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Government Shutdown: Causes and Effects

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On October 1st, the United States Congress failed to pass a continuing resolution needed to finance government activities, leading to a government shutdown.  This information has been all over the news media, but often without a clear and concise explanation of what exactly is going on and what it all means.

To clear up the confusion, a little background is necessary.  One of Congress’s constitutional responsibilities is to pass the nation’s budget.  However, in recent years, Congressional stalemate has made complete budget overhauls rare, and Congress has often relied on Continuing Resolutions (CRs) to keep government funded.  CRs are used as a sort of legislative compromise mechanism; they don’t specify specific increases or decreases in funding to each government program, but instead provide across the board funding based on appropriations levels of the year before.

But even though CRs are a compromise designed to be much simpler and therefore easier to pass than a full budget, Congress still failed to pass one.  The underlying reason was, interestingly enough, not a fight over appropriations but a fight over healthcare.  Congressional Republicans, led by Senator Ted Cruz, said they would only pass a CR if it included a dismantling of the Affordable Care Act, popularly referred to as Obamacare.  Democrats refused to accept their terms, and since each party controls one house of Congress, a stalemate was reached.  The morning of October 1st marked the beginning of a new fiscal year, but without a continuing appropriations bill, nonessential government operations were shut down.

The term ‘nonessential’ is key.  A government shutdown does not mean America’s nuclear arsenal is left unattended and airport security disappears.  These government operations are considered essential to the continued safety and security of the United States.  Still, the ‘nonessential’ part of government includes the 800,000 government workers who were sent home on furlough, including the majority of NASA, the Department of Commerce, and the Department of Labor, in addition to half the Department of Defense.  Important programs and government services are now without funds, potentially causing trouble for those who depend on them.

Unfortunately, the negative effects of this government shutdown are almost insignificant compared to the potential negative effects if the debt ceiling is not raised later this month.  While the debt ceiling and the government shutdown are often incorrectly thought of as being the same problem, they are actually two different concerns entirely.  The government shutdown occurred because Congress failed to appropriate money to fund programs.  Raising the debt ceiling allows Congress to borrow money to fund programs.  More simply, government shutdown is to spending as debt ceiling is to borrowing.

That explanation still doesn’t demonstrate why not raising the debt ceiling is so catastrophic.  If the debt ceiling is not raised by October 17th, the government will be spending more money than it is taking in without an ability to borrow more, setting the United States on the path to credit default.  An advanced sovereign nation defaulting on its debt is exceedingly rare, and usually precipitates economic turmoil for the country involved.  And given that the United States is not only the largest economy in the world but also that the United States dollar is the main reserve currency of the world, the international consequences of a default would multiply the economic destruction of already severe domestic effects.

Because of the dire stakes, it is extremely unlikely politicians will actually allow the government to default.  That being said, a ‘grand bargain’ where both sides of the aisle can come to a comprehensive, long-term solution on both borrowing and spending is just as unlikely, especially in the hostile political environment the government shutdown has created.  The most likely solution is a series of stopgap fixes to increase the debt ceiling and restart the government.  Ultimately, we shouldn’t expect a panacea to our nation’s woes – Washington is too divided for that – but we shouldn’t expect Armageddon either.

Filed under Domestic, Economy
Oct 6, 2013

Economics – Confusing As Ever

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Lately, there have been two main viewpoints regarding the American economy, and they are pretty much polar opposites.

The first viewpoint is the optimistic way of looking at things.  Proponents of this glass-half-full belief can cite financial markets, which have rebounded from 2009 lows and have recently hit new all-time record highs.  Moreover, the U.S. economy has consistently added jobs each and every month for the last two years, showing that the days of rapid job losses appear to be over.  The unemployment rate has dropped from a scary 10% to a much more manageable 7.6%.  And even though the current unemployment rate is higher is not as low as it could ideally be, America’s 7.6% unemployment is still much better than the eurozone’s 12.2%.

