The Best Presidental Campaign Lies Gets You Into Office
Economics is not an exact science. You cannot predict the future with
it. There are no crystal balls. It is based on axioms that ultimately are
used to derive theories. However, these theories themselves often prove
equally unsound. Imagine an Economist wearing a black and white wizard's
hat with a silver sparkling quarter moon on the front of it, and draped in
a long black robe sitting in the Oval office before a crystal ball, and
President elect Obama pumping him for answers to the future about the
President elect Obama is planning to initiate another stimulus package for fiscal year 2009. If anybody paid attention during his campaigning before the election he stated emphatically that his economic plan for the new year would change the dire economic circumstances the Bush II Administration plunged the American people into.
In retrospect, the prior two stimulus packages authorized by the Congress and signed by President Bush II had very little impact on the economy as a whole. Ostensibly, Economist in the white house were short sighted in anticipating such fiscal policy would solve the problem. They forgot a lot of things.
One for sure was the lack of foresight for the American consumer. This by far is the most important indicator of how the economy is doing over all. They also underestimated Externalities. Unforeseen events resulting from economic uncertainty simply because they, the Economist, are not telepathic. To prime the economic pump by flooding the market with money, without giving consideration to future adverse market forces, was a sign of desperation.
Rising unemployment was another telltale sign that must have worried Economist. Though the unemployment rate and consumption by the consumer are branches from the same economic tree, they however bifurcate rather than converge. Which means fixed income people such as Pensioners, those persons on disability or SSI, the elderly on Social Security, and AFDC, aid to families with dependent children, social programs, all contribute to the economy most through entitlements.
These fixed income people mentioned above assures us, to some degree, that money is in constant circulation in the economy, even though in the private sector, the rate of employment may be on the decline. Further many people categorized as unemployed are entitled to Workman's Compensation. Though this stream of income is only a fractional portion of their net pay when they worked, it does help to keep a trapdoor of decreasing currency in the overall economy from opening up in recessionary uncertainty.
Here let me add the dreaded tax. That instrument used by governments to impose revenue. All types of revenue such as: tariffs, payroll, excise, sales, and property taxes. The pickle, though, to these revenue generators are whether they're progressive or regressive, and who is doing the paying.
The bad thing about taxes, for revenue generating is the very poor bear the brunt of the burden to pay. That is, their income, if fixed, can wind up a victim of regressive taxes, thus reducing their overall disposable income by some marginal factor. In other words, the more money you have the better off you are.
So there are safeguards, but not without a price. ( no pun intended ) And though I believe these safeguards are enough to ward off a depression in the long run, in the short term of a business cycle they can do very little to avert an economic recession.
The next stimulus package in 2009 by the, in office Obama administration, with rising unemployment, more people being sent to prison, jobs being outsourced, businesses going out of business, a massive twin deficit, in my opinion is doomed to further failure.
President elect Obama will be taking office in a climate of deep-rooted uncertainty. The American people voted for him rather than McCain, because of his hardline focus on the Economy. But the American people are now going to have to face the fact that sometimes you don't always get what you vote for.
President elect Obama to some degree I think understands how the American people feel about the economy, but he may not realize just how uncertain or how deep these feelings of gloom run. That is to say, his consciousness is not their consciousness. The fact is, his struggle to the white house is over. He is within fifty days away from being inaugurated, and the American people can do little if he changes course.
What's to stop him from simply turning away from his campaign promises, and turning to more pragmatic objectives that may be easier to solve than the ailing economy, like the war in Afghanistan and Iraq? By that I mean to say if you do the math fundamentally using Keynesian Economics you may see theoretically why another stimulus package will go down the drain like number one and number two did under the Bush II Administration.
Lets do a little analysis to get a better understanding of why this may be so. There are several functions in economics we need to look at. One is called the Expenditure Multiplier. Since we are in a recession this indicator is used to help determine the amount of money the government needs to close a recessionary gap with, and is usually a number above one. Another function is called the Marginal Propensity to Consume. This indicator looks at how much of their disposable income consumers spend on goods and services.
If the Consumer spends hypothetically 3/4 of a dollar of their disposable income, and use the other 1/4 as savings, the MPC is $.75. What it means is that since the MPC is $.75, and the Expenditure Multiplier is 1, we set the equation up like thus: 1 / $.25 = 4.
Four is the Expenditure Multiplier we can use to resolve how much money we would need initially to prime the economic pump applying Keynesian Economic theory. For example, lets say we need $200 billion, to close up a recessionary gap that is preventing full employment from occurring. Four and some fraction of the $200 billion is our number. Bear in mind four is a multiplier and not a sum. So in order to use our multiplier to equal $200 billion we need a smaller amount of this budget deficit. We then can multiply 4 x $50 billion. This gives us: $200 billion. This amount is what the government would spend to prime the so-called economic pump supposedly in the form of a stimulus package. As it stand today in November 2008 our budget deficit, in real terms, is estimated to be nearly $455 billion.
