There is a lot of discussion going around about the current economic situation and there are a lot of people who believe they have an explanation and a solution. The economic structure of this country (maybe the world) appears to have been cracked at its foundation and is in danger of collapsing into a full-blown depression. The problem is complex and anybody who claims to have a solution that can be expressed in 25 words or less is wrong.
The proposals discussed range from sensible but ineffective to bizarre. One person says a large part of the problem is rising unemployment. His solution is to end the unemployment tax on businesses and stop paying unemployment benefits. That is absurd. It would make the problem much worse. People who lost their jobs would shortly become destitute. We would have a large increase in the number of homeless people. Some folks still seem to believe that solution to poverty is to make rich people even richer.
Another suggestion is to replace all the lawyers in Congress with business managers. Although it would be a good thing for the people running the government to have some sense of fiscal responsibility, something every successful business manager must have, the federal government is emphatically not a business and should not be operated in the same manner as a business. Responsibilities, strategies, goals, requirements, opportunities; all of these are very different for government from their roles in business.
One person complained that he had financial trouble partly due to his mortgage payment going up by $200 a month. Obviously, this is an adjustable-rate-mortgage (ARM), which has seemed like a good idea to a lot of people. It is clearly stated when you agree to one of these instruments that the rate may increase after a specified time period. If you are surprised when that happens it means you weren’t paying attention when you agreed to it. Other people have engaged in even more dubious mortgage arrangements, such as interest-only loans and no-money down loans. As a general rule, these are a bad idea. They make it easy to get into your choice of homes but later the pain comes.
Our Congress, pressured by lenders, decided that there was an emergency and the solution was to provide $700 billion to banks, even though a large majority of the American public opposed the idea. This was supposed to provide a temporary solution to the serious trouble banks were having, especially large investment banks. The bill did not solve anything; it just made top executives at banks breathe a little easier for a while. It was a stupid, pointless thing to do. Self-styled “experts” said on all the news channels that if the bill did not pass the stock market would drop steeply. The bill passed and the market dropped anyway.
What we need to address the roots of our current economic turmoil is not more handouts to banks or relief for those who cannot make their mortgage payments (which would be done, by the way, by compelling those people who did not sign off on mortgages they could not afford to subsidize those who made bad decisions and are now in trouble as a direct result of their own poor decisions). Those measures are stopgaps and only apply to select groups of people, most of whom are directly responsible for causing the crisis in the first place. These measures will ease the pain in some quarters but they will not, in themselves, bring overall relief and make our economy turn around.
What we need is a lot of jobs. We need stable jobs that pay a living wage. Creating these jobs will not be simple or painless. As a start, we need to stop hiring so many immigrants. Americans need jobs and the jobs should be reserved for them until all of us who are willing and able to work are gainfully employed. Working people pay taxes and spend money, both of which benefit the economy as a whole. If Congress believes we really do need 10 million or 14 million, or whatever the number may be, of workers to come here from Central and South America, then Congress has the authority to issue green cards to all of them. They won’t do that, of course, because the function of illegal immigrant workers is only served if they remain illegal. They drive down wages and make confidence in job stability nonexistent.
The tech industry has been clamoring for years that they need a dramatic increase in the number of work permits issued in their industry. They say they cannot find enough skilled workers in this country to meet their needs. It is true there a lot of well-educated, highly skilled workers available from places like India and China. They should be permitted to work here if we need them. The reason the IT industry wants them is that they can be hired for significantly lower wages than comparable U.S. workers.
It is all about jobs and wages. If we solve that problem, the rest of the economic woes will diminish to a manageable level. If we do not solve that problem, everything else we do won’t matter much.
One more side note on a name that was in the news a lot in 2008: Joe the plumber. He is not a plumber and he is not registered to vote (and his name isn’t Joe). Lowering his tax rate won’t make much difference to him because he doesn’t pay his taxes anyway.