4 Money Problems That Obama Can't Fix
The talk sounds reassuring, even if we know these are vapid campaign promises. As fixing the economy surges to the top of the candidates' to-do lists, Barack Obama and John McCain are starting to promise free money as if it were just sitting there in Washington, undiscovered. OK, what the heck? We'll take some!
Obama has been sticking his neck out by promising to strengthen the middle class and help struggling families, and now it's time to explain exactly how he would do that. Part of his plan would be a second round of stimulus checks to taxpayers, totaling perhaps $115 billion, according to the Wall Street Journal. Obama also envisions a huge new government health insurance umbrella for those who can't get coverage elsewhere. He plans to create thousands of jobs by funding new roads and other infrastructure projects. Perhaps most irresistible: a big package of middle-class tax cuts, to be paid for through tax increases on the wealthy.
Well, OK...but haven't we heard this before? Oh, yeah—it comes up in just about every election. And what usually happens? The economy runs its own course, more or less indifferent to the machinations of politicians.
If elected, Obama could certainly tweak the tax code, as other presidents have done, especially with the expected Democratic Congress. He could send out more rebate checks, take his shot at healthcare reform, and maybe even build the Obama National Freeway. But smart consumers shouldn't expect much, because it's remarkably difficult for politicians in Washington to do much about the economic factors that affect Americans most. Such as:
Empty wallets. The government can stuff a few extra bucks in your pocket every now and then, the way Grandpa used to slip you a five to buy some candy. But the true measure of prosperity is whether real incomes, after inflation, are going up or down. And the trends aren't encouraging. The Census Bureau recently reported that real incomes inched up in 2007. But that was mostly before the current downturn knocked the wind out of workers. And since 2000, incomes have barely risen at all, despite strong economic growth. Many workers are falling behind.
If Obama wants to fix that, he'll have to harness globalization so it benefits America, which means bringing millions of the highest-paying jobs to the United States and making sure they stay here. No big deal—all he has to do is persuade organized labor, overhaul immigration laws, rework our regulatory regime, and outcompete 50 other nations that are rapidly gaining on us. Should take a decade, max. As long as Congress and all those beltway interest groups go along.
As for those rebate checks—don't spend them yet. Even if President Obama were able to rush a new stimulus plan through Congress in his first month, the timing could be terrible. Government stimulus can work if it comes early in a downturn, giving people extra money to spend when the economy is at its weakest. But if it comes too late it can backfire, triggering inflation just as the economy is picking up steam on its own. At the earliest, Obama might be able to mail out stimulus checks by early next summer. By then, the economy will probably be through the worst and on its way to recovery. It might sound good now, but will Obama really want to risk an ugly bout of inflation that could undermine his entire first term?
Falling home values. The biggest single problem in the economy is the collapsing housing market. And there's not much Washington can do but try to contain the damage and wait for the correction to run its course. By most measures, home prices have fallen 15 to 20 percent from their peak—and may still need to fall another 10 percent or so before buyers start to re-emerge in force. That's the only thing that will restore a supply-and-demand equilibrium and get housing back on its feet.
The government does have one big job here: Keeping Fannie Mae and Freddie Mac, the mortgage-finance giants that are integral to the housing market, from collapsing. Treasury Secretary Henry Paulson has set the stage for a bailout, if necessary, and Obama has said he'd follow that general course. Any president would. Letting Fannie and Freddie fail would cause a housing implosion that would take years to recover from.
But keeping Fannie and Freddie afloat isn't going to restore lost home equity anytime soon. It will take several years of normal market activity to do that. Millions of American homeowners, meanwhile, have less household wealth than they used to, a nationwide bum-out that's one reason consumer confidence is so dismal. Obama can offer cheerful talk. But that's about it.
High gas prices. Notice how politicians this summer had all kinds of idea for rolling back gas prices, but none of them actually happened? That's because gas and oil prices are another factor determined largely by global demand, not by political intervention. Obama's idea of tapping the Strategic Petroleum Reserve might reduce prices by a few cents, for a few weeks. That get you excited? Offshore drilling, which he would now consider, might lower prices by a tad—in a decade, when we're all supposed to be driving cars that run on switchgrass or hydrogen anyway. Even if the next president repealed the entire federal gas tax, that would lower pump prices by only about 18 cents per gallon and leave a massive funding hole for highways and other projects.
Since peaking at a national average of $4.11 on July 17, gas prices have drifted back to about $3.70. They could fall farther by November. The candidates might even take credit for that. Or better yet, stop offering silly solutions.
