Why it is a bad idea to cut taxes at this time for the United States

  Written by: Trevor Greene 

         

          The United States encountered a very crucial and bad time in their economy. In 2008 the US went into a recession. Prices rose and people stopped spending money as willingly. This took a toll on everyone. Jobs were lost and many people were left clueless of what to do. There was no exact reason to why this happened, but there were a few that were easily identified when coming to a conclusion. One of them was that there was an overhang of private sector debt that was hard to pay off. Others say that the government just talks about it and has taken no action to fix it. These are just a few problems with the American economy.

            Many government officials and economists say that the easy fix to this problem would be to raise taxes, but that would not be a smart idea, especially during a time like this. This would just put the people of America into more and more debt. This is a time that encourages very, very much government spending. With government spending, the government could produce more and more jobs. Also not only producing jobs, the government could help people out of debt, by providing different government plans and different government aids; like social security.

            Not only does the government have to worry about the national debt, but they also have to worry about the unemployment rate. A solution According to Paul Krugman of the New York Times is “So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending.” This just shows that government spending is necessary to help America out of the Recession. With the more amounts of government spending comes more time to stall Intel the private sector is ready to spend money again.

            With all of this being said, this does not mean that the government is in competition with the private sector. It just puts unemployed resources to work. When people are in tough times, they tend to save their money, obviously. The economy is the money flow throughout the United States and is good when there is lots of money be spent consistently. When this process slows down this is when our economy is troubled. The problem is, is how is the government suppose to get the people to spend more money if they are trying to save it, because of job loss. This is a very tough situation for the United States of America and is not quick to resolve.

            As the United States has been in a economic crisis since 2008, the money flow has been slow, but as time goes on it will be back up. With government aide to encourage spending the United States will be back on its feet in no time. This is why it would be a very bad time to cut taxes in America today.

Source:

Paul Krugman. “The Story of Our Time” New York Times. April 28, 2013. Web. April 29, 2013 

European Employment

Written by: Mattie Warbelton 

One of the key factors in any economy is employment. Employment generates income-which is used as consumption spending, investment spending, and savings. In Europe, the most popular employers are the small businesses. Recently in Europe, there has been new research that showed evidence that the previously predicted rates of economic growth may be inaccurate. Now the government is predicting stagnation, simply meaning a period of slow economic growth.  

            The news of this stagnation has caused the small businesses in Europe-who were already having a hard time earning profits- to panic. Economists in Europe also, “expect the E.C.B. to cut its benchmark interest rate to a record low of 0.5 percent from 0.75 percent when it meets Thursday. “ With lower interest rates, the economy it a higher chance of having to combat inflation, along with an appreciating dollar value. 

            Because of changes, the small businesses are recognizing their newly needed concern for their futures.

"Human Capital Runs the World"

Written by Libby Schauer

Hi everyone,

For my blog, I decided to write back to a previous blog titled “Who is really in charge?” by Kyle Petoskey. This is in no way intending to be rude. I simply want to present a different side of his argument. If you haven’t read his blog yet, I would suggest you do it quickly before you continue on reading mine.

I am here to say that our economy needs the top 2%. Sure, the distribution of wealth may not be even but you have to take human capital into account as well. The high paid CEO’s of Fortune 500 companies are in that spot because they can do what they do better than everyone else could. Back in December my class read a chapter from the book Naked Economics titled “Why is Bill Gates so much richer than you are”. And I found the answer; human capital is defined as the sum total of skills embodied within an individual: education, intelligence, charisma, creativity, work experience, entrepreneurial vigor, even the ability to throw a fast pitch. It’s what you would be left with if someone stripped away all of your assets-car, house, money- basically leaving you on the street corner with just the clothes on your back. Bill Gates is insanely rich because if that exact event were to happen to him as what I just described, he would be snapped up in an instant by another company. He would without a doubt have multiple companies fighting over him, and earn back everything he lost.

I'm sure well over half of the 98% left in the country couldn't do what the top 2% do to earn their money. They do have to work very hard for it. Compared to the rest of the world, the United States has one of the highest percentages of a middle class population, which is a blessing from our economic freedoms. Instead of criticizing the upper class and wanting more for the middle class, we should be extremely thankful we even have a middle class, because most countries have their top 2% and the rest of the 98% are dirt poor. The graph below shows an analysis about the distribution of wealth around the world…

As you can see, the United States is doing enormously better than the rest of the world, especially countries like Africa and Asia who have a much higher population than the red, dark green, light green, dark blue and light blue bars, thus meaning a lower standard of living.

So in summary, I submit to you that human capital is the basis for wealth. It’s really quite simple actually; want a better paying job, go to school and get an education to qualify for it,expand your human capital. People working to better themselves is the only way the United States will come closer to closing the huge margin of uneven wealth distribution. It should not be the governments’ job to redistribute incomes. That sounds a lot like socialism or communism, and as history has proven, those are both forms of government that ruin a country completely. Like I said before, we should consider ourselves lucky beyond belief to live in a country that has such a large middle class. That is rare elsewhere.

 

LOWER PAYMENT LOANS

Written by:    Anthony Miosi

You could argue that throughout this recession, the market that took the biggest hit was the housing market. It didn’t matter how beautiful your home was, or how nice of an area it was in. If you were going to try and sell, you were undoubtedly going to take a hit. Houses that were once worth $500,000 were worth $350,000. Homes that were selling for $1,000,000 now sold for $700,000. Because now is such a terrible time to own a home, nobody wants to buy. And due to the recession, many don’t have the money, even if they wanted to buy a home.

Fannie Mae & Freddie Mac, commonly known as Fannie and Freddie own more than half of all US home loans, and on March 27^th they made an announcement that they were going to  make modifications to their policies, to make taking out a home- loan more appealing. An article from the Los Angeles Times states: “In a push to simplify loan modifications, many borrowers who become 90 days or more past due on mortgages backed by Freddie Mac and Fannie Mae will be offered lowered payments without having to prove hardship.”  What this article is saying is that, normally, in order to receive a reduced payment loan, you needed to prove that you were in financial hardship, now you no longer need to do so, which basically means that anybody can receive low interest/payment loans. The Wall Street journal better depicts the new policy modifications that Fannie and Freddy have announced: “The policy change will also allow borrowers who make three reduced payments during a "trial" modification to automatically have the modification made permanent. Previously, borrowers had been required to show proof of hardship and document their financial situations before the modifications became permanent. The policy change is designed to eliminate a stumbling block that had frustrated borrowers and lenders over the past four years.” Now that Fannie and Freddie have done this, hopefully this is going to encourage many more people to take out loans from them, in attempt to give the housing market a boost.

Not only will this boost the housing market though, all of the Mortgage Insurance companies that took huge losses due to the recession, will also now see increases in there business. This will happen because everyone taking out loans for houses, will now want mortgage insurance to protect that.

Hopefully, now that Fannie and Freddie have announced this, the housing market will see a big increase, which we know directly relates to our economy, once people feel comfortable with where they are living, they will be more motivated to go out and buy things, which is exactly what this country needs, to get completely out of this recession. If the housing market is what took the biggest hit during the recession, then this is the market that desperately needs to be jumpstarted the most, If we achieve a booming housing market once again, that will carry us out of the recession.