A LAYMAN’S VIEW OF THE ECONOMY
Given that I have a limited knowledge of economic development I nevertheless, like most Americans, have thoughts on how we can improve the difficult situation we find ourselves in today. Although we are slowly climbing out of a major recession that bordered on a full blown DEPRESSION, we remain in a very tenuous position economically. The issues are spending versus budget cuts and tax reform.
Our spending and budget deficit has been, many times, compared to our own household and from a MICRO economic viewpoint, it is. That would be because our household economic health depends solely upon us; whether we can….or will….hold a job that meets our household expenditures. From a MACRO economic standpoint, the view from the middle and bottom is similar but different due to economy of scale. Rather than one household, it becomes an issue of a nation of households. A nation of different educational levels, skill sets, number in the family, social status, health requirements, et., al.
President Reagan, whom I admired very much and voted for, had a “trickle down” economic philosophy. It sounds good on the surface but the problem is/was that the money never “trickled down”. It stayed at the top. There’s ample evidence obtainable from credible sources with a simple Google search. Simplistically stated, our current problems comes down to the old Capitalistic credo of “SUPPLY AND DEMAND”. A simple analogy would be to return to the individual household.
In our household, we earn money and, if fortunate, earn enough to meet our financial obligation i.e., food, shelter, health care for our family, reliable transportation, etc. Unfortunately, as a nation, these requirements will vary due to the national population differences stated above. Nevertheless, we can, and most do, meet those obligations albeit on a sliding scale from top to bottom. BUT, and it all begins and ends with “but”. To accomplish even a simple modicum of life as we in this country have known, we must have a job or career, depending on our qualifications.
I have always been a budget hawk and despised deficit spending, although in my earlier years, I was a pretty good practitioner of it due to necessity. I believe this to be one of those times that deficit spending is in order. Opponents rave we will be leaving debt for our children to pay. No, not necessarily. Yes, the R.O.I. on the money we have to spend will take awhile to repay but it can be done with increased revenue. You say, “how can we increase revenue”? We, as a citizenry, did not get ourselves into this mess but, clearly, we are going to have to get out of it ourselves or our children’s future will be of no consequence.
The Keynesian theory of economics state that the government must input funding into the economy by creating a TRICKLE UP economy as opposed to Reagan’s trickle down philosophy. So, how do we create a “trickle up” economy? Again, it starts with jobs. Jobs thru infrastructure and, in todays world, alternative energy careers. These fields will create lower and middle and some upper level jobs and exponentially expand into other career fields.
These jobs will place disposable income into the hands of the worker who becomes a consumer who, in turn, spends and creates DEMAND. This demand requires new goods and services as inventories are lowered which, in turn, creates MORE jobs. Most importantly, it creates even more revenue thru payroll income taxes. The U.S. Bureau of Labor Statistics place the number of unemployed Americans at 13.9 million through Oct, 2011. If that infusion creates only 80% (11.1 million) in jobs at an average of only $12,000/yr in personal income taxes, it results in a revenue stream of 1.3 trillion per annum. Add the household income derived from the tax increase on the “wealthy”, which really only returns to the levels during the Clinton era and lower than the Reagan era, which will generate even more revenue and it’s pragmatically possible that we can work out of this jam in a relatively short period. Won’t happen overnight but as the work ramps up, the revenue stream will consistently increase.
There’s even more to say in this area about healthcare affordability, mental stability, etc. but time and space constraints beg restraint. One last point, Roosevelt accomplished recovery from the Great Depression(with a D) with the many civil programs, i.e. infrastructure, dams, TVA, etc put into place in early 30’s. His major problem was when he was cajoled by Republicans to CUT spending which led us back into the major recession (with an R) of 1937.