Exorbitant healthcare. Yep, there's growing agreement among consumers and corporate America both that soaring healthcare costs are an inexcusable problem. But the agreement ends when it comes to finding a solution. Sooner or later, healthcare costs will probably get so high that politicians will need to find a fix in order to keep their jobs. But until then, any kind of serious reform would ignite one of the most furious lobbying battles Washington has ever seen.
That means any changes in an Obama first term are almost sure to be marginal. Someday, maybe, we'll have a better system. But it might be one of Obama's daughters who finally pulls it off. Now that would really signal change.
Related Articles
|
Top Rated Comment Streams:
-
1.Hedged In661
- 2.
-
3.Smarty_Pants398
-
4.cos1000290
-
5.axelrod608290
- Free E-Newsletters
This article has 14 comments:
-
User 236735
-
3 Comments
Aug 28 08:02 AM-
Joyful Alternative
-
106 Comments
My Website
Aug 28 08:55 AMI am hoping he goes with a "Medicare for all" plan, which would help "exorbitant health care" immediately and also help the "empty wallets" problem in that some businesses could hire more workers because they're paying each less in total due to lower bennie costs. Moreover, there'd be a boom in new business starts and self-employment, as entrepreneurial types are no longer blocked by fear of lack of health insurance for themselves and their family members. This should also stop all those medical bankruptcies.
As for "falling home values," I think we'll just have to wait for them to level out. Around my area, average sales time is now 60 days, down from "the day the sign goes in the yard."
-
Econ 101
-
56 Comments
Aug 28 11:20 AMOh, I forgot this government is for business not people. And the democrats will be worse!
-
gramps2
-
113 Comments
Aug 28 11:24 AMThe NHS in the UK has been losing doctors, closing offices, and rationing care for the past 5-10 years -- because spending has gone out of control and revenue from the North Sea oil fields have peaked.
The U.S. is not an oil exporter -- quite the contrary. We don't have loads of government money sitting around waiting to be spent -- we have massive budget deficits, and absolutely overwhelming entitlement deficits.
The problem with healthcare is **NOT** how many people have/don't have insurance. The problem is sky-rocketing costs. When businesses cancel / trim health benefits, they always cite costs that are rising 3-4 times the rate of inflation. Anyone and everyone in the U.S. can **buy** health insurance -- they just can't afford to. Its a cost problem, not an availability problem
There is no credible argument that the U.S. government, an entity known to spend $2 billion on an airplane and $10,000 on coffee makers, is going to control costs. Congress just spent over $36 BILLION (with a "B") to build a visitors center at the US Capital. There are no healthcare companies that spend $36 billion on one building.
Has everyone seen the disastrous care the US government provides for our soldiers?
The U.S. consolidated all its disaster response agencies into the Department of Homeland Security... Ask the folks in New Orleans how well that worked out.
And if the government takes over healthcare -- that means decisions over what procedures are covered / not covered becomes a political issue. Roe V Wade gets overturned by checkbook instead of by law -- remember, the government would control ALL payments to ALL doctors.
Healthcare costs are out of control and need to be addressed. But as the Hippocratic Oath says "First, do no harm". Don't make a bad situation worse by putting spendthrift politicians in charge of our health.
-
sumosama
-
237 Comments
Aug 28 12:31 PM-
Brian27
-
37 Comments
Aug 28 01:21 PM1) When oil production is maxed, repealing the 18 cent tax will not reduce oil prices. That's because any decrease in price will result in a slight increase in demand that cannot be met by an increase in production. So market price of gas will remain unchanged.
2) Current and future oil prices are linked by arbitrage equation
F= P + C.
where C is the carrying cost of inventories and cost of borrowing.
Any information that causes individuals to believe that future price of oil will be lower will impact current prices negatively. Offshore drilling for oil today will create expectations of increased future supply. This will have a negative impact on future oil prices and by arbitrage reduce current prices.
-
alajac
-
112 Comments
My Website
Aug 28 01:25 PM(note - certain puctuation keys on my laptop are suffering from `sodapopitis`. please excuse the workarounds.)
The following is my update on Tom Paine`s ``Agrarian Justice``, in which he made the original proposal for a `social security` system.
Two axioms
1. Everyone owns whatever property that they claim and that they are willing and able to defend.
2. Whoever claims and is willing and able to defend that property is the sole and only government of that property.
Thus, Crusoe Island belonged to Crusoe only as long as no one came along and took it from him.
Thus, North America wound up belonging to the more numerous and more lethal Europeans.
