Blast from the Past: Mother Necessity

Blast from the Past: Walkin on Wall Street

Time to cut

My brother-in-law was just notified that the job he has held for 10+years is being outsourced. He monitors computer systems to verify that ATMs across the country have enough money in them at all times. My dad, who trains sales people, is being asked to present the value of his job. Corporate executive retirements are not being replaced, their positions are being consolidated amongst current employees.

I think our recession is more a question of the chicken and the egg. Wall street continues to fall, and companies are getting ready for the coming storm by trimming excess, even the lavish AIG meeting was targeted at finding ways to cut costs. So which is it, will Obama get elected because the economy is going into recession, or is the economy going into recession because Obama is in the lead? Obama and the Democrats are standing up and saying they are about to tax people beyond the point where it hurts. Going to spread the wealth. Not everyone will get taxed of course, but when they levy taxes on big corporations, where does that money come from? Price increases on the products that you buy.

Business owners are fairly savvy when it comes to matters such as this. Many smart business owners and executives understand the need to cut will be there. They understand that Obama may be offering a $3000 tax break for hiring a new full time staff person. However, in most professions, it takes more than that to train someone just to be productive. But when businesses stop hiring, or start cutting staff, the good folks in Washington will call them greedy, after all they were being given a "huge" tax break. The result will be more people getting paid for their votes than getting paid for actually working. That's how "spreading the wealth" works. Once more than 50% of the voting public no longer pays taxes, you can raise taxes all you want. Of course that ignores the economic damage that will occur, but you are safe in Washington and passing money back to over half the people, while the media just marches to whatever drumbeat you play.

If you are in favor of taxing people making over $250,000 (or is it $200,000 after the debate?), ask yourself how you think your life will be better if these "rich" people pay more in taxes. What do you think you will gain? More money goes to Washington, do you think that will be funneled back to you? What if your boss is taxed more forcing layoffs then the money goes to help fund poverty relief in Africa (Obama's one attempted accomplishment in the Senate). You are out of a job, but a dictator in a third world country gets to add another security guard to his detail. Not to mention that many people making over $250K are very intelligent, driven people, if their jobs are cut will you find yourself competing for your job with these people who are likely more qualified and experienced and now willing to work for less?

Loss of Short Term Memory

I have to admit, I was one of those that was a little miffed about the Wall Street bailout plan. The idea that $700 billion would go to big business and leave regular folks in the cold struck me wrong. I supported it, but I didn't like it.

Then came some facts. The bailout does not mean grants, but loans. Banks will have to pay this money back. In addition, they face increased government regulation of their practices. It's a lot like when you are a teenager and either crash a car or get a ticket. Your parents may help, but you will have to pay it back in some way. Most definitely your activities will be curtailed as well.

What those (and me too, I admit) who criticize the plan's big business focus forget is that Main Street already got help. The tax rebates were not loans, they did not come with any restrictions on how they were spent, and they will not bring restrictions on how Americans decide how to spend in the future. The tax rebate checks benefited the poor, but not the people with higher incomes. Yes, those people got checks as well, but several hundred dollars is much more vital to a poor family than one making six figures.

I cannot fathom why the tax rebate has not been brought up to counter those who want to make this a class warfare issue. Apparently even the media in this country has lost some short term memory.

It's Not What Reagan Would Do!!!!

The proposed $700 billion dollar loan package to the financial sector has ruffled feathers across the political spectrum. Both liberals and conservatives have expressed considerable anxiety about the plan that President Bush and Congress are close to assembling.

Liberals dislike a plan that seems to bail out Wall Street for making foolish choices while ignoring Main Street. To be honest, conservatives have many of the same qualms. Why are we rescuing these people? I hate to use the word greedy, but both they and many borrowers were gambling on an ever expanding bubble. The housing bubble was like a huge game of musical chairs. When the music stopped, some would be rich, and others would be in desperate shape. Economists should have known better.

Our president, congressional representatives, and economic experts have mostly agreed that allowing these firms to die would have a catastrophic impact on our economic system. In theory it may be okay to allow a boat that wanders into a hurricane to go under rather than risk the lives of rescuers. Apparently, however, we are all passengers on that boat whether we know it or not.

In 1929 Herbert Hoover acted as many conservatives would have President Bush act today. Hoover was a rock solid conservative and 90% of the time his ideas were sound. However the situation in 1929, as today, was an extraordinary combination of events from the economic and political realms. Inactivity led to disaster because we were not just talking about stupid business decisions, but a crisis of confidence in the system. The potential for that is developing today. 2008 is not a replay of 1929, nor are things as bad as they were then. Certain crises do demand leadership and action. We elected a "decider" in 2000. When has President Bush ever backed off of a crisis?

But Reagan would have let them go, or would he? The closest leader to Reagan in his time was Prime Minister Margaret Thatcher. In the early 1980s she unleashed howls of doctrinaire criticism by implementing an economic intervention plan. Thatcher explained that business and individuals need more freedom to make their own decisions about the economy. That being said, fear, instability, and lack of confidence restrained people's activities more than government action. To act freely, people need confidence in the free market system. Extraordinary situations demanded action.

People used poor judgment in the past several years, as people often will. In most cases, government "help" is often the worst medicine. In a few severe cases, it becomes necessary. No, government should not always be there with a band aid, milk, and cookies every time we get a boo-boo. But we do expect that if the catastrophic happens, they will send an ambulance.

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Speaking of Thatcher, she also criticized socialist governments for relying on large prestige manufacturing projects for economic development instead of real reform. She was talking about 1980s Mexico, but the comment hits close to home.