Wednesday February 11 | Open Phones

February 10, 2009 at 12:12 pm | Posted in Coming Up | 15 Comments

It’s another edition of Open Phones. This time we want to hear what you have to say about the stimulus package crafted by lawmakers and the Obama administration. Does it address the right needs? Is it big enough? Too big? Will it work? We’ll get your take and a guest expert will help us put it all in perspective.
John Connaughton – Economics Professor, UNC Charlotte

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  1. I have a couple of discussion starting points for the good professor…

    …”the economy” is supposed to be a “machine” used to facilitate the transfer of goods and services. Monetary units are symbolic representations of the relative values of certain goods and certain services. If the goods and services do not dissapear, why would the monetary units arbitrarily dissapear causing the demand to dissapear as a result of the lack of financial capital to facilitate these exchanges.

    Basically, my question is, if we still have as much stuff as we did three years ago, why don’t we have as much money to facilitate the exchange of this stuff as we did three years ago? Is this a fundamental flaw in our markets or is there really a shortage of goods that economists and others are refusing to tell us about?

    Also… I’ve seen a report that the amount of underprivileged students in the Char-Meck school system has risen to the point of more than 1 out of every 2 students is considered to be living in poverty according to the subsidized lunch/breakfast system… … Meanwhile, median and mean incomes have risen. If Median and Mean incomes are rising while the number of poverty stricken citizens is also rising, do these figures indicate that the growth of the American economy is disproportionately effecting the wealthy and the poor?

    Is there a way to convince those members of our society with wealth that it is in their best interests to encourage all members of our society to possess wealth and that it in no way diminishes their experience with that wealth to bring us on the road to eliminating poverty?

    Simple mathematics tells me that when the mean and median incomes rise, the percentage of our population who are impoverished should fall, unless our system is unfair and unbalanced…

    …however, I am no economist.

  2. …additionally, while it is great to have Government intervention in the midst of a crisis, what role should those with wealth have in resetting our economy? It seems to me that with wealth, there should be a responsibility to our society to correspond to the convenience afforded by that wealth. Those with wealth, possess that wealth because they have more value to the community. I hear a lot of complaints about taxes, and the lack of financial capital from the chattering classes, but I do not hear the financial elite in our society explaining how they are going to lead us to financial prosperity. Perhaps they feel as though it is the Governments job at this point to lead, but I would help that they have a vested interest in the viability of the global economy and a vested interest in the interests of others as well.

  3. The world put the squeeze on the leader of the free world, GW Bush, using all manner of tools, like boycotts and other refusals.
    Habits are hard to change.
    People need to know, to their core, that the proverbial witch is dead, then fear can give way to charity, and the brighter tomorrow.

  4. Corporations were devised to be long-lived, but we live now in a
    time of very rapid change. Currently big corporations typically survive not by continuing to provide the same goods or services, but by acquiring or merging with another (newer) company. Because of this, “beancounter” types, who don’t necessarily understand anything other than finanacial/managerial metrics, have become dominant in business, rather than those who really understand the core of the business. In addition, these corporations tend to take on lots of debt in trying
    to live past their original mission.

    My first suggestion is that we switch to a model in which a business can more easily (and without stigma) be dissolved when demand for its proper products or services wanes. Let business owners & investors simply distribute remaining profits and shut down once they see the market declining rapidly, instead of going into debt trying to survive.

    My second suggestion is that we focus on helping entrepreneurs start up new companies. Put together teams of a lawyer, accountant, perhaps a SCORE volunteer, plus a business-plan writer, and offer their services cheaply (not as full-time employees of the new company). The other partner for a new business is traditionally a bank, but since they are too large now, most won’t work with would-be entrepreneurs anymore.

    Also, I suggest turning the “unemployment” benefit into a new employment benefit: Let job-seekers interview among “approved” new companies, with half of the “new employment” benefit paid by the government for 6 months and half by the start-up company. (This should
    not apply to franchises or spin-offs of large corporations, btw; just support new businesses.) Even if 2/3 of the new small businesses fail, this is where most of the job growth is these days.

