A Brief Analysis Of Why The Economy Is So Crummy

A Brief Analysis Of Why The Economy Is So Crummy

If you talk to 10 different economists, you’ll probably hear 10 slightly different theories as to why the economy is and has been so mediocre throughout the Obama presidency. For whatever it’s worth, here’s my explanation.

#1) The economy was riding a housing bubble that was being driven by shaky loans encouraged by the government. When that bubble inevitably popped, it destroyed an immense amount of wealth, created a worldwide recession, cost us an enormous amount of jobs, and left us with a vastly overdeveloped housing market.

#2) The overwrought, hyperactive response from the government exacerbated the problem by propping up badly run companies with taxpayer money, dramatically increasing the debt, and introducing a large amount of uncertainty into the market.

#3) Obamacare, the demonization of business by the Obama administration, and fear of what the Obama administration might do next helped to paralyze businesses. Corporations are sitting on mountains of cash that they’re afraid to spend because they worry we might go into another recession and because they can’t be sure how the Obama administration may try to hurt them next.

#4) Our debt is also finally starting to cause major problems. The Fed’s Qualitative easing is inflating the cost of food and gas, while the realization that our debt problems have become serious enough to threaten our AAA rating are slowing investment and consumer spending. Everyone’s socking away money right now instead of spending it.

#5) Because everyone’s afraid to spend money, hiring remains sluggish, which creates a vicious circle. The more people are unemployed, the less people have to spend, and the less jobs are created.

How do you fix this?

1) You replace Obama with a Republican who’s more friendly to business. That will create certainly and cause corporations to start spending again.

2) Obviously, if government spending were the key to prosperity, our economy would be growing faster now than at any time in history. The fact that’s not happening tells you that government spending isn’t a key driver of economic growth. So, there’s little worry that we’ll slow the economy by dramatically cutting into spending. However, if we do cut back our spending, we can safeguard our AAA rating, reduce anxiety over the debt, and make the populace and foreign investors feel more comfortable spending money here again.

3) Given the seriousness of our debt situation, tax cuts would have to be a “maybe.” On the one hand, they’d be likely to increase economic growth, which would eventually lead to our tax revenues going up. But, it’s also very possible that we’d still have taken in significantly more revenue had we NOT cut taxes. It would just depend on the situation

4) Killing Obamacare, which has been a major drain on the economy, would certainly speed economic growth.

If we were to do those things, we’d see the economy start to hum again within 18 months.

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