American Economists Failing U.S.

We are fooling ourselves if we think the economy will “improve”

Excerpt from the Green Living site, www.pbzproductions.com/green/:

Even if our economy "improves," this would be illusionary, since a similar financial crisis can happen again. The reason for this is that the math doesn't work. Most household budgets have no income that can be spent on anything beyond basic needs. To buy anything else requires going into debt. But lending institutions are now required to be picky about who they lend money to. Even more importantly, there is no room in this tight average budget to make payments on any debt beyond housing and maybe a car. If borrowing that cannot be paid back keeps going on, it can lead to a total and permanent breakdown of the world economy, far beyond what we have already experienced.

Let's look at the average family budget:
 
Income $50,303
Taxes: federal income and payroll 7,281
Taxes: state and local income 4,879
Housing 17,109
Food 6,443
Healthcare 2,976
Transportation 8,604
Insurance, pensions 5,605
Total $52,897
Left after basic expenses -$2,594
 
The median income is according to the U.S. Census Bureau's Income, Poverty, and Health Insurance Coverage in the United States: 2008. Expenses are from the U.S. Bureau of Labor's Consumer Expenditures—2008. The amount for federal and payroll taxes is from the IRS Employer's Supplemental Tax Guide, which provides withholding amounts for employers. The state and local tax estimate is based on the average of 9.7%, from retirementliving.com. Keep in mind that the healthcare average cost from the Bureau of Labor seems far too low (what were they smoking?), and it is not clear from the report whether health insurance is included under "healthcare" or "insurance/pensions." It appears that utility costs are included in "housing." Even if the numbers need a little adjusting, they would tell the same story.

The average family has no discretionary income per year, and is behind by $2,594 per year when only spending on basics. No wonder the economy melted down. The problem is not that suddenly Americans didn't have money to spend. They never had the money. Although the average income declined in 2008, from $52,163 in 2007, and offset a gain in income over the previous three years, there was no discretionary income in those years either. None of the vacations, electronic gadgets, restaurant meals, and such were paid for by money people had actually earned.

And the Obama administration's plan of tinkering with the tax code and making one-time stimulus payments will not alter the basic equation here.

So the green economy, or any economy that does not crash and burn on a regular basis, is focused on basics, with almost nothing on additional products and services.

This is sobering until you realize that such an economy would be far better for the environment without the destruction that excess consumer goods causes. It is also far better for people's lives. Is it really all that great to sit in a car several hours every day? To rush around, "multitasking"? Isn't the shopping mall a weird, impersonal place? Haven't you noticed that children will ignore a roomful of expensive toys and play with boxes or pots and pans?

Electronic gadgets aren't fun. They suddenly quit working and you go nuts trying to hunt down and read the manual to figure out what to do. Quickie food doesn't taste all that good compared to peaches right off the tree. When you go green you really aren't missing anything.

Find out more at www.pbzproductions.com/green/

Patty Zevallos
media producer – web, video, print
www.pbzproductions.com

The distinguished former Senator from South Carolina is right on with his focus on the economics profession as leading this country astray.

When we turn to what should be done, we need to be as clever as we are assertative. Hollings is correct in his zeal to take action. We must not allow the present situation to continue.

In my opinion, we cannot compete with our trading partners by subsiding exports (a tactic that they use successfully). They have the advantage on us there. Due to 30 years of a trade deficit, they have accumulated a storehouse of dollars that they can use to outbid us in any effort to spend Federal dollars to support exports.

The only option left to the U.S. which has a good chance of success is to impose tariffs on imports from those countries that have the largest trade balance surplus with the U.S.

Many U.S. citizens are afraid to take that route. They fear retailation from our trading partners. They are likely to retailate by ceasing to buy U.S. Treasury bonds. I do not fear that response. If the two largest purchasers and owners of U.S. Treasury certificates stop their purchases, the interest paid to sell these bonds will go up. How much will it increase? No one knows. We do know that the Net Wealth in the U.S. remains greatly in excess of any amount of debt the Federal government wishes to sell. We also know that many other countries and individuals desire to own U.S. Treasury securities.

I want China and Japan to cease buying U.S. Treasury debt so the U.S. government and U.S. public can see for themselves the kind of difficulties we have created for ourselves by deficit spending by the Federal government. The present situation merely disguises from view the degree to which we are piling up trouble for future generations. We need to face our problems - not run away from them.

Tariffs on imports to the U.S. from the 5 countries that traditionally run a large trade surplus with the U.S. is the first logical step to bring this country back to a going concern. The alternative is to remain fearful and hostage to what China and Japan may do.