However, all this good news avoids the less-than-pleasing economic indicators that the pessimists focus on.  Even though the U.S. economy has been gaining jobs, the rather slow rate of job creation means that the unemployment rate is likely to remain stubbornly high.  For example, the U.S. gained 175,000 jobs in May, but that did not stop the unemployment rate from actually increasing by .1%.  Not only are new workers entering the workforce, which is why the number of available jobs must grow just to keep a relatively stable level of unemployment, but the U.S. still faces a huge problem with both discouraged workers and workers who are stuck in low paying or part time jobs.  Worse, government cutbacks from the sequester combined with ineffective legislation from Washington makes our economic future murky at best.

There’s information to support both fields of view, but it seems like many people are quick to align themselves with one side or the other.  The one viewpoint that gets lost in the optimist versus pessimist battle is also the most sensible one – a realistic take of all forces affecting the U.S. economy.  This realist take on the economy celebrates the economic gains of the last few years while also recognizing the corresponding weaknesses of our current economic situation.

Would markets have rallied to record highs if the economy still had an imminent threat of a precipitous drop into a double-dip recession?  Should a healthy economy have 7.6% unemployment even after 4 years of fairly consistent GDP growth?  Both of these questions deserve an emphatic ‘no’ as an answer, showing that things are neither as dire nor as cheery as many are apt to argue.

Politicians and pundits need to take a more moderate stance on American economic progress.  It’s hard to plan the right path forward if you disagree on your current position.  Instead of bickering about what the current economic facts mean for our economy, the U.S. must accept its economic strengths along with its weaknesses, and use this realist viewpoint to help spur the economy into a truly healthy state so no one can disagree.

Filed under Domestic, Economy
Jun 10, 2013

Meritocratic Missteps- Part 3

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Following suit of Tyler Miksanek, in this multi-part article, Matthew Dudak discusses another American ideal: meritocracy and how it ultimately hurts America as well. This is part 3 of 3. 

The final argument made for meritocracy is that it is all we have. The problem with this argument is the contentment with the system that proponents of it seem to possess. As civilized beings, it is our natural tendency to develop institutions, and rightfully so, they hold the potential to much greater power than an individual. However, often, when institutions begin to fail us, we simply keep trudging along, trusting the kinks will eventually be worked out. Chris Hayes defines the issue of meritocracy, not as one of right versus left, though it often comes off that way, but rather as institutionalist versus insurrectionist. Douthat and Brooks both fall into the former category while Hayes self-identifies as the latter. Institutionalists believe that the capacity for greater change lies within the bounds of an institution, while insurrectionists believe that in order for beneficial change to occur, we must revise our institutions in order to create this change (Hayes, 17-23). When examining just how broken our system of meritocracy is, it almost seems inevitable to lean towards insurrectionism. But beyond that, the fact that institutionalists have largely failed at creating any real change to meritocracy and have in fact accelerated its demise lends itself as enough reason to turn to insurrectionism. Look no further than the almost universally agreed upon failure of George W. Bush, certainly an institutionalist, to fix meritocracy: No Child Left Behind. By staying within the bounds of the preexisting institutions, Bush tried to give students more equal chances but created another institution which has grown to be hated by education professionals across the nation. Insurrectionism exists on both sides of the political spectrum, perhaps the best examples are the Tea Party on the right and Occupy Wall Street on the left. Both present images of a broken America which can only be fixed by a sweeping overhaul of our current institutions. Since we are focusing on meritocracy, we shall focus on the kind of insurrectionism that leads itself to change the meritocratic system. The fact of the matter is that meritocracy is clearly broken on all levels, from the smallest businesses up to the United States government, however since it is hard to proscribe changes in the private sector until they have a massive enough screw-up (a la Enron) to merit government intervention. For this reason, we will focus on changes which can apply nationally.

