If Current Recovery Loses Steam, Economy May Face Real Trouble

THE WALL STREET JOURNAL ^ | August 18, 2003 | GREG IP

[SJackson]

A recovery, it appears, has begun. A potent jolt of monetary and fiscal stimulus is lifting consumer spending, and business confidence is reviving.

But the real challenge stretches into the next year: When the adrenaline rush of lower interest rates and big tax cuts ebbs, will the expansion have gained enough momentum to continue? Or will it fade, as earlier, stimulus-stoked expansions did in 2002 and again earlier this year?

[Jim Noble]

There is too much private debt to allow consumption to function as the engine of economic recovery.

The article speaks of people rebuilding their savings, and refusing to take on more debt, as a problem.

That's not a problem-that's the solution.

Of course, the fact that their savings are being rebuilt with little green slips of paper that add to the national debt every time another one is printed is another story...

[Mr. K]

Geez.... have liberals ever heard good news that they liked?

[xzins]

If Current Recovery Loses Steam, Economy May Face Real Trouble

Yeah....and if the river floods, there'll be trouble; and if the house burns, there'll be trouble; and if the car crashes, there'll be trouble.

Methinks this is an effort to dwell on the negative which DECREASES confidence rather than dwell on the positive which INCREASES confidence.

[BushCountry]

Yep, if the world comes to an end that might be a bad thing. Why we have to put up with all these IF, IF, IF articles!

[harpseal]

Okay there is little more the fed can do with interest rates. there are however a set of policies which could be adopted by politicians which would address teh structural problems within the US economy.


In no particular order of importance.

1. Get rid of government subsidies for offshore investment of US companies. OPIC is the first such program which should go but support of World Bank programs that subsidize the outflow of Capital would be another.

2. Use tariffs on those nations which are engaged in unfair trade practices such as currency manipulation (China and India for example), those nations which refuse to open their markets to US products (China for example with its 50% tariffs on US consumer goods and non tariff barriers), those nations that subsidize competition to American Industry (airbus for example) and those nations which have slave conditions for their workers.

3. Use tariffs and other means to prevent the relocation of jobs offshore that are essential to the national defense. If necessary take control of the company seeking to export vital technology or industry by means of eminent domain (No I do not like this last option and I will only defend its use as an absolute last resort like say in the case of rare earth magnets essential to smart bomb technology).

4. An immediate end to guest worker programs. If people wish to come to the USA to work and make a life let them immigrate according to the rules.

5 Provide economic development zones where the corporate income tax is zero for operations within these zones. In order to operate in this zone a company must agree to only purchase American components if available and employ only American citizens or legal immigrants in these operations. These economic development zones shall be eventually be expanded to include every bit of every state once the benefits are shown I would like them to be totally implemented immediately but I realize4 that may be overreaching.

6. Scale back unnecessary regulation including the tort system. Institute a cap on punitive damages, limits on class action suits, and limits on liability to the actual percentage of liability with no plaintiff able to collect if said plaintiff was involved in the commission of a felony at the time of the alleged tort or was more than 49% negligent in the alleged tort. Note that the loser in a frivolous lawsuit shall pay the attorney fees of the winner. There are many other regulatory structures that also need to be included that need to be included such as repealing the Family leave mandate, getting rid of OSHA etc.

7. Increase the domestic content in purchases by the Department of defense and give absolute preference in non-domestic content to proven allies of the USA over say the French or Germans. The only reason any content for DOD purchase may come from non US allies is that content is not available elsewhere and is essential.

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

9. Prosecute for perjury anyone who has made a false statement in order to employ an H1B or L1 visa worker. I will be lenient on the actual perjurer if he/she was ordered to make this false statement and he/she provides testimony to aid in the conviction of the person ordering the perjury. Just because a person is a CEO does not give them a pass on criminal behavior.

