Oh, about that U.S. economic recovery …

August 17, 2009

What might stand in the way of a robust economic turnaround. Gary Becker outlines the following factors:

The federal government is creating many programs, such as reducing student loan repayments and mortgage payments for persons with low incomes, which discourage the unemployed from finding jobs, and encourage the employed to become unemployed. The proposed caps of various kinds on executive pay, especially in the financial sector, the large government debt being created due to huge fiscal deficits that will put upward pressure on interest rates, the European style reorientation of anti-trust policies toward protecting competitors rather than consumers, the enormous excess reserves that have a considerable inflation potential, the federal government’s likely incompetent management of two of the three American auto companies and a major insurance company, and the planned creation of a consumer czar that will interfere with the goods and services offered consumers are examples of policies that are likely to discourage business investment and risk taking.

Me: It is not about aggregate demand, gang, it’s about confidence.

8 comments

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I seriously doubt people are quitting their jobs just to get a lower mortgage payment. People need to eat, too.

Posted by kyle | Report as abusive

As the above commentor notes, what a ridiculous quote by Becker. I seriously doubt that people are choosing unemployment to take advantage of government programs.
And if you think aggregate demand is not important, it’s probably time you retake Econ 101 before writing another column…

Posted by Kramer | Report as abusive

ONLY MANUFACTURING WILL CREATE JOBS AND END DEPRESSION.

CONGRESS AND WHITE HOUSE HAS NEGLECTED THE MANUFACTURING SINCE 20 YEARS AND HENCE WE HAVE A DEPRESSION. UNEMPLOYMENT, BANKRUPTCIES, HOUSING CRASH, AUTO FAILURE IS ALL DUE TO END OF MANUFACTURING. HOUSING, AUTO, BANKING INDUSTRIES ALL DEPEND ON THE JOBS AND REVENUE GENERATED MY MANUFACTURING.

BAN IMPORTS FROM COUNTRIES WITH WAGES BELOW OUR MINIMUM WAGE. THE WORKERS IN OTHER NATIONS ARE STILL POOR AND OUR WORKERS ARE UNDER POVERTY AND UNEMPLOYED. THE THEORIES OF FREE TRADE HAVE FAILED AND DESTROYED OUR NATION. FREE TRADE HAS NOT HELPED TO UPLIFT THE POVERTY OF OTHER NATIONS AND HAS GOT OUR NATION IN A DEPRESSION.

DEVALUE THE FALSELY INFLATED DOLLAR TO HALF ITS CURRENT VALUE TO ALLOW EXPORTS AND END THE TRADE IMBALANCE.

THERE IS NO OTHER WAY OUT NOW. STIMULUS, BAILOUT, HEALTHCARE REFORM – ALL HAVE PROVED TO BE WRONG. THEY ARE ONLY PROLONGING THE BIGGER DISASTER TO HAPPEN, “2ND GREAT DEPRESSION”.

WAKE UP AND REALIZE YOUR MISTAKES. I WROTE 4 MONTHS AGO TO WHITE HOUSE, CONGRESS AND HOUSE THAT THERE WILL ME MORE UNEMPLOYMENT, RIOTS AND RECESSION. IT HAS COME EXACTLY TRUE.

BY DECEMBER UNEMPLOYMENT WILL GET WORSE. DEBT ON OUR NATION WILL DOUBLE. EXTREME RIOTS AND DEMONSTRATIONS WILL ERUPT. GOVT WILL GET LESSER TAXES AND WILL TEND TO FAIL. CHINA WILL NOT GIVE MORE LOAN. OUR DEFENSE AND BORDERS WILL GET WEAK. MULTIPLE BANKS WILL FAIL. VOTERS WILL SEEK CHANGE IN LEADERSHIP AND WILL VOTE ALL OF YOU OUT.

I WILL WRITE AGAIN AFTER DECEMBER TO INFORM ON THE STATUS AND TRUTH OF REALITY. PLEASE GET WORKING ON EFFORTS TO BRING BACK MANUFACTURING. JOBS WILL COME BACK. WE WILL BE A GREAT NATION AGAIN. STOP BOGUS FREE TRADE AND DEVALUE DOLLAR IMMEDIATELY.

(I have written in short and simple so you all ‘congress’ can understand. I can write a thesis on this recession but you all will have no time and desire to read. You all have not even read the bills that you are given to vote on.)

