Boom or Bust: All Economic Indicators Say It’s Time to Choose

Every reliable economic indicator available shows that the U.S is poised for either an economic boom, the likes we haven’t see in decades, or a total collapse back into the financial and unemployment quagmire of another recession. And there only a few things in the position to tip the course of the next few decades into the “boom” or “bust” column.

I’d bet everything I own that those things are:

  1. The uncertain political circus that has evolved from extremists who took over the GOP after the election of America’s first black President and 
  2. The resulting turmoil in the economic and tax environment in this country after the economic collapse during the waning days of George W. Bush’s disgraceful presidency.

Companies like Apple, Google and Amazon are sitting on TRILLIONS in cash , but simply do not feel confident enough in the ability of our political leaders in Congress to spend it. These are some of the most dynamic companies in the world, but unless the entertainment companies that run the broadcast news organizations for profit stop encouraging and promoting political divisiveness in their quest for ratings, and start calling a spade a spade, we as a country are going nowhere.

Brinkmanship Is Killing the Goose Laying All the Eggs

Our economy is undoubtedly being held back by the deleveraging and hoarding of cash at both business and personal levels in such numbers that the resulting drop in demand is crushing economies across the planet. Austerity in Europe has broken the euro, China has exploding inventories in cotton, steel, and unsold property just to name a few. There simply isn’t any global demand outside of the U.S.

And yes, a lot of this is because of the 2008 financial crisis. But they are being reinforced daily by global uncertainty and worry that we in the U.S. do not have our own political house in order.

Why are the two connected? Because our tax, regulatory, pension and societal safety net frameworks are all in doubt–because of insane political brinkmanship– at the very time we need them the most, that’s why. Lack of effective regulations have enabled the wealthy and dishonest to steal the entire the U.S. Savings & Loan sector into bankruptcy. Repealing Glass-Steagall brought down the wall between Investment Banks and Commercial Banks, irreparably damaging both. And we seem to forget how devastated the real estate and wall Street collapse in 2008–under the same President that 9/11 took place–left our left our financial sector.

Add to that, The Sherman Anti-Trust Act and the ever-increasing damage from monopolies hasn’t been mentioned since Ronald Reagan began demonizing government and unions,and what you have is a very fragile and tenuous middle class that’s bordering on burn-out.

Investors, businesses and consumers are all holding back just enough cash for the growth and employment to remain stagnant with no robust, sustained momentum in sight without the demand that comes from a stable and confident workforce. With one percent of the population owning the only disposable income available, demand has no chance of increasing. Sure, the wealthy throw some money into the stock market if the only alternative is zero interest from bonds or banks, but it is not being cycled back into the economy with confidence that comes with long term strategies…instead, we get GOP quarterly debt-ceiling squabbles.

All Revved Up But No Roads To Travel On

It’s sad and it’s tragic. The feeling that the economy wants to take-off is palpable, but the GOP is sitting on the national squelch button with debt ceilings, fiscal cliffs, and bullshit economics that have never worked, while the American people have to sit on the sideline watching mommy and daddy fight instead of honoring their commitments to do what’s right for the country.

Americans can see firsthand that the highways are in disrepair. They’ve all heard that ten percent of our most-traveled bridges are structurally deficient. Twitter claims they have 175 million users. Go to #Economy and look at the comments.

The latest Wall Street Journal/NBC News poll, conducted in mid-January, found that Americans see some signs of improvement but that “just over half of those surveyed said they were less confident about the economy as a result of the budget negotiations.” Less confident, because our elected officials can’t act like respectable, and respectful, caring leaders.

The poll essentially indicates that this economy is Washington’s fault, and in a very tangible way, Washington is causative to the negative sense of what’s going to happen in the economy by their inability to simply do their jobs. The GOP seeks to rig the game rather than competing fairly. They spend all of their time trying to manipulate the media and stacking the decks, so that they can keep their jobs regardless of how many suffer.

Richard Curtin, who directs the Thomson Reuters/University of Michigan index of consumer sentiment, says that since August, the index has seen record numbers citing government paralysis as contributing negatively to the economy, including in the survey released Friday.

“People’s incomes are so stretched,” said Curtin, “that any additional uncertainty about how taxes or government spending might affect them has a big impact on their situation and how they plan for the future…There is real economic uncertainty out there.”

In addition, he said, historically, “people have always turned to Washington in times of economic crisis, but now they’re losing confidence in the government’s ability to reshape the economy, and that affects their buying and investing habits.”

How Do We Get This Train Moving?

The GOP’s pivot to the far right has been more responsible for this paralysis than the Democrats for sure, but The President, every President, wants desperately to succeed. As a country, we  need for him to be successful in figuring out a way to make his plan happen. Has it been tough? Hell yes it’s been tough and it could get a lot tougher.

But he owes it to himself and to the country to make one more good shot at working at getting the waste and inefficiencies out of the government. He wanted this job and we backed him, twice, to get it. So get it done.

We need fairer investment and tax reform more than we need him trying to pummel the Republican Party, in the hope of winning the House back for the Democrats in 2014. He had the House in Democrats’ hands for two years and they got lazy and stupid in 2010 and now we’re paying for that too. Harry Reid had a chance to reform the filibuster and chose capitulation instead. That’s pure laziness.