On this planet at this time, a few governments own everything within their stated boundaries and divide up the rest of the property of the world as they wish, choosing when and where they wish to defend their claims. Recent examples of this selective defense of claims have been provided by the USA in Kuwait (1991), and by Russia in Georgia (2008). In other words, the actual owner of Kuwait (the USA), and the actual owner of Georgia (Russia) have each determined that it is currently desireable to maintain the illusion of self-government in certain lands where enforcing their claims may cause them more trouble than they believe presently worthwhile.
Note that the act of claiming property is precisely that which creates government. you can`t have one without the other. So a `state of anarchy` (i.e., no government) could only last until someone got hungry and claimed some food for themselves. On the other hand, a government could decide to govern its property in a non-coercive manner if it so chose, and would choose to abide by non-coercive rules if it concluded that that was the best way for it to survive. Of course, the government`s property could never actually be owned by any of the government`s other property, but allocation and distribution could be done in a voluntary manner if it could be shown to be conducive to the survival of the government.
If there was a natural right of property, then we wouldn`t be having this discussion, just as we aren`t talking about why people can walk down a street without flying off into space. Gravity is a natural law, while human `rights`, like water `rights` and mineral `rights`, are grants from their actual owner, that is, the government that actually owns the property (land, minerals, vegetation, and animals including humans) on which those rights depend for their exercise.
Humans banded together in order to be able to claim and defend larger amounts of property, giving up actual ownership of all of the property they had previously claimed (including ownership of their own labor and bodies, as well as that of their children) in exchange for the protection and OTHER BENEFITS that a larger, more lethal government afforded. Those that were slower to band together were attacked by larger, more lethal governments and were either killed or became the larger government`s property involuntarily.
ALL governments are fascistic, deriving their power from the number of people who have `bundled together` under whatever form of government was most accessible at the time (visually symbolized by the Roman `fasces lictoriae`). And though the fasces is used as a symbol of Republican forms of government, even monarchies and dictatorships depend upon `strength of numbers` for their survival.
Therefore, all governments are comprised of all the people (or descendants of those people) who have (willingly or unwillingly) given their lives and their property to the government, regardless of whether or not the form of government gives them any voice concerning how that government operates. If the people (or some part thereof) who comprise the current government become dissatisfied enough with how their government operates, they will change it (and not until). In other words, nobody complains as long as the trash gets picked up on time.
As seen from the above, we need to (legally) realize that the U.S. federal government owns ALL of the nation`s real estate. This fact is quite obvious when you think about it - try not paying the government its `rent` - aka property taxes - for a while and see how long it stays `your` property`. Your `title` gives you only exclusive `right of use` until the government decides that it needs the property back. A `right` that must be enshrined in a constitution is a legal right, not a `natural` right. A `natural right` is one that requires no defense or revolution or constitution or law for its enforcement. For example, `gravity` is the `natural law` that gives you the `natural right` to not float off into space and thus to have a chance to live. Any right not supported by `natural law` is merely a legal right and depends for its continuance on (in `Magna Carta terms`) keeping the government`s `head on the block`.
It then follows that the U.S. government has (by privatizing all the land), denied everyone free access to all of its land and all other property that it claims. and, upon further inspection, we find that the government has not compensated anyone (much less everyone) for that `taking`. the government is not naturally required to make such compensation, and I am aware of none who have paid such compensation. (Although the equi-dollar distribution of a percentage of oil royalties in some countries can be considered as `partial compensation`.)
But, as `We, the People` supposedly ARE the government in the U.S., we can have Congress legally pay (to ourselves) `Adequate and Equal Just Compensation` (which coincidentally, can replace all forms of personal and corporate welfare and subsidies and boondoggles, including Federal Minimum Wage laws and a phase-out of Social Security).
As a starting point, $1000 per month (of new, non-Federal-Reserve, non-Debt-Money, see below for description and argument concerning) could be paid to every legal adult resident (compensation of minors should, of course, be held in trust to avoid incentivizing `baby factories`).
Since everyone gets the same amount, the plan is not wealth redistributive, but will (in a ``Rawlsian Justice`` manner) give the poorest the biggest advantage (in terms of monthly increase of wealth, percentage-wise) and a better chance to `catch up` than the current totally regressive system that keeps the rich getting relatively richer, through good times and bad. Someone right out of school should not be paying a greater percentage of their wealth in taxes than, say, a `Bill Gates`, but that is exactly the case under the current tax laws.