The first, arguably most important, step to fixing our broken institutions starts with the first institution most people encounter: education. The biggest problem is the disparity between the amount of money those at the top spend on their children’s education versus the amount those at the bottom spend. This does not necessarily guarantee higher achievement, it merely guarantees more graceful failure. Should a child who comes from very little not do well enough on their ACT to get a considerable scholarship anywhere, they simply do not go to college and thus fail altogether at higher education. But should a child whose parents are loaded not do well enough for a considerable scholarship, they end up going to college on their parents’ dime, it just is a school that is not Harvard. The second child was not guaranteed a higher ACT, and thus not guaranteed Harvard, or higher achievement, they were simply guaranteed a safety net to prevent them from failure. Charter schools are beginning to take a stab at this problem. But they still rely too heavily on either meritocracy or random chance. While guaranteeing students are given an equal chance in primary or secondary education is near impossible, giving them a more equitable chance at post-secondary education is possible. By focusing admissions testing on intelligence testing and not standardized testing, test preparation becomes a dead art and colleges are able to see the students they really want, not simply the students who can prepare. Additionally, we are living in an era of often ineffective affirmative action. Affirmative action schemes should be decided more on the basis of wealth than gender or race (Social Mobility in America). Education must the starting place. With a little insurrectionist nudge, education can fall into place and present more equality and less entrenchment.

Yet the change cannot stop simply at education, it must also follow into fiscal policy. The words “fiscal policy” are often the last words anyone wants to hear, but in the case of an entrenched elite they may be part of the solution. Fiscal policy should certainly not make millionaires into beggars or beggars into millionaires, but must create something more akin to an equal chance at life. In the September/October 2012 issue of Foreign Affairs, Andrea Louise Campbell discusses fiscal policy and its role in equality in the United States. Marginally, the US has a relatively progressive tax system, on par with many other OECD nations. However this tax system is made quickly regressive when you add on many tax breaks and subsidies that benefit mainly the wealthy, leaving you with a regressive effective tax system. Pair that with the fact that our social safety net is very small and the redistributive state is only very moderately progressive, and you leave those at the bottom at a loss. Campbell suggests a two-tiered approach to this problem. First and foremost, the United States must simplify its tax code, cutting out many tax breaks and making our effective tax system much closer to the marginal tax system. Then, when you are left with a moderately progressive tax system, add in a larger redistributive state which catches all those who need help, not just those with a giant need. Couple these two changes, both of which are not all that insurrectionist, and you are left with a more fair and progressive fiscal policy. This fiscal policy uproots the harsh lines which divide the elite from the others. Throw in some education reform for good measure, and we are able to achieve a system in which equity of opportunities is met with equity of tools.

Within the United States, our meritocratic system has gotten out of hand. What started with good intentions has devolved into well-established class roles and a dismissal of personal ethics in pursuit of meritocratic achievement. While in an ideal world, meritocracy appeals to the fundamental core of our American identity and produces inherent “good” within us, when meritocracy is left to run its course, and we continually push to stick closely to the mirage we call meritocracy, we in fact create more “bad” than “good” as well as entrench those at the top and leave those at the bottom to fend for themselves. Yet through a mixture of admittedly radical education reform and more moderate fiscal reform, the good of meritocracy on a national level once again outweigh the bad. If we can fix the broken national institutions, perhaps the change will trickle down into the smaller institutions. The Occupiers of Wall Street have since died out and the Occupy movement has all but come to a halt, however their core message that America is broken still resonates. America and meritocracy are indeed broken, but they do not have to be.

Brooks, David. “The Merits of Meritocracy.” The Atlantic. N.p., 1 May 2002. Web. 20 Mar. 2013.

Campbell, Andrea L. “America the Undertaxed.” Foreign Affairs, Sept.-Oct. 2012. Web. 28 Apr. 2013.

Douthat, Ross. “Luck, Hard Work and Meritocracy.” The Atlantic. The Atlantic, 9 Dec. 2008. Web. 20 Mar. 2013.

Hayes, Christopher. Twilight of the Elites: America after Meritocracy. New York: Crown, 2012. Print.

“Social Mobility in America: Repairing the Rungs on the Ladder.” The Economist 9 Feb. 2013: n. pag. Web.

Filed under Domestic, Economy
May 5, 2013

Meritocratic Missteps- Part 1

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Following suit of Tyler Miksanek, in this multi-part article, Matthew Dudak discusses another American ideal: meritocracy and how it ultimately hurts America as well. This is part 1. 