    The new economy will be many, many smaller, quick-lived businesses, not huge ‘legacy’ corporations. We need to bear this in mind and move in this direction.

    Of course, a very major obstacle right now is the frightening cost of health care or health insurance, so the first thing we need to do is work on this to remove this barrier to entrepreneurial innovations.

    N.B.: I sent this as an e-mail to the show, but I know it’s a lot of material to hear or read quickly! Thought it might work better as a blog comment.

  5. John Connaughton is a poor choice of commentator if you want to be frank with the people of Charlotte. In his role as a prognosticator of regional economic outlook this gentleman has to be somewhat a booster.When the analysis of moderate Republicans like Kevin Phillips and moderate economists like James Galbraith is considered Connaughton’s model of only several billion of 40 to 50 trillion in debt being “bad” is an extremely narrow view. Phillips and Galbraith agree that the solvency of the American family has been undermined since 1980 and that the spending power of consumers has been exhausted through credit. When the several bubbles of speculation burst losses were compounded by deflation. At this point world “bad debt” may be in the hundreds of trillions. The global market is porous and any bailout tends to bleed out overseas.

    As for the monetary policy of 1/4% interest, it is the wealthy speculators who got out early who can borrow FED money at this low rate and buy 20 year bonds with a 3% return. Wealth is becoming more concentrated by the day. Muzzle loading the chimney by bailing out the largest institutions while no fuel is being injected from the bottom is crazy. Things will not turn around until households are secure with living waged jobs. All other schemes amount to paying tribute to the pirates that robbed us. It is a shame Obama has fixated upon old thinking 70 or 80 years out of date and that the Congress cannot see beyond favor trading and the revolving door of federal-corporate employment. Mike, you know better than the scenario you are presenting.

  6. When demand drops precipitously we need government spending to stimulate demand, even if it drives up debt. The most effective way to quickly boost demand is to get money into the hands of lower income people who will spend, rather than save it. Bush’s stimulus did not work because it was not targeted to low income people so too much of it was saved.

    The data show that the largest bang for our bucks is an expansion of the food stamps. Each dollar spent will generate about $1.75 in economic activity. In comparison, every dollar of capital gains tax returns only $.37. The much-praised compromise stimulus bill left the tax cuts virtually untouched but cut the food stamps program.

    Unfortunately too many in the media do not know these basic facts and are not doing a good job of informing the public.

  7. A previous caller commented that “over exuberant consumerism” in the US cannot not be sustained, and I would agree. In a world economy where US consumers are depended upon to spend, shouldn’t more pressure be placed on the “saving” economies -namely in Asia- to consume more?

  8. Gas prices are already beginning their rise again despite crude prices under $40 per barrel. Speculation may mean we will pay $4.00 a gallon again by Labor Day.

  9. I interviewed for a customer service position with a very large Charlotte call center back in December. I went through both interviews and background tests and on 1/21/09, I accepted an offer of employment. At that time I was to start in the next class and they would contact me with that time as soon as it was set, it still has not been set. Do you think they are waiting for the stimulus package for employer tax breaks?

  10. I wish I could have called in this morning, I couldn’t. I’ll pose my questions here. I’ve heard President Obama say (often) that this is the worst economic crisis since the great depression. It may turn out to be but the fact of the matter is that it’s not as bad as the 70’s. Either I’m wrong about that (I don’t think I am), Obama is woefully misinformed or he is lying. Which is it?

    The other thing he repeats is that we can’t go back to the same old “failed policies” that got us here. What policies? Is he trying to blame the tax cuts? That’s demonstrably not true. Is he blaming spending? Yup, spending was awful but that’s what he’s proposing now. Also he was in the Democratically controlled Senate for the last two years. Is he blameless?

  11. There is too much talk amongst economists and others about “GROWTH, GROWTH, GROWTH” and “SPEND, SPEND, SPEND” – I think a quote is most appropriate here:

    “Growth for growth’s sake is the ideology of the cancer cell.” – Edward Abbey

    Our economy is maturing, and most everyone has all of the plastic widgets and such which they need for a good life…thus a degree of so called ‘stagnation’ is in order so that we can take stock of what we have accomplished so far.