Regarding the currency we use, Federal Reserve money is privately-owned, which is why we have to borrow to get more of it to give to the bankrupt banks (the ones that have lost all or most of the Fed-borrowed money that we had entrusted to their fine care), the same banks that own the Fed in the first place. (What is wrong with THAT picture?)
We`re like ``a growing kid that has to take out a loan in order to buy more blood every time we have a little growth spurt``. We need to get rid of the Fed`s debt-money and replace it with our own debt-free fiat currency, backed by the value of all of the real estate in the country (real estate that is, in fact, owned by the U.S. government).
(There should be no problem with the simultaneous use of other currencies, Fed or gold included, but the ``even distribution`` of our own, debt-free fiat currency will probably drive out but the use of any other before too long. Even today, anyone can use gold for transactions if they so desire. The good thing about having our own currency is that we will always know how much of it is extant, know that there won`t ever be a `shortage` (caused by hoarding) that leads to deflation, know that banks can`t print up billions of extra dollars to give to themselves (as the Fed has recently been doing), and know that we are not creating any public or private debt as we require more currency to facilitate trade.)
We also need the government to end its legal support of the Fed`s fractional-reserve Ponzi scheme. If people want to risk their money in banks that gamble with less than 100% reserves, then they should be willing to take their losses without any hope of government bailout.
Regarding taxes, non-comsumptive taxes should be transparent and avoidable (and thus arguably voluntarily-paid). The only unavoidable tax should be the one which we can`t avoid, the natural tax of purchasing power caused by the printing of more fiat money (which taxes everyone transparently and equally according to their respective wealth, in terms of currency holdings). Since everyone is taxed by the same percentage on however much of the currency they possess, there is no wealth redistribution inherent in such a tax.
In place of ALL income taxes, we should have a small and avoidable (by the use of cash) debit tax on all electronic debit transactions (1/2 percent or less will be sufficient) in order to begin paying off the national debt and to fund government programs (programs which will be pared down substantially under any Congress that puts this plan into effect). As this debit tax is imposed on everyone equally (as all taxes and benefits and laws should be) there is no wealth redistribution inherent in such a tax. Let the market do its thing. Get rid of all income taxes. No more IRS, no more tax filing at all, no more chasing businesses offshore with tax craziness.
Regarding Healthcare, we need to get the AMA and FDA to quit restraining supply and get thousands more doctors and other healthcare professionals trained up and get access to WHATEVER drugs adults want (from whatever source those adults decide thay want to obtain them) so that the market can get the price of normal medical help and pharmacology back into an affordable range paid out-of-pocket. (Cuba has 4 times as many doctors as we do per capita and medical treatment down there is DIRT cheap.) If there is going to be any `universal` insurance it should only be for major medical after, say, $2000 has been spent out-of-pocket. (``But, what about the poor?`` Remember, every `poor` adult is getting $1000 a month and they can work as much as they want on top of that with no penalty...there will no longer be any `poor`. A heck of a lot less crime, also, and, once we take this global, by annexing foreign states as we did The Republic of Texas, no more wars, because everybody will have a vested interest in everyone else - including the US government - doing well.)
Also, if we had 3 or 4 times as many dentists as well, dental offices could stay open around the clock and dental care would also become affordable for all, out-of-pocket.
If we want to get the US to kick its `crude (oil) habit`, we could have Congress add on a 10% surcharge at the gas pump (bumping it up another 10% every six months) and rebate it in monthly equi-dollar amounts to every registered car OWNER, regardless of how much or little they drive. That causes the biggest oil consumers to subsidize everyone else with no BOTTOMLINE cost to taxpayers. Cheaper alternatives will become apparent and people will use them with no direction from the government needed.
A system that rewards intransigience, gambling and stupidity seems to me to be the main problem. As Emerson (not Jefferson) said,``The government is best which governs least``. How about we get them to stop `governing` at all and set the whole thing up to work automatically?
-
TinyTim
-
170 Comments
Aug 28 03:32 PMI seriously doubt that corp America truly wants to fix the healthcare problem. Sure they complain about the costs. Connecting healthcare to employment is a travesty. It was started in WW2 to keep war production flowing. Now, many people stay in jobs with big companies mainly because of the medical benefits. The companies must be aware of it, but want it both ways-keep employees roped in, but don't make it too costly. Replace this connection with individual insurance and increase employment mobility, reduce healthcare costs through more competition, increase health through more patient accountability.
My doctor hates insurance companies, probably for increasing his costs and lowering his gross income. I've seen arguments for govt sponsored programs in other, more fiscally responsible countries, but that's not here. Not even considering the political issues of coverage.
