Brazen careerist
Where ambitious young professionals connect and grow
Email
Print
I was recently reading this article about the Obama tax cut and it really got me wondering if it is going to help us get out of our mess. Personally, I am a bit more on the side of letting the economy resolve it’s problems rather than having government intervene, but I do understand that we are currently at a critical point and Obama sees no other way to fix it than a tax cut.
In the article, the writer mentions that the current economic crisis is made up of these three parts…
- Mountains of bad loans, which are weighing down banks and other financial institutions
- Rapid retrenchment by businesses, which is causing them to cut jobs and investment
- Trillions of dollars in excess consumer debt, which is forcing households to cut back on spending.
He goes on to say that the $300 billion taxcut is essential to help the American consumer. Don’t get me wrong, for my own wallet I wouldn’t mind seeing a taxcut, but as far as helping the US economy from a longer-term perspective, I am not sure this is the answer.
My thoughts on US overspending
It seems to me that if we as a country are now in this mess as a result of overspending, that we can’t get out of it by spending more. It reminds me of a theory I heard in a past life that you should drink a beer to get over a hangover.
The obvious, yet terribly painful solution for lots of Americans would be to cut back even beyond appropriate spending.
I remember when I wanted to get out of debt, I had this sad realization that I needed to not only stop spending more than I made - which was difficult enough by itself. But I also had to spend a lot less than I was making in order to pay off some of the debt. If I would have just stopped overspending, I would have stopped the bleeding, but the wound (my debt load) would not have healed.
Isn’t this the same reality that we as Americans are going to have to face up to now?
Related posts
For more timely, relevant, and engaging articles,
subscribe to Brazen Careerist.
- A New Kind of Business Mover and Shaker
- The Anti-Stalker’s Guide for Converting Online Contact into Real World Collaboration
- Why You Might Be Better Off Without a Job After College
- How To Find a Writing Partner Who Can Help You Achieve Your Goals and Make More Money
- Continuing Education: Extending Learning Beyond Your Campus Years
Comments
01.22.09
It's my understanding that half the reason the economy is crashing is because, as a result of all the early problems - mortgage crisis, job losses, etc - people have begun trying to save more, cut back on spending, like you suggest. This is like turning against the spiral of a car on ice. Until we start lending again, banks will be in trouble. Until we start buying again, jobs will be in trouble. I'm not an economist, but from what I've read and gleaned from people who know more than me, a large part of the American (and thus global) economy is built on credit. We thrive on living beyond our means.
The problem is, though debt is an integral part of the economy, it's not always a good thing. It's bad loans that began a bunch of these problems, so it's natural to want to be more cautious. But debt and risk cannot be our main concern right now. In a recession, they come second to getting the economy rolling again. And we can't do that without taking risks, or without spending.
I don't know, this is just the impression I've picked up from watching this whole thing unwind.
Also, the tax cut portion of the stimulus was primarily a nod to the GOP. I'm not saying it's good OR bad, but I think your implication when you say "Obama sees no other way to fix it than a tax cut" is a bit flawed.
01.22.09
Nice post Bob, I'm not sure I agree with you though. Recently I attended an economic forecast over the next three years that showed the recovery time and severity with a stimulus plan and without. The forecast showed that with a stimulus plan (plus additional factors), the economy would begin turning around towars the end of 2010. Without the plan, the pain would continue for far longer.
I also think it's important to note that deregulation, a hallmark of republican thinking,is a major reason why this crisis occured, with credit default swaps and poor loan judgements by banks. "Letting the market fix itself" has proven it doesn't work in regards to keeping the American and global economies running, just as excessive government regulation doesn't work. Now don't get me wrong, I'm not a fan of bailouts due to greed and deceit any more than the next person, but if we wouldn't have started a war and gone on a rampant spending spree during the Bush administration, we wouldn't be in nearly the predicament we're in today.
Regarding his tax cuts, I'm not particularly convinced people will spend it on the economy as opposed to paying off debt, but at the very least we will have fewer citizens to bail out if people use the money to pay old bills.
01.22.09
Interesting post, but I'd have to disagree. First, you can't compare what worked for your experience in getting out of debt -- what works for such a massive economy are totally different than what works for one individual.
I don't think it's as simple as spend less, and the economy will get out of debt. Look at the countercyclical fiscal policies used in the Depression -- deficit spending when the nation is in a recession. It helped in the 40s and a lot of economists still recommend it. I think putting more money back in the consumer's pockets is likely to be a great way to stimulate the economy again.
Got Something To Say?
Got Something To Say?
Not a Member? Brazen Careerist is a career management tool for next-generation professionals. Set up a free account today to comment on this post and start sharing your ideas. Learn more.
Login to view your networks!
 |
 |
|
 |
|