Posted by bobby | Report as abusive

“The federal government is creating many programs, such as reducing student loan repayments and mortgage payments for persons with low incomes, which discourage the unemployed from finding jobs, and encourage the employed to become unemployed.”

Here we bail out Wall Street and companies the tax payer bailed out who took loses dump millions in bonuses and when a few scraps are handed out to the tax payer James here thinks this will create a bad attitude in the peons. James, the bad attitude is due to Congress not listening to the People and still dumping out those bail outs to the fools who created this mess.

“ The proposed caps of various kinds on executive pay, especially in the financial sector, the large government debt being created due to huge fiscal deficits that will put upward pressure on interest rates, the European style reorientation of anti-trust policies toward protecting competitors rather than consumers, the enormous excess reserves that have a considerable inflation potential, the federal government’s likely incompetent management of two of the three American auto companies and a major insurance company, and the planned creation of a consumer czar that will interfere with the goods and services offered consumers are examples of policies that are likely to discourage business investment and risk taking.”

Let me see if I can put this plainly and succinctly, DUH! We want to discourage risk taking. That is a big part of what got us in this mess.

“Me: It is not about aggregate demand, gang, it’s about confidence”

If you mean consumer confidence then I can agree that is a small part of the solution. You need to put people back to work. Once the consumer is “confident” he will be able to pay for what he buys then this economy will recover. This administration promised 300k new civil service jobs. Where are they? Trickle down never has and never will work. What you get is greed at the top where the only trickle is into CEOs off shore bank accounts. You need to percolate up from the consumer. The more people you have working the higher the consumer confidence rises. It doesn’t get simpler than that. This country should never have bailed out one company. It should have expanded its worker safety nets and put people to work building dams, levies, bridges, roads, schools and anything else that would have kept people working and paying. That is what it is all about.

Posted by B.Free | Report as abusive

cue: Jeopardy Theme
[dingdongdingdong dingdong ding etc.]
aaand we’re back!

Things Gary Becker would be better doing with his time for 200, Alex.

- This virtual substance might be woven when applying makeup to Gary’s misconceptions, or creating more of them

What is… a Tissue Of Lies?

[applause]

Me: I don’t have a problem with Gary Becker quitting his day job. Seriously.

Posted by The Bell | Report as abusive

I agree it’s about confidence, now. But the truth is the bubble wasn’t allowed to burst, it only leaked a bit and is being re-inflated, this time with government dollars. People (and by extension corps and gov’t) will have to realize that any expectation of going back to over-leveraged earnings levels without the over-leverage is impossible without a MASSIVE re-investment of capital into industry, and I don’t mean with #(*&@#& bonuses, AND it must be done without the ridiculous levels of debt that we’ve seen in the last few years. Given that stock valuations are based on earnings, one can readily see that you two options: A) another bubble where the public at large pay the tab when it bursts, or; B) a dramatic lowering of stock valuations across the board that reflect the lower profits that should be expected. Dow at 5000 is a reasonable start, and it shouldn’t cause people to panic, quite the contrary. It should make people understand that companies finally understand that bubblenomics are unsustainable and MUST STOP. Now, who has the will to be the first to drastically cut guidance for the forseeable future and not try to hollow-out a company to make it’s numbers look pretty like before the crisis?

On another note, how about seize all TBTF entities and break them up into smaller corps and return them to the markets. Once they are return, NO MORE BAILOUTS. Period. Full stop. If any single entity as the power to bring down the system, it shouldn’t be legally allowed to operate. It can be given a small window to divide itself or face nationalization and have it done for them. I think that would sound reasonable to anyone. I’m tired of corporation running the world and influencing gov’t… give power back to people or the people might choose to take it back by force!

Posted by the Shah | Report as abusive

[...] James Pethokoukis wrote an interesting post today onJames Pethokoukis » Blog Archive » Oh, about that U.S. economic <b>…</b>Here’s a quick excerpt [...]

I recently read an article published by CEO Q magazine on economic recovery, the new world order, and the impact of current economic policies. I thought i would share it as it has some very interesting facts and insights on the crisis and expected recovery.

Check it out: http://www.ceoqmagazine.com

Posted by CH | Report as abusive

I recently read your article I thought i would share it as it has some very interesting facts and insights on the crisis and expected recovery.

http://studentsblog2.blogspot.com/2009/1 0/great-ways-to-student-debt-recovery.ht ml