Home > 2012 Election, Capitalism, Economics, Government, Politics > Of Course It’s the Economy, Stupid

Of Course It’s the Economy, Stupid


Economics for Dummies

Let's hope this is on the president's summer reading list.

Well, of course it’s the economy dragging down the president’s poll numbers.  Rasmussen reports that the president currently has a -18 approval rating, even as rumors of a double-dip recession grow.  The spring and summer has seen his approval rating trend sideways in the best of times, and far more often, downwards.  The initial nudge he got from the elimination of America’s enemy number 1, Osama Bin Laden, has evaporated.  The reality of Americans’ paychecks (if they still have them) staying stagnant, while food and goods prices rise, has hit home in a big way.  Crude oil has broken through the $100 mark, and upset Americans even more, as it refuses to retreat to the $75 level we enjoyed just a year ago.  The administration again has seen its economic advisers shuffled, leaving failure in their wake.

For all the administration’s tweaks, quick fixes, bailouts, and creative accounting tricks, the nation still finds itself with a stubborn 9+% unemployment rate, and they try like hell to find any narrow ribbons of hope amidst the mess.  Policy makers in Washington continue to press their “solution” to the growing deficit by claiming increased tax income will somehow fix the mess (all while they continue to spend, mind you).  This is after their claim that the stimulus would keep unemployment below 8%.  The truth is, the only way that they are going to get increased tax revenue is to give some tax breaks to get people spending.  As things are, merely increasing tax burdens aren’t going to do anything with a stagnant economy, where less goods are being bought.  This means the liberals would probably tax income more.  But, wait, there is an election coming up – is the president foolish enough to risk his “mandate” for liberalism on his eroding people’s paychecks?  I doubt it, especially not with a weak approval rating.

So, what does the Obama administration do?  They claim that big business, their favorite boogey-man, is hoarding money, not spending it, but using it for bonuses and to make the president look bad.  Wait, business is hoarding the money, and giving it away?  Yes, those are the claims from the left.  That business is conspiring to make the president seem like a poor economic steward – that’s the party line.  It couldn’t be the spate of insanely damaging legislation passed over the democrat’s years with a legislative plurality, could it? No…  So how to get some of that big business money?  Tax them, of course!  But then, we are back to my conundrum of inactivity not providing an action for a tax to be levied.

So, as the president pays America lip-service, telling us that business is the boogey-man, and that we need jobs, Americans continue to grow further incensed and resistant to he and his party’s rhetoric.  November should have  been a huge clarion call to the democrats, but they seem unwilling or unable to comprehend the fact that their policies were largely rejected.  America spoke loudly at ballot boxes, and yet democrats see something in the economic darkness they speed headlong into.

FORE!

You can't mulligan the economy, Mr. President

The GOP says that the reason for the lack of economic turn-around is uncertainty.  Spending a short time on various financial channels seems to bear this out – there is no talk of a huge, conspiratorial plan to “make the president look foolish.”  The simple fact is, that beyond setting basic guidelines to how individuals should act in an economy, government cannot simply issue an order to behave in a certain way (as they’ve tried with Obamacare), and expect people to follow blindly it, meanwhile having the fiat affect an economy whichever way they desire.  The bottom line is this: it’s the economy doing what it’s naturally going to do – anyone careless enough to try and get in its way is going to get run over – or run out of office.

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  1. June 14, 2011 at 00:26

    The truth is, the only way that they are going to get increased tax revenue is to give some tax breaks to get people spending.

    That has never worked in the past, but maybe THIS time it will.

    Like

    • June 14, 2011 at 00:29

      I don’t see how raising taxes is supposed to increase revenue in this economy. Even holding taxes at current levels, while the economy spins its wheels, won’t have the administration’s desired effect.

      Like

      • June 14, 2011 at 00:36

        Raising taxes on the wealthy will have little to no negative effect on the economy. It might actually have a positive effect since the deficit will be reduced and people might think we have a government doing what’s in the best interest of the country.

        Like

      • June 14, 2011 at 00:45

        If you raise taxes on the wealthy, who also are the group who can most easily take advantage of cheaper prices in other countries/markets, how does it improved the American economy? The rich can also take advantage of shelters, such as stock options, and use loopholes. Closing loopholes would go far further in raising capital than just changing rates.

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  2. June 19, 2011 at 15:27

    JBrenn :
    Closing loopholes would go far further in raising capital than just changing rates.

    Whose trying to change rates? All the administration wants is to let the “tax cuts” expire and go back to the base rates that were in effect. Just trying to get back to the rates of the 90’s, ya know, that time we were on our way to a balanced budget.

    Raising taxes worked for Clinton, and actually, guess what, it worked for Clinton too. The last time we HAD a balanced budget was with Eisenhower, with a 90% top tax rate, however did the American economy survive with all those rich people getting taxed?

    Like

    • June 19, 2011 at 15:49

      With the proposed amounts of increased spending, and the lack of budgets the last two years, there’s no way to meet the expenditures. By allowing the lower tax rates to expire, it has the action/effect of raising them.
      The tax rates of the 1990’s, are pointless unless the spending matches the rates of the 1990’s too – with this administration and Senate, that’s just not going to happen. What America needs, rather than raising rates on everybody, is a better way to determine and tackle government wastes, and overall, a better return on investments. Simply throwing money at problems isn’t going to solve anything, but it will increase waste.