Everyone has a financial axe to grind and a vested interest in this issue. A hybrid system with basic care, mostly preventive, available to anyone with a small copay ($10?) sponsored by the govt would keep overall costs down (indemnify the docs & assistants, subcontract the lab work). Individual / family insurance for major procedures / catastrophes with appropriate deductibles or for those who can afford to opt-out of basic care. The system is broke from many angles and the money spent could be better utilized to improve the quality of life for everyone.
-
Joyful Alternative
-
106 Comments
My Website
Aug 28 04:20 PM-
DougM
-
112 Comments
Aug 28 04:52 PM-
YogiG
-
42 Comments
Aug 28 05:10 PMSo, as OIL/Energy prices began to rise from themid-$100, a massive drain on American Wealth began - From all acroos America, money began to flow form the American People's pocket books into the hands of Big Oil and on to the OPEC countries, all eager to foster this 'shift' of our Natinal Treasury. Add to this the drain of American Tax Dollars from domestic infrastructure projects, dollars that would re-cycle in our economy, to financing the Wars, and it is no wonder we woke up to the current credit crisis we find ourselves in today. Really flamed further this year with the explosion of Commodity Prices, led by the motley group of our 'top WS Firms" and furthered hyped by our favorite financial media org, and it is no wonder we have a sagging economy.
With mounting SS Debt, Fed Debt and a massive Foreign Exchange burden, the good ol' USA finds itself with a sinking dollar, which only serves to feed the problems stated above.
It all begin with OIL, POWER (as expressd by war) and Greed - and the only way any of this gets resolved is for those who have been directing this onslaught of insanity are no longer in power or allowed to raom freely across all the commodity exchanges around the globe, unchecked and unfettered.
G
-
fran
-
239 Comments
Aug 28 07:57 PM't[composed of both executive AND legislative branches, not solely one.
BUT--there are even larger unresolved issues you have not addressed, reference to all issues highlighted in recent movie and documents identified as " I.O.U.S.A." gov't obligation building to $trillions for which no plan exists to handle. these are the same issues identified in early 1990s by CONCORD COALITION.
to reference an old BIG MAC add--
"where's the beef?" in the candidates specifics? neither party nor any POL has addressed our economic dilemma adequately.
-
Alpine Buttercup
-
4 Comments
Aug 30 09:58 PM-
gramps2
-
113 Comments
Sep 02 06:09 PMMost of the taxes are per barrel or per MMCF -- so they generate revenue based on volumes exported, not based on the market price.
I have no idea if you can run an accounting audit to show a direct line between energy tax/royalty revenue and health care. If Canada's government is anything like the U.S., I doubt you can find out much of anything.
What you can do is look at total revenue the government receives from energy taxes / royalties, and ask what percent of the government's total revenue comes from that. Its hard to get an exact number, but its about half (I am talking about all government: federal, provinces and local). Your taxes would be roughly double if not for the energy subsidies.
Your former PM lost power at least in part because of disagreement of how to share this revenue between the central government and the provinces.
The Canadian government's "surplus" of recent years was caused entirely by increased energy revenues.
Your former PM also dropped support for the Kyoto Accord once he realized that the bitumen produced from tar sands was a huge source of gases that are supposed to cause global warming. Your government quickly realized it would not stand if it lost that revenue.
Alberta started its own wealth fund because they worry about when the energy runs out. Like Norway, they have huge resources -- but it won't last forever and they know it.
At any rate, those of us here in the States don't need to worry about this. We import somewhere around 30-40% of our oil -- there is no revenue generated from non-existent exports.
BTW -- I find your "Canadian system beats the American system hands down on efficiency" comment a little strange? How does one measure "efficiency" in health care? I don't think the US system is efficient under any definition, just wonder how you measure it.
Second, I lived in upstate New York (near Toronto) for many years. It was always amazing to see how many wealthy Canadians crossed the border into the U.S. for care (where obviously they had to pay themselves). If price is less important (and for wealthy Canadians I guess it is) -- they actually travel to the US and pay out of pocket for care rather than accept "free" care in Canada... One hospital in Rochester NY actually advertises for patients in Toronto, and finds it very profitable to do so...
Its also worth mentioning that many Americans are now traveling to Thailand/India to get care. Even factoring the cost of the airplane ticket, its vastly cheaper to have "major" surgery there. The doctors over there are (mostly) trained here in the U.S. -- quality of care is quite comparable.