I don’t think getting the House back will be easy either. The effect of rampant GOP gerrymandering and poor Congressional Democratic has seen to that.

But if President Obama could make some sort of headway with avoiding the myriad traps and pitfalls the Republicans are constantly putting in his way, I think he still has a majority of Americans behind him.

But he has to use his smarts, his organization, his connections, and his personal popularity to keep pushing. Pushing on badly needed improvements for infrastructure, pushing on early childhood education and pushing on a trade agreement with the European Union.

He’s got to utilize the support he has to find a way to force through a comprehensive package in three major areas:

  1. New investments must be made that would merge instantaneous jobs in infrastructure with long-term growth-stimulation like a badly needed upgrade of electric and nationwide high-speed broadband capabilities. And he’d have to give some ground on fiscal streamlining and common-sense, written into law, which slows the growth of both Social Security and Medicare imbalances. Massively profitable medical care is crushing Medicare, and the removal of the cap on earnings subject to immediate Social Security and Medicare taxation needs to come before income tax increases. Corporate tax rates are too high, but loopholes and subsidies for hugely profitable industries need to end.
  2. Our choice at this time, in this stage of the economic cycle is not austerity, or governmental timidity. That is the very same set of circumstances that led to the Great Depression. And austerity versus spending is a straw man argument promulgated and exploited by both extremes. We need a specific yet gradual, well-thought-out, long-term plan that balances our need to protect the most vulnerable in this generation while funding the most opportunities for the next generation, while creating an atmosphere of growth. We simply can’t protect two generations in full anymore. We have sufficient resources and capabilities to provide support for babies and grandparents, but everyone must contribute fairly.
  3. Some sort of Big Picture Agreement now, rather than the meat-cleaver that an across-the-board sequestration castration would provide steadiness for the long-term and maybe even bring some of those huge dollars parked on the sideline into the real economy. It’s the one thing that consumers and investors are aching for—a government aggressively working as a dependable unit toward the betterment of the entire country, rather than which party or which people will get credit for it.

After the ass-kicking the Republicans took in the recent election, there seems to be a growing, but fragile group of Republican politicians and C.E.O.’s who could stomach meeting President Obama in a mutual middle ground.

If President Obama makes the effort and again gets shafted by the GOP, he’ll have to endure some rabid “I told you so” jabs from his base. But if he gets enough Republicans this time, in this atmosphere, to meet him half way on a “Grand Bargain”, it would split the GOP like the Red Sea between the remaining sane conservatives and the nutjobs that are shooting themselves in their bare, selfish, and hardhearted feet on a daily basis.

And we’d all be better for it.

Harvey A. Gold

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  2 comments for “Boom or Bust: All Economic Indicators Say It’s Time to Choose

  1. Jim Olson
    February 22, 2013 at 6:08 pm

    @ patriot, good analysis, however I notice you did not point out that the executive has long ago assured the wall street criminals that they would not be prosecuted for their massive ongoing crime spree,and without that housecleaning we will stall and crash, a footnote to history.

  2. Patriot 1776
    February 21, 2013 at 12:16 pm

    Harvey – some commonsense solutions in your article.

    I do not think the steps you mentioned will address the private sector quandry we are in.

    You made mention of corporate tax reform. This is a good idea but I think the problem goes deeper than that. There are trilliions of dollars off-shore or held in accounts here in US that could be invested to help get our economy going.

    Corporate tax rates may be too high now but I think the real reason for reluctance to invest is fear of the future. The fear of future tax increases are what really scare off business. Couple that with fear of increased regulations that tie up money if you put it in play in this country. Ie – you cannot get it back out of the country if things get too bad. I believe this is what really holds business back. Fear of the future.

    The deficit/debt and the Affordable Health Care act are two of the key drivers of this fear. If the Democrats win the House in 2 years business money and business in general will be in the cross-hairs. Business people are vary aware of this. The deficit/debt and AHA are two big unknowns – Business does not know what they will do to our economy and tax rates.

    Personal wealth, big wealth – asset based wealth,not income-based wealth, has already pretty much escaped. People will not leave individual wealth where a tax-starved government can get to it.

    People who make large incomes by working for it are a different story. They will be targeted and taxed. If you receive a paycheck or have a small business – your taxes will go up under a full Democrat controlled government.

    Business has the problem of activity. Money invested in a business has to be active and “work” to make money – and when it does it will be taxed and taxed hard if the Democrats get control of the House. The only escape is to get it out of circulation. Remember business faces two primary risks – normal business risk and taxes. Either or both can devastate your capital.

    I think the Democrats may take control of all three branches because the country is in a downward spiral economically and people want the security of benefits they feel the Democrats will provide to them.

    What is the answer for business, more private sector jobs and ultimately the economy?? I do not think there is a legislative answer. Even capital gains tax reform will not erase fear at this point.

    I think an answer, if there is one, will be event driven – not legislative or some kind of plan. It will come about through events thrust on us – not planned by us. And – no – I am not talking about a revolution. I am talking about economic and financial upheaval.

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