The words “We are the 99%,” echo through the streets of one of America’s most prestigious institutions: Wall Street. These words are not shouted by the prestigious brokers and Warren Buffet-wannabes, rather these words echo through the hallowed blocks of Wall Street as a result of a movement which was set afoot September 17th, 2011: Occupy Wall Street (OWS). Take away the numbers, but leave the burning rage and discontentment of the upper middle class which participated in OWS and you are left with a central message: America is broken. The Occupiers, or 99% had a list of grievances, many of which varied from person to person, but among them was one theme: inequality. In the United States, our ideal society is one of pure and unadulterated meritocracy. While a dictionary definition may be unnecessarily complex, meritocracy can be defined simply by looking at the first five letters of the word. The key is merit. Whether athletic, intellectual or otherwise, in an ideal meritocracy, achievement and success is based entirely on objective merit. To illustrate this, imagine two students: the first student may be black, poor, a mother, female and have everything else going against her, while the other student is white, rich, male, and has been spoon fed everything his whole life. Yet in an ideal meritocracy, both students take the ACT, which objectively measures their intelligence. The first student receives a 34, the second a 15. The first student thus then gets admitted into Yale and goes on to law school, while the second flunks out of community college after a year because he is always hungover. Now contrast this with a more dystopian scenario: the first student struggles to get by in life, let alone in school, cannot afford any test prep materials or classes and only gets a 24, although she works very hard on her own for it. The other student, on the other hand, is sent to ACT prep class three times a week by his parents, has a private ACT tutor and 10 ACT books in his house, allowing him to get a 29. In this dystopian world, the ACT measures no intelligence whatsoever, only ability for prepare for the test. While we certainly do not live in either of these two extremes, we are far from this ideal meritocracy. Meritocratic systems on their face present an ideal way to establish institutions, but eventually lead to an entrenched meritocracy which not only produces immense inequality, but also a potentially disastrous hypercompetitive environment.

In order to truly understand meritocracy, it is imperative to examine why we, as a nation, are in love with meritocracy. The ideal of meritocracy is so deeply ingrained within us, that we have a knee-jerk reaction to anything that seems even remotely anti-meritocratic. Call it communism, call it fascism, call it “The Tyranny of the Majority,” whatever we name it, we stray away from anything that is not meritocracy. But the thing is, it just makes sense, especially to Americans. For most Americans, after so many years of becoming so meritocratic, anything else just seems insane. The fact that the SAT was created to allow for an objective way of judging college admissions only after more than 250 years of higher education in the United States seems alien to many people. Standardized testing is considered to be the epitome of meritocracy. It allows educational institutions, from elementary schools up through law schools and medical schools to objectively judge proficiency in a subject. When it fundamentally comes down to it, meritocracy just seems fair. Not fair in any sort of equitable outcome, but fair in achieving equitable opportunity. And if Americans love nothing more, it is being the land of opportunity.

Beyond the idyllic view of meritocracy we as a nation hold, many view meritocracy as a bringer of tangible “good.” David Brooks, a man who has reached one of the nation’s hardest jobs- being a New York Times conservative columnist- views meritocracy as a bringer of “good,” namely character. Brooks believes that many children today dance through life with very little struggle or hardship, which presents a problem for the children’s character. Brooks takes logic which was largely championed by Paul Tough, author of How Children Succeed, who essentially argues that middle and upper class children, with a lack of hardship, lack character and often end up as worse as those who experience constant hardship throughout their life. Tough argues that the key for developing this character to sustain a healthy and fulfilling life is in finding a balance of a bit of hardship coupled with the right amount of soft landings at home in order to develop character. However, Brooks argues that hardship is not the only catalyst for character, and instead you can develop character from the sort of competition and drive which meritocracy instills. True meritocrats want to climb up the ladder, and want to contribute society, and this driving force instills in them character along the way (Brooks). Clearly, ideally as well as practically, proponents of meritocracy see it as a system which is worthy of governing our institutions.