      Like

      • June 19, 2011 at 22:33

        The bulk of our spending we do now that we didn’t do in the 90’s IS the tax cuts. Then the wars and the increased spending on social programs.

        The cost of the wars is decreasing now, if the tax cuts are allowed to expire and as the economy grows the spending on SS shortfalls, or unemployment insurance, and medicaid goes down. So the spending CAN go back down, relatively close to 90’s spending.

        Obviously fixing wasteful spending is a necessity, but claiming that cutting spending is the only way to fix it is mistaken at best, and lying at worst.

        Like

      • June 19, 2011 at 23:06

        Increasing spending is the bulk of what’s built the current problems. It should be simple enough to look at all of the things the last few years of the republican Congress’ and the massive spending increases of the democrats’ in the Senate and House didn’t pass (but somehow still did (‘deemed it to have passed my eye!) At this point, anyone who believes that the government is going to come through on any of its promises, is a fool. It’s simply untenable, and when people have dollar signs in their eyes, that’s still no excuse to support country-ruining spending.
        The wars we’re involved in are draining the country, as well as the “kinetic” wars-that-aren’t-really-wars are. Even if we were to begin pulling troops out of Afghanistan tomorrow, I think it would be ten years before the completion (at the earliest).

        Like

  3. June 19, 2011 at 16:54

    Great article J. Brenn and well done. I am leaving this mostly for your readers who seem to think big business is the boogie man.

    J. Brenn’ you are 100% right on big business being the lefts boogey man. It takes the heat off Politian’s poor economic policies and directs the blame at the greedy business man. I have been watching the left very attentively since 1978. I was in business running 3 separate businesses from 1978 to 2009 or 33 years. The $2.5 trillion is not money sitting there doing nothing as the media keeps repeating to the public. Here are a few facts; there are 1.1 million small and large corporations that hold this $2.5 trillion. 70% of this amount is used for operating expenses weekly monthly and quarterly. Businesses don’t get a paycheck every Friday like an employee they run on 60 and 90 day business cycles. They need 70% of that money to pay their employees on time and there creditors and operating expenses called overhead.

    The math works out at the average of 70% is needed for operating expenses works out they only have $750 billion in expendable cash. Then divide that by 1.1 million companies and each corporation only has $681,818.00 not trillions as the media reports. I just wanted to explain to people or your readers to show how the liberal media not you J. Brenn’ creates a boogie man.

    Seems a lot of the comment from your guests they want to raise taxes on the rich. Taxing the so-called rich or corporation is really taxing the general public. Few points here first if you have a 401K you invest in stocks through a 401K plan and if they raise taxes on corporations it comes directly from profits paid out to stock holders dividends in 401K so the public losses here.

    Corporations will increase prices to the public to make up for part of the losses from the higher taxes to keep dividends and the stock value up. This raises the cost of any product or service that we buy so how does that help the little guy? Every that is taken comes from some were and goes some were. We the public need to learn that money doesn’t grow on trees and money normally doesn’t fall out of the sky.

    Raising taxes on corporations to pre bush tax cut level will produce about $70 Billion in tax revenue. The on budget deficit is $1.55 trillion and the off budget deficit is an additional $400 billion for a total of deficit of $1.95 trillion for 2011. So raising $70 Billion in higher taxes on corporation will not even put a dent in the deficit and leaves us with $1.88 Trillion deficits. It’s not a revenue problem it’s a government spending problem.

    There will also be job losses from cuts made buy the corporations trying to cut expenses to keep profits up for the above reasons. I refer to the 8 million layoffs and firings after the bank collapse of 2008. Job losses would be much less in number, but how many more jobs can we afford to lose?

    Like

    • June 19, 2011 at 23:00

      I know exactly what you’re saying, especially the bit about taxing business and how it’s passed onto consumers. Just what does the government think is going to occur when the higher, passed-on taxes are added into the mix with the monetary inflation of the QE programs? It’s a recipe for disaster, in my opinion.

      Like

    • June 20, 2011 at 10:05

      the figure you put up for the deficit INCLUDES the cost of the tax cuts, so you take 70 billion OUT of the deficit since you’re no longer spending, then you add the revenue, that’s $140 billion. Per year, that’s $1.4 trillion in 10 years. So even if all other spending continues, the budget gap goes down.

      Of course, raising taxes on the rich lessens the pressure on the middle class, and helps pay for social programs that stimulate the economy. I know you can disagree with that “stimulate” comment in theory, but in reality we can look at the booming economies we’ve enjoyed as a country. 90’s (raised taxes), 80’s (raised taxes), after WWII (70-90% top tax rate), after the depression (when government spending more than doubled). There’s proof that taxing the rich and social spending during economic downturns serves the country just fine, and there’s NO proof that tax cuts are the answer, just theory. So as the economy recovers, as the middle class goes back to spending, which creates demand, which requires employees, which means more new jobs, which means a growing economy, which means less unemployment, which means less unemployment spending, less medicaid, which all translates to, LESS SPENDING… then the deficit continues to shrink.

      ultimately, we’ve tried the tax cuts, the Republican controlled government didn’t grow the economy at all, the 6 years in which they had majorities, we slowed down and then started to shrink. Why should we try it again? Let’s try what worked last, let’s go back to a Clinton budget, give it a whirl.

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