Saturday, January 10, 2009

The Key To An Economic Turnaround

Amid all the talk of stimulus package, investing in infrastructure, etc. (all important if designed correctly), the most critical component of a lasting economic turnaround is incredibly simple to sum up: it's the plight of the working family.

If that middle class working family is confident, stable and financially secure, we will ultimately recover. Their spending and recovery will be the engine of any lasting rebound.

If that family remains stressed, worried about making ends meet, unsecure in their home, and in too many cases recently unemployed, the current economic doldrums will continue.

Which is why every story like the one in today's Enquirer (about the high cost of maintaining COBRA health coverage for those recently unemployed) is troublesome. (UPDATE: this story on soaring bankruptcies highlights another symptom of the problem).

In 2009, as we see stories such as this, nothing is more important than undertaking every effort we can to provide opportunities for that working family to get back on its feet, feel secure financially and in their home, spend once again, etc.

This means tapping into new opportunities such as job creation through the stimulus bill, job training for 21st century jobs, helping small businesses grow, continuing to do all we can to prevent foreclosures through counseling, and helping reduce costs on essentials (such as energy, and taxes, by the way) whenever possible so that working families have the funds to begin spending on the items they've stopped buying as of late. And many more steps.

While there's a lot to do at the federal and state level along these lines, there's also a lot we can do on the local level, at very little to no cost.

But at all levels, stabilizing the basic situation of the middle class working family will ultimately kickstart consumer spending and put the money back into the economy that will lead to a permanent rebound.


Brad said...

The average Cincinnatian spends 20% of their income on transportation, the sixth highest percentage in the nation. The best way we can help the middle class is to create a viable public transportation system that will allow families to save thousands of dollars a year by operating fewer automobiles.

Anonymous said...

Making the middle class AMerican family "feel" secure is kind of stupid - it's the intended result but not the anwer. Two different things.
Here's where I think the problem can be fixed: The American economy is stagnate. The middle class is doing everything they can under the circumstances. The problem is that there is too much cash rapped up in savings - stagnate. As the incomes of the upper class grew, having all their needs met and most of their wants fulfilled, they are sitting on their money - which is composed more of a share of the whole economic ecnomy than ever before. The wealthy sit on this money because the inheritance tax was reduced/ repealed. This gave n incentive for the rich to spend - they could save it and pass it on to the next, and the next, and the next generations.
(Mind you, we are a society that whole heartedly believes that we are entitled to what we, ourselves, earn; while at the same time we don't believe it is honorable to be "made" by the fruits of another's labor - even if it is your parents or grandparents. Legacy wealth bad, self made wealth - good)
The purpose of the inheritance tax and the progressive income tax was to make everybody earn their own, and to keep the money in circulation.
We need to impose a drastic wealth tax, immediately, to force those on top to spend their money - because, afterall, it is THEIR money and they deserve to enjoy the fruits of their labor.
By doing so, we will have people expending money on an unprecedented level - including investing in start up businesses, hiring more employees, and boosting the sales of all kinds of products.
Trickle down economy - it works, as long as their is an incentive to trickle. (taxation)
So all savings or income in excess of say, 2 million per year, should be taxed at the normal rate as income tax, then again at the end of the year for "wealth taxes". This should include trust funds, retirement funds, etc.
Use it or lose it - I say.
Now, in conjunction with this wealth taxation plan - we need to incentivize certain expenditures - buying products made in America. It is a natiional defense issue that we have no manufacturing sector - like farm subsidies (because we know we can't be reliant on foreign nations for food)we need to promote until it isn't even financially sensible, national industries to secure our ability to produce any and all items. I know that sounds stupid - but, if we don't have the infrastructure for things like steel, computers, and textiles established and running (just like oil) - we can be held hostage when we have become dependent on other nations (unless we enter into some highly secure multi-national agreements). We have to have tangible ownership in every product we need. We cannot become an exclusively "service" company, we need to support the trades occupations. The third prong is government growth - yes growth, in this area we need to increase auditing of gov't functions and those working for the gov't. These jobs should be para-professional and professional services. We also need a continuing works corp - everybody with a job, a chicken in every pot.

Making middle class families feel confident will be the result of finding the KEY to the problem. The KEY is forced trickle-down economics, upgrade of manufacturing, and gov't growth and job subsidies.
But, I don't know nothing.

Anonymous said...


Sounds socialistic !

We can stimulate manufacturing without make work.

Fair trade policy.

Cheap labor and lack of environmental controls has made China the rust belt.

They can dump products on our shores for less than cost and gain market share. Which they did.

They have socialized medical so they don't have legacy costs.

Tough trade policy tied to min. wage and environmental standards is in order.

Level the field and watch the manufacturing return to the U.S.


Anonymous said...

I agree with the last post for the most part. But don't think for a minute we are a pure capitalistic society - it's a myth. Furthermore, the closest we've come to it in the last 100 years has both times resulted in tremendous recessions/depressions caused by the failure of a purely capitalistic society. The fact that we accept that our gov't is one of checks and balances, likewise, so is our economy and we need to put these trade polcies "in check" just as you say and "balance" the opportunity to provide a level playing field.

I have no claims whatsoever to being a social economist - so take my opinion for what it's worth (nearly nothing)

I just know that this stimulus package for most families will only go to bills - it will not spur the economy to the level we need and serve a long term result

Anonymous said...


Agreed any stimulas in our household will go to pay down debt.

In the long run this should make funds available for growth, but, not immediate.

We may just dump any funds into the market, because, when we paid off a major credit card to the tune of 5,400.00, the card company closed the card and we have a 710 beacon ?

Go figure ?

It was a zero percent for 1 year, though.


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