are not creating jobs in America.  Overseas workers are forced to work in conditions that are making them suicidal.  Conditions that would not be tolerated in America.  Conditons that would make them liable to legal action in this country.  Yet Americans buy their products.  Supporting the oppression of others. Even though it costs them jobs that could be done here.  It does not matter though.  They are saving money on the over priced Apple products.
     Maybe it is time to, not only, not buy Chinese products.  It is time to quit buying American products made in foreign countries.  Recently Bank of America reversed itself.   It cancelled fee increases because of the outrage of consumers.  Well consumers have the same power with international companies.  The companies make the stuff overseas to sell in America.  If it does not sell here they will loose money.  They will have to rethink their program.  Congress needs to get involved on the behalf of American citizens.  They need to start putting taxes on the goods of American companies that are being shipped into the United States.  It could be called an Equality Tax.  Which having said all the above brings me to the real reason for writing this article to start with.  They also need to repeal laws that force American products overseas.  Like the basic light bulb. Which was and is an American invention.
   The big question is how is the economy getting any better.  Nothing is being done to fix America's problem.   The national debt is growing out of control.  Nothing is being done to reverse it.  Having been through a personal bankruptcy certain facts apply just as much at the national level as they do at the individual level.  If you live beyond  your means sooner or later a day of reckoning comes.  When you are borrowing money to keep living at the level you like to live at you have a problem.  The problem is that you have to much debt and you are spending to much.  There are several ways to deal with the problem.  The best is to make more money.  Not just print it, but actually make more money. The government does that buy raising taxes. Private enterprise does it buy creating jobs that pay taxes.  With the government method individuals who pay taxes have less to spend and that hurts the economy.  Private job growth is by far the best way to solve the problem.
     The other way to cut debt is to reduce spending levels.  In other words quit buying as much.  Again that hurts the individual who has to do without some good or service. It also hurts the business which can not sell its products.  Businesses that do not sell as much also do not pay as much in taxes.  However if government spending is cut enough the debt level starts to go down.  The trick is finding the balance of belt tightening and spending cuts that bring things back into line.  In line means spending only what you have to spend and not creating more debt.  At present the country is doing neither.  It is not cutting spending and it is not increasing income by raising taxes. So the debt continues to increase at a rate that is not sustainable.  Sooner or later, I believe sooner, the government will not be able to do all it is required to do.  Even with borrowing huge sums of money.  When that happens it is called bankruptcy.   We are headed there as certainly as the sun comes up in the morning.  You can count on it.  It is going to happen.  The problem can be fixed, but it will take an effort not only of the government.  It will take the creation of jobs and on a much grander scale than is presently happening in America.  Even little things can help start the tide to turning.  Pay someone to mowy your yard or wash your car instead of doing it yourself.  Preferably someone unemployed.  It may help them and it may stimulate people to see ways to create jobs that help others. The ideas are out there. Private enterprise can create the jobs needed.  What needs to be done is to change the way the game is played.
     The rules need to go back to the way they were before a compromise between Bill Clinton and Newt Gingrich set in place a couple of plans that were destined to create the problem we now face.  Clinton wanted  a program where low income people could participate in home ownership in America.  We know what that caused.  The housing bubble and the collapse of the housing market.  In return Gingrich wanted the largest Capital Gains Tax Cut in history.  What that simply meant is that the rich got to take their profit off the top of their income and keep it.   The problem is that they did not make a corresponding cut in the government spending. The income going into government coffers was cut tremendously.  While spending went merrily on its way and still is.  You throw in 9/11 and a couple of wars which raise expenditures and the debt level literally is in explosion mode. With no cuts in spending to offset the Capital Gains Tax Cut.  Also no allocation of extra money to pay for the wars.  The rising debt was not probable, it was inevitable.
     The only solution is to put things back in balance.  Those who benefited from the tax cut need to be taxed to give that money back.  They in essence ripped off the government.  The government did not have the money to give up. The Capital Gains money was already being spent.  During the housing melt down the big bankers raked off more and more profits. Mostly in the form of bonuses.  Money they did not earn and would not have had except for the not well thought out Capital Gains cuts.  Even a non banker like me could and can see that something had to give.  Down the road we may be able to get things back in balance. Then we can make the spending cuts to let the rich have "their" money back  However right now the only solution is not just cuts in spending, but there needs to be a major increase in tax income that is going in the governments coffers.  Till that happens the problem will not be solved.  Eventually the system will collapse.  Somebody will not be paid money the are entitled to.  Money they worked all their life to get.  It will be the people who paid into the system all their lives.  Unfortunately it will not be the ones who took advantage and raped the system to get all they could get.
    The increasing oil prices may bring it to a head.  Oil prices are what drove the collapse in the period of 06-08.  People who are living on the edge.  Ones who have already lost their income and now are losing their unemployment will no longer be able to pay their bills.  The cycle starts again.  On one of these cycles the reality is going to hit home to the government that business as usual is not working.  As the old Biblical saying goes." The writing is on the wall."  The facts are there and they can be seen.  Figures do not lie.  However liars do play with the figures.  The truth is no matter how good things might look or seem,  America is setting on the edge.  Cutting off oil or increasing its price will drive the economy over the edge.  Unfortunately recovery in other parts of the world which increases demand for oil may also drive America over the edge.  At this moment in time the downside holds a lot more potential for happening than the upside does.  In my open letter to the President a few weeks ago(which is on one of my posts)  I showed a way to help the economy, but as usual it was ignored.  This administration either does not care or does not read their mail.  Either way four more years of nothingness that has kept us on the edge, will only drive us over the edge.  Especially if the "Status Quo" is pursued and nothing is done to put things in order.  Right now I think 25% unemployment is more of a possibility in the future than 6%.  Make your own decision.  Make your own preparations for what you see coming.  When it happens it will be to late to start making plans.  In an economy with 25% or higher unemployment violence will explode in America. That is one fact you can take to the bank. It happened in the twenties and thirties and it will happen again.  Might be time to write your politician and tell them to do something.  Can you really afford not to.

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