April 7, 2012

Why Is Unemployment high?

Why do we have such high unemployment? If you talk to ten economists, you will get fifteen answers. Let me give you answer sixteen.

Congress has refused to pass an adequate stimulus package and a plan to control our nation’s debt problem. A stimulus package would increase jobs while building and repairing infrastructure to compete better in the future. Passing a plan relating to our federal debt would brighten the outlook for the country and improve confidence. Congress says it wants to reduce debt; however,it refuses to raises taxes on the wealthy. We need both a stimulus and a long-term debt plan.

Congress is at fault regarding both not having either plans and both the congress and President are to blame for not having a plan regarding our deficit. The Republicans are blaming the President for our high unemployment and yet it was their party's past policies that caused our near depression and their present practices are preventing further stimulus.

We were in a near-depression and we still have not climbed out of it. Depressions take more than a day to create and recovering from one takes a long time. Most families not only had their income drop, but also saw their net worth fall because of the decrease in value of their largest asset, their house. Further, housing values have been slow to recover. The result has been the consumer has lost confidence and has not been in a mood to spend.

We drained our nation’s capital and lost lives by fighting two foreign wars in a manner that provided very little benefit to our nation. As a result we have thousands dead and trillions of dollars wasted.

In addition, much of the consumption in the prior decade was a result of tapping the equity in the family home to use as collateral to have the money to spend. Over the last four years the consumer has been paying down his debts and rightly so. As a result, there is less demand. He is not ready to start borrowing again for consumption. In short, he has lost confidence.

In the last decade too much was consumed relative to income per family. Therefore, do not expect consumption per capita to get back to the “good old days” soon. We will need to rely on exports to increase the demand for goods and services produced in this country.  Increasing exports is a challenge and does not happen quickly.  The world is competitive and increasing exports will take time.

We have too much regulations on small business, we do not defend small business from big business and we need to enforce anti-trust laws against big business where needed. We should not burden Small business with the same rules as big business. Capitalism works fine to the benefit of the nation for small business. Competition requires they give the consumer what he wants. Further, when a small business acts improperly the damage done to the nation at large is minimal because their small sixe.

Capitalism for many industries controlled by oligopolies is broken. Free markets in these industries do not exist. Oligopolies control these industries and need more regulation. Capitalism exists to serve society. Society does not exist to serve capitalism. We should either fix capitalism where it is not working by enforcing anti-trust laws or recognize there are some industries that must be highly regulated. We are comfortable regulating utilities. If capitalism does not work in an industry one alternative is to recognize the problem and treat it as a utility. Capitalism is not working anyway.

1 comment:

  1. I understand your needing to post this but could you at least proof-read your headline before posting?

    ReplyDelete