    The post-industrial American economy is losing jobs because highly productive/efficient machines are replacing the need for human labor in so many economic sectors.

    This is inevitable in post-industrial economies: the mechanization of labor leads to rising unemployment…rising unemployment leads to even more social ennui and economic/political instability (such as we are now experiencing) as large amounts of people cannot healthily cope with all of the extra time they have. Nowadays and in to the future most jobs will be ‘service sector’ jobs (get used to it) because manufacturing and agriculture has become so mechanized and thus MANY fewer people are needed to manufacture or grow a surplus of goods.

    Humans in the past were burdened by too much work, and now we modern humans are in many respects burdened by too little work. Many feel that there is simply “not enough to do” because everything is now manufactured so efficiently and quickly, whereas in the past life was one of extreme toil and hardship…this makes many humans in advanced industrial countries feel kind of like useless or guilty non-working lumps when in fact we are suffering from the effects our collective material success which has compounded over the past 100 years. The key is not to “work harder” but to “worker smarter.” We should be basking in the glory of our amazing material successes as a species instead of wallowing in misery because the U.S. economy is maturing (some would say ‘stagnating’) and leveling out.

    A major problem is that humans in the most ‘advanced’ industrialized countries have not been able to (socially) keep pace with the rate which extremely rapid technological progress has altered the once entirely rural human civilization. The overwhelming nature of our technological and material progress in the last two centuries has left many humans bewildered…now is the time to begin to pick up the pieces and search for answers to the ennui and social malaise which too-rapid industrialization has wrought. A social revolution must now begin to catch up with the technological revolution.

    The current crisis is one of social adjustment to life in a post-industrial society where we all have much more time on our hands due to, as I said, the large-scale mechanization of human labor (I repeat this because too many people just do not get how important a fact this is). We need positive ways to channel all of our energy which was once expended merely trying to survive in a difficult world – positive ways do not include unhealthy overeating, becoming a TV zombie, doing drugs, etc etc…we need to find ways to socially reconnect with our fellow humans, to re-establish the sociability inherent to humanity which has declined so much due to the hypermaterialistic rat-race we brought upon ourselves in the past couple of centuries of technoindustrial progress.

    There is obviously much more work to be done, but even MORE technology likely isn’t the answer at this point. We need to sit back and take stock of what we have built so far and figure out ways to socially, politically, and economically adjust to the rapid and far-reaching technological changes which have swept the world in the past couple centuries of industrialization. A new era is beginning in America and perhaps the entire post-industrial world.

    There will be no famines in America unless they are deliberately planned or caused, so the people that speak of such things need to calm down – we and nearly every other industrialized country in the world produces a surplus of food, and farmers are paid to NOT grow as much food in some areas so that food prices remain stable. Also, we have a massive oversupply of housing, clothing, autos, and the other necessities of human life…and I mean MASSIVE oversupply – capitalism has been brilliant at providing people with the necessary material goods needed for a decent life.

    There is no need to panic about the current situation: we humans are amazingly resilient and intelligent – we will make it through the current crisis.

  12. Eman,
    OK, your repeated use of the word “humans” is a bit freaky but, that was brilliant. An optimistic broad view is refreshing.

  13. Agreed, Eman’s post is very good. We don’t really have quite enough housing, but most of our problems in the ‘developed’ world are really political. (I mean that in the sense that politics is the art & science of governing or self-governing.) All humans have a vocation, I believe — some gift to offer or contribution to make — and once we help people work with that, we should do much better.

    This scenario does not work for the undeveloped world, however, including much of Africa, and many areas of true poverty in South America, Asia, etc. Furthermore, the threats to humanity posed by our various looming environmental catastrophes also require prompt and thoughtful action; these are sometimes global threats..

  14. I sympathize with Carol Stein, Gregg Smith and Eman. They are spouting the old time religion, but like the Lakota ghost dancers, time will prove their faith misplaced. Our buffalo are not hiding within the magic mountain: They are extinct. Throw your Italian shoes and coach purses to the wind. You can’t eat diamonds and gold. This is not a crisis of confidence.

  15. Huh?

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