I've been having this discussion with some of our friends on the Right for quite a while now and I've always been confused by the arguments I hear. A repeated insistence that the economy is not only in fine shape, but in fact seeing some of the best times ever, leaves me wondering. Certainly some of them may live in areas where the economy is stronger, since it's an issue with regional peaks and valleys. For others there may be an element of political necessity, as it certainly benefits the Republican party to maintain the appearance of a strong, vibrant economy. (At least until November.) For some few who see the national trends but are doing well personally, there may even be an attitude of "I Got Mine So F**k You."
Still, nothing seems to budge the opinion of roughly eight in ten Americans who say the economy is one of their chief concerns - that they are worried about keeping their jobs and if they will be able to pay their bills and care for their families in the coming year. The stock market, up until this week, was still doing well and total job numbers, as well as unemployment figures, have been described as nominal to good. These have been hailed by some GOP supporters as signs that "the Bush tax cuts are working." However the reality - that many of these jobs are lower paying positions for people pushed out of more lucrative lines of work - has not escaped the attention of Americans. And that thriving stock market really only spells good times for the uppermost crust of citizens who count dividend checks as the lion's share of their income and fret over the capitol gains tax. In the past 48 hours that same market has dropped by 300 points on the Dow and analysts are wringing their hands figuring out where the next bounce will come from. It is highly doubtful that the President would be proposing an economic stimulus package this morning if everything was coming up roses.
As has been previously noted here, trickle down or "supply side" economics has simply failed to work. In a past age it likely would have fared much better. There was a time when family owned and operated businesses felt an obligation to their employees and sought to share profits and provide wages and benefits to keep them as happy as possible while still reaping reasonable profits. During such a time, tax cuts and incentives might well have gone, in large part, into the pockets of workers who would then feed the surrounding economic infrastructure.
But that, as I said, was yesterday. Today the business environment is about as bloody minded as one could care to imagine. The bottom line for boards of directors is not the health, wealth or wisdom of the corporation's employees, but the bottom line of profits and dividends payed to shareholders, with an eye towards making sure those numbers increase (or at least hold steady) every single fiscal quarter. Employees are views more as a necessary evil - an expense to be minimized wherever possible to maximize profits. Tax cuts which put more cash in the hands of the controlling powers do nothing to disincentivize the goal of shipping jobs overseas where cheaper labor is to be found, or to expand the use of automation (if I may take my inner Luddite out for a brief stroll) to reduce the workforce.
The result? More and more people who, past middle age, see their anticipated lifelong careers in computer engineering or durable goods manufacturing vanish, sending them out to seek jobs serving coffee at the local book store.
The dramatic drop in the stock market this week, combined with the previously identified collapse of the housing market, has put the lie to the rosy picture previously being painted. The President coming out with an "economic stimulus package" is pretty much tantamount to surrender on this story. Analysts are now using the dreaded "R word" out in the open.
Note to readers: Following today's announcement, you may find that you're getting an extra 800 dollar check in the mail to "stimulate the economy." Be warned that this bonus, should you receive it, is not a free gift or tax refund. It is an advance on your anticipated tax refund for next year. This means that if you generally figure your taxes out well and wind up with a very small bill or refund each season, you will be starting out 800 dollars in the hole next spring.
Across the pond in the Telegraph, Jeff Randall has an interesting article titled "When governments print money, buy gold." He poses, via quotation, a pertinent question for your consideration.
"If you don't trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?"
Gold is durable. The author goes on to quote Alan Greenspan, who noted that cash in a fiat-money regime (where currency is not underpinned by gold) has no anchor. It can rise in value, but can also plunge precipitously. I suggest you check out the entire article. You may want to invest in some Krugerrands before this ride settles out.