Simple huh? Yeah I know, but only on paper. The problem we face with the economy today is worse than just a recessionary gap in consumer spending. There are outlying factors involved as well such as: subprime mortgages to begin with. Then there's the credit card crisis and the fact that what happens here with the economy affects foreign markets throughout the world. The massive national, and foreign debt, nearly $10 trillion. Still the biggest uncertainty of all is consumer spending. This is what President elect Obama is attempting to reverse by fueling the economy with still another stimulus package.
I think he would have better luck going after Osama Bin Laden, because he will be stepping into an economic morass come January 2009, and will surely be sucked down due to his lack of knowledge about the unpredictable and psychological consumer confidence levels.
This is what President elect Obama and his Economic advisors are incapable of forecasting. How much disposable income, given the present economic conditions, will the consumer be willing to spend? Consumers at all levels. Will they spend the entire stimulus sum? Which is what is hoped for. Or will they spend only half? What portion will they contribute to the economy? These are the questions that are not easily answered based solely on a theoretical assertion, because psychology plays a major role in an attempt to forecast public sentiments. This is the situation facing President elect Obama in 2009.
Suppose for example the Obama administration authorizes the stimulus package to the American consumer in 2009. And afterwards, what if they hoard half the stimulus, instead of spending it all. What happens is first and foremost consumption declines. Second, this will have an effect on prices and inflation, driving them down also. But on the flip side of the equation driving up layoffs and unemployment at the same time, as producers, as a result, begin to cutback on production.
Banks would have money for investment in demand deposits, but would be equally unlikely, as the consumers, to invest in a failing economy. Consequently, bank rates would go up, and the economy would stall. This is not stagflation. Nor is it hyperinflation. But what it is, is an economy out of control. Sort of like a hydra. You destroy one head, and the thing grows a new one in its place, more base than the previous one.
Getting a handle on the core causes of the U.S. economic dilemma by the incoming Obama administration is going to take real thought. If they aren't careful, this out of control economy could easily be converted to a hyperinflationary leviathan. So to flood the economy over and over again with money in the disguise of stimulus packages, in an effort to address the problem, needs more psychological forethought. I say, stop the stimulus entirely and focus on regulatory policy. Commit the corporate heads to budgetary behavior. Eliminate corporate extravagance. Stop lavish corporate dining at the expense of the shareholders and federal expenditures.
Such behavior could only goad foreign investors like, China, France, and Germany, holding credit debt in securities in this country to pull out of their investments, either by selling them in the secondary markets, or cashing them in before maturity. Either way the overall effect is the U.S. becomes financially hamstrung.
There are several key factors that I have mentioned in several paragraphs, that should be reprised here to envision just how much fear and mistrust consumers have right now in the national governments efforts to reverse the economic situation. These facts were acquired from the Bureau of Labor Statistics:
1) In October the unemployment rate rose from 6.1 to 6.5 percent and the number of unemployed persons increased to 10.1 million.
2) The CPI, Consumer Price Index rose 0.1 percent in October from 0.0 percent in September.
3) The PPI, Producer Price Index fell 0.4 percent in September for finished goods.
The Corporate Reporter
Corporate crime as I mentioned only vaguely above whether itís embezzlement,or fraud, cost taxpayers over $500 billion each year. In the Healthcare industry fraud has reached levels upwards of $100 to $400 billion. Savings and loan fraud cost the American taxpayer nearly $500 billion a year. Auto repair fraud, and securities fraud combined cost in FY 2007 over $60 billion. These are just the tip of the iceberg in aggregate cost of white collar crime that takes place yearly in this country.
The 100 corporate criminals fell into 14 categories of crime. Environmental (38), antitrust (20), fraud (13), campaign finance (1), food and drug (6), financial crimes (4), false statements (3), illegal exports (3), illegal boycott (1), workers death (1), bribery (1), obstruction of justice (1), public corruption (1), and tax evasion (1).
Six corporations that made the list of the Top 100 Corporate Criminals were criminal recidivist, repeaters, companies during the 1990s. In addition to Exxon and Royal Caribbean, Rockwell International, Warner-Lambert, Teledyne, and United Technologies each pled guilty to more than one crime during the 1990s.
These are some the problems we face right now with the economy in such a mess that itís in. The politicians will not mention this type of immoral behavior to the American people, because it characterizes the Corporations as the untrustworthy villains that they are.
And because there is to little space for much more about the problems that we face at this time in Washington I will stop it here and maybe do a part two. I hope that anyone having an opportunity to read this commentary will realize the importance of the crisis that has been only partially dealt with. As for the American people they continue to be financial pawns on a chess board controlled by big business. Mainly, the so-called middle class.
In addition to writing commentaries, poetry and novels, I am one half of the macbrothers, Inc. We are songwriters and not artists or performers. We write music for others to perform or record. I do not do tours since I am not an artist. Like I said, we write & record our own songs and release them for purchase online. However, we are interested in nonprofessional or professional artists seeking songs. If you are an artist interested in songs for your album please email me. I will send you the demo and lyrics (and any changes to the lyrics), or you can listen online to our songs readily.