In the next part, we will finish examining the arguments for meritocracy before determining why meritocracy may be more of  curse than a blessing.

Brooks, David. “The Merits of Meritocracy.” The Atlantic. N.p., 1 May 2002. Web. 20 Mar. 2013.

Tough, Paul. How Children Succeed. London: Random House, 2013. Print.

 

Filed under Domestic, Economy
Apr 24, 2013

Is the Economy Really On the Mend?

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The Dow Jones Industrial Average, a basket of stocks that is often used as a bellwether for economic health, broke 14,000 back in the fall of 2007.  Less than two years later, it had plummeted to less than half that value.  But recently, the Dow Jones proved to everyone that not only had it recovered from this serious stumble, but it was actually doing better than ever.  On March 5, the Dow Jones broke its previous record high from the fall of 2007, meaning that is actually worth more now than it was pre-recession.

Of course, just because a commonly cited indicator of the stock market is back to pre-recession levels does not mean the economy as a whole has recovered.  That being said, the Dow Jones was not the only good economic news as of late.  The other half of the story lies with the recent release of February’s unemployment statistics.  In February, payrolls increased by an unexpectedly high 236,000 jobs, sending the unemployment rate down to 7.7%.  All the economic signs are appearing rather rosy, and its not hard to assume that our economy might once again be clear of serious headwinds.

Unfortunately, unchecked optimism is just as risky now as ever.  While the economic headlines might paint a pretty picture of economic recovery, these headlines are still set against a backdrop of economic insecurity.  Take those unemployment headlines, which are quick to talk about the new jobs created but mostly skip over the fact that the labor force actually shrank by 130,000 jobs in February.  Clearly, not all the current economic numbers yield optimistic conclusions about the state of the economy.

Worse still, government leaders have gotten our economy into an even more shaky situation.  Budget cuts due to the sequester have yet to be stopped, and this sudden cutback in government spending could throw the economic recovery off balance.  If Congress wants to oversee a stable economic recovery, they should start off by passing sensible economic legislation.  The instability caused by the unresolved sequester, in addition to the lack of clear economic policy coming from Congress, means that government is far from ensuring economic stability in both the short and long term.

And even though we’ve made some gains in the fight against unemployment the last few months, we are still far from solving the unemployment problem.  While unemployment is down from a high of 10% back in 2010, it’s current 7.7% level is not even close to the 4-5% unemployment expected in a healthy economy.  Just because we’re recovering does not mean that we are recovered.

That being said, the current economic indicators are still showing a recovery, and while the recovery may not be as straightforward or as fast as we would like, some economic momentum is better than none at all.  A few years ago, we had almost nothing to be optimistic about economically.  And while the data is far from perfect now, we at least seem to be moving in the right direction as a whole.  While its not time to get out the party hats just yet, we may be able to put those doomsday signs back in storage.

Filed under Domestic, Economy
Mar 9, 2013

Unexpected Outcomes of an Inconclusive Italian Election

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If we here in America think that our politics have become too partisan and too polarized, we really ought to take a look across the Atlantic, towards Europe for a reality check. While our parties have shifted slightly away from the center, and grass roots movement like the Tea Party and Occupy Wall Street gained momentum for a bit, by now, both Democrats and Republicans alike have realized that the fringes are not the way to go. Yet in Europe, there is a growing movement towards populism, and away from pragmatism. Last year, the Greek neo-Nazi Golden Dawn party received a surprisingly strong showing. In France, Marine Le Pen’s right-wing Front National became the third largest party, while Francois Hollande’s Socialist Party won the parliament and the presidency. And now, it is Italy’s turn. After only a bit more than a year in office, Mario Monti resigned in December, remaining on as care-taker until an election could be held. Well, this week, that election was held, and the results were inconclusive. We now take a look at the top four vote-getting parties and what they mean for Italy.

Finishing in first, with 29.5% of the vote, was Pier Luigi Bersani’s Democratic Party. Campaigning primarily on an anti-austerity platform, the Democratic Party is the center-left party in Italy. Just a few months ago, it looked like their primary competition was crumbling, and the Democratic Party would be a shoo-in, yet now, the situation has changed. Winning a majority in the lower house and only a plurality in the Senate, the Democratic Party will be forced to form a coalition if it wishes to rule Italy, something which may force it into an awkward situation.

Finishing second, with 29.1% of the vote, was our good pal, Silvio Berlusconi’s People of Freedom (PdL) centre-right coalition. After years of running Italy into the ground, and of course his famous Bunga-Bunga sex and alcohol infused parties, Berlusconi was forced out of his office as Prime Minister on a vote of no-confidence by the Italian parliament. It initially appeared as if he had left politics, but we were fooled. Winning only a fraction of seats in the lower house, the PdL did exceptionally well in the Senate, still without a majority, but with a plurality only 6 seats smaller than the Democratic Party’s. Their victory was in large part due to their coalition with the right-wing Northern League.

As a surprise finisher in third, with 25.5% of the vote, was comedian Beppe Grillo’s Five Star Movement. Beppe Grillo’s party really demonstrates the political attitude of most people in Italy right now; which is to say, they hate politicians. Grillo, rather than being a politician, economist, or anything of the sort, is a comedian. And most of his party does not have a single unified platform- rather they represent the sort of anti-party that Italy wants. All of this is incredibly illogical though. Five Star Movement’s candidates were chosen in a primary held online with a very small turn out. Most of them have no training in political science, economics or foreign policy. Instead, they are “everyday” people. In one region, the assemblyman and Senator are a mother-son pair. They even prefer ditching the titles of assemblyman and Senator in favor of the term “spokesperson.” While they do present some compelling anti-establishment arguments, their lack of organization not only means that they will not progress politics in Italy, it also means that their strong turn out may severly hold Italian politics back as they are unlikely to enter into a coalition with any other party.

Finally, in fourth place, with a meager 10% of the vote, was Mario Monti’s Civic Choice centrist coalition. After running the country over the past year as a technocratic leader, Monti initially decided that he would step down and let actual politicians take over, but then decided to lead a centrist coalition, and only remain on as prime minister if this coalition succeeded  It was a long shot and alas, they did not succeed. But the failure of this coalition essentially proved the fears of many outside of Italy, from the European Central Bank to the creditor countries such as France and Germany. The fear was that, after Monti, Italy would move back to politics, and threaten the stability that Monti worked so hard to obtain.

Until Italy establishes an actual government, the world will look nervously at Italy over the course of the next few weeks as the party leaders try to obtain a coalition which gives them control of the country. Bersani and Berlusconi may be forced into a coalition as it seems that Grillo will not enter a coalition anytime soon. Needless to say, this pairing of parties which have long been rivals could be awkward, but with the failure of Monti’s pragmatism, may lead to real progress in Italy.

Filed under Economy, International
Mar 3, 2013

Confronting the Realities of our National Debt

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Everyone in Washington seems to be proposing their own solution to solve the nation’s crippling budgetary woes.  The big issue: many of these so called solutions don’t actually solve our debt problems, and their math just doesn’t add up.  Few politicians are willing to address the numbers head on, but it’s important for Americans to realize the exact predicament our nation is in.  So let’s do something that politicians won’t, and examine the underlying numbers behind our nation’s fiscal failures.

Our fiscal year 2013 deficit is projected to come in at 901 billion dollars(1).  But that’s just a one year budget shortfall.  Our total national debt is around 16.4 trillion dollars and rising fast.  Clearly, monumental steps need to be taken in order to stabilize our budgetary failings.  Unfortunately, politicians are only focusing on the small solutions, and this shortsightedness is evident from both major parties.

Republicans have clamored that a smaller government is the right path to a balanced budget.  It’s a good argument on the surface, but dive further into the math and Republican proposals seem far from a panacea.  The reason for this is that Republicans are targeting too small of programs.  Take food stamps, a federal program Republicans have lambasted.  But when Republican backed legislation to curb spending on food stamps surfaced in the House last year, it was only able to trim about $16 billion of the $80 billion food stamp budget.  Simply put, proposed Republican budget cuts don’t have the ability to solve our nation’s fiscal woes.  Bigger reforms are needed.

That all being said, Democratic proposals for tax hikes have been far from a panacea as well.  While tax hikes can certainly ameliorate our budget woes, they are far from actually fixing the problem by themselves. On the surface, tax hikes also seems like a good idea- raise revenue while possibly lowering the income inequality gap. Yet, upon further examination, this plan runs into some problems. First and foremost is the breadth of tax hikes needed. Currently, federal taxes are about 18% of the United States’ GDP. In order to balance the budget, these rates would have to be hiked by about 10% over the next ten years. Not only is this a huge hike which could slow down economic growth all around, this only takes care of the deficit in 2023. By then, the United States will have picked up as much as 26 trillion dollars of debt.

Neither the Republicans nor the Democrats can stick to the hard line on this issue. Simply spending cuts or simply tax hikes will make a little dent in the deficit, a smaller dent in the debt, and overall get nothing done. If Congress is serious about cutting our deficit and eventually lowering our debt, a comprehensive approach must be taken. Taxes must be raised, this much is evident. The Bush Tax Cuts have run their course and should expire entirely, perhaps even raising taxes across the board on this issue. Republicans will first have to break free from their Norquist-ian chains, reach across the aisle and admit it has to be done. Yet Democrats also have to give in some too. Programs like Social Security, Medicare and even defense spending have become wildly inefficient and are doomed to bring failure to the budget of the United States. An all-encompassing reform of revenue and spending must occur if Republicans and Democrats alike want to hold on to hope to truly ridding the United States of the shackles of debt.

 

(1) – White House Office of Management and Budget – http://www.whitehouse.gov/omb/overview

Feb 5, 2013

Greek Grievances

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Greece”s Parliament Building in Athens has been the site of both political and economic turmoil.
Source: CIA World Factbook

Americans had much to be thankful for this Thanksgiving. Our economy, arguably, isn’t terrible, and we have a democracy. Greece, on the other hand, cannot say the same. Entering a sixth year of recession with an unemployment rate of 25%, things do not look so good. Its high unemployment rate endangers social unity, because people who are out of jobs begin to lose faith in their political parties. Therefore, the party in power stays in power, and is able to manipulate the government as they please without any form of cohesive opposition.

Powerful party leaders appear to be doing what’s best for Greece, especially economically. As a result, most of the common people are deceived. They fail to realize that their representatives’ means of seeming like a just leader does not reflect the people’s best interest at all. In truth, those in power often abuse their rights of decision-making. For example, on November 1st, Greece”s ruling parties decided that financial aid was so crucial that they removed seven representatives from their government positions after those representatives failed to back an austerity law. Decisions that appear to benefit the general public in reality only bolster individual authority. At the same time, while Greeks endure endless austerity along with an ever-shrinking GDP, there are indicators that suggest that the well-connected government executives were circumventing theses fiscal burdens. Dominant beneficiaries force the masses to do the heavy economic lifting. A corrupt group governs the citizens, not the citizens themselves.

Police brutality intended to cover up the actual lack of freedom exemplifies press censorship. In an effort to hide repeated oppression, the police restricts the media, usually with further oppression. Aspiring journalists find this tight cycle hard to break. Even foreign sources have difficulty finding their way in communicating to the Greek population. The popular London newspaper, The Guardian, was met with threats after publishing allegations of police mistreatment and torture of anti-fascist protesters. Instead of undertaking investigation to make sure this was not happening, threatening to sue the newspaper makes the police seem even more suspicious, and proves that the government has become increasingly authoritarian.

Without outside news sources, the people in Greece would not have any reliable forms of media, as there is virtually no freedom of press anymore. Greek media is owned by magnates or financed by banks, allowing politicians, businessmen, and journalists rule the country. They essentially have the power to manipulate media and change laws to justify illegal actions. Members of Golden Dawn, an increasingly popular Neo-Nazi and anti-immigrant party, corrupt the official police force and the judiciary. The party runs the slogan “Get the stench out of Greece”, referring to unwanted immigrants. Even more worrying is the fact that, ever since Golden Dawn won eighteen seats in parliament back in June, violence against immigrants and leftists has increased. Police even participate in it occasionally.

All of this suppression cannot be the fault of Greece’s government alone. Other countries in the Eurozone are also partially responsible for the lack of democracy. Fiscal tightening has imposed a great deal of austerity onto Greece, which already has a hard time simultaneously trying claw itself out of debt and making reforms. Heavy austerity distracts leaders from what is really important: their people. It’s kind of funny how the European Union was awarded with the Nobel Peace Prize for their democracy and human rights, considering all they have done is foster corruption. A more suitable candidate for that prize would have been the US!

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Filed under Economy, International
Nov 26, 2012

Averting a Fiscal Cliff

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At the beginning of 2013, a group of tax cuts that includes the Bush tax cuts is scheduled to expire.  At the same time, many key government programs will be cut or reduced as spending is drastically lowered.  But these measures aren’t designed as a fiscal belt-tightening of the federal government.  Instead, this ‘fiscal cliff’ – as it has been dubbed- is a dangerous combination that politicians are scrambling to avert, as most lawmakers are in agreement that allowing taxes to be raised at the same time spending is cut could hurt an already fragile economy.

But even though most politicians agree that the fiscal cliff should be averted, the same bickering that has epitomized Washington continues in regards to the technicalities.  Republicans believe that the Bush tax cuts should be extended for all income earners, while Democrats argue that the top two percent of income earners no longer need the cuts.  Still, a  route for compromise exists.  Negotiations have already begun over the possibility of closing some loopholes and deductions for higher earners without necessarily raising the top income tax rates.  This idea, essentially a middle road between the two party’s stances, appears to be the most bipartisan plan so far.

The coupled political and economic risks involved in not extending these cuts makes the situation ripe for compromise.  However, the high likelihood of a compromise does not mean these economic trade-offs will reflect well on the American political system.  Conversely, the fact that these budget talks have already been dubbed ‘negotiations’ by the media show the high tensions that still divide leadership in Washington.  Just because an amicable solution can be found does not mean that the politics behind the solution will be friendly.

That being said, any compromise is better than a stand-off.  Across the board tax hikes and program cuts would lower individual spending and hurt consumer confidence.  Additionally, these tax hikes would also affect businesses, which would be less likely to seek growth as a result of increased taxation and more economic uncertainty.  If businesses aren’t looking for growth, they won’t be investing in our economy or hiring workers.

And as much drama as the media may put on this fiscal cliff, lawmakers can also simply put off the most important decisions.  While a final decision on the Bush tax cuts is needed, many of the budget cuts that were simply delayed as the result of debt ceiling negotiations back in 2011 can be delayed again.  The overarching problem – that of an unbalanced budget and a growing national debt- will likely remain unsolved.

This refusal to solve the big budgetary issues should hardly be a let down; Congress has refused to tackle many tough issues in the last few years.  However, the willingness of politicians to delay these big decisions represents a disappointing trend in American politics.  As much as Americans decry stalemate in Washington, they choose to reelect politicians who only break stalemates through short-term solutions.  If Americans were more open to large-scale solutions that didn’t necessarily match their ideology, politicians would find it more politically viable to make long term structural fixes to our economy.

It seems likely that Washington will find a way to compromise and avert the fiscal cliff.  Unfortunately, even this compromise doesn’t fix Congress’s disappointing track record on delaying problems instead of finding long term solutions.

Filed under Economy
Nov 18, 2012

Economic Freedom: The World Stage

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Economics have been a large focus of this election season, but Americans often become too caught up in domestic policies to accurately compare the U.S. economy to the rest of the world.  For this reason, we are often surprised at our low rankings on the world stage.  This infographic from OnlineBusinessDegree.org helps to draw some comparisons.

World Economic Freedom: Which Countries Rank the Highest?
Via: OnlineBusinessDegree.org.  This infographic is used under a Creative Commons License.

Filed under Economy
Oct 13, 2012

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