10. Prosecute anyone who orders the transfer of vital defense technology or funds a R&D project that could be of use to our military overseas except to strong allies of the USA. Make the necessary enhancements to our espionage laws so that continued support or funding of any R&D in a nation whose government has threatened the USA is guilty of espionage. The UK and Australia come to mind as meeting these criteria for being eligible for transfer of technology first. There will be other nations and a gradation of what can be transferred to which specific nation. Under no circumstances may technology be transferred to any nation whose government has threatened the USA within five years without a complete change of government or specific exemption from Congress and the administration.

11. Deport all illegal aliens immediately and take measures that prevent the entry of any more illegal aliens. Fine all companies knowingly employing illegal aliens Criminal sanctions should be imposed on anyone helping an illegal alien stay in the USA in violation of our laws.

12. Decrease the punishing levels of taxation on companies and eliminate the double taxation on corporate dividends. See effects of item 5 for how minimal this will be if item 5 covers the entire USA. Eliminate all IRS provisions that inhibit free use of independent contractors by businesses for example section 1706.

13. Eliminate the minimum wage so that the worker can be paid based on productivity. Overtime compensation will remain the same but instead of 150% of the "wage" the worker would receive 150% of the production pay. If one through 13 are enacted # 14 becomes an irrelevancy as no one will be working for that low a wage.

[harpseal]

ping

On or off let me know

[harpseal]

,I>Methinks this is an effort to dwell on the negative which DECREASES confidence rather than dwell on the positive which INCREASES confidence.

You may be right on this but to be honest it is not wrong to always look at the positive and the negative if one wishes to understand what actions should be taken. I cheer every bit of good news and I would dearly love for George W. Bush to be running with a booming economy and full employment. We are not there yet and as such articles like this will come out and come out repeatedly.

Now as an Historical aside wityhout any implication we are in a Depression or one is coming. During the Hoover administration the administration was convinced that tehonly problem was confidence in teh economy. It did not do them good in the elections of 1932.

[xzins]

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

Given our current tax system, I like this.

However, I prefer the nation go to a national retail sales tax. The end consumer pays all taxes, anyway. They're part of the cost of production.

[Lazamataz]

Geez.... have liberals ever heard good news that they liked?

The problem is, this ain't liberals talking. This is the Wall Street Journal, a right-of-center news organ.

[scottlang]

Yes, ther are alot of people scared about the economy and jobs. If it does not improve Bush will have a hard time next year.

[xzins]

No one ever accused conservatives of having a lock on omptimism.

[Euro-American Scum]

Yes, ther are alot of people scared about the economy and jobs. If it does not improve Bush will have a hard time next year.

Bush will win in '04 handily for a couple of reasons. First, the Dems do not have a candidate. There is nobody in the Gang or Seven or Nine of however many of them are scrambling for the nomination, who resonates with the voting public. Second, they are as reluctant as the Pubbies to get into specifics about a supposedly ailing economy, either in the causes or the solutions.

Bush will win easily in '04. '08, however is another story.

[mtbopfuyn]

Doom and gloom. Doom and gloom. I'm so tired of hearing nothing but doom and gloom over every little thing the last few months. I see I'm not alone on this. Journalists can't find enough smelly garbage to write about so they are reduced to making it up. Lawyer or Journalists; which is worse?

[Lazamataz]

Lawyer or Journalists; which is worse?

Law reporters.

[KCmark]

National retail sales tax.

---

Extremely regressive. The poor would be paying a tax on everything they make. The more money you made, the less tax you would pay. I personally think anyone who makes less than 30K should pay no income tax at all. The better those people do, the better off we all are. They spend almost everything they make. It drives the economy. If you want those people to open small businesses, they need some seed money. Trickle down is a sham. It keeps failing. Trikle up is the way to go.

[carlo3b]

...and the cow jumped over the moom! High falutin Fairy tales.. anything to stir up muck, and scare the bottom feeders.. just more BS!

[Sam Cree]

If it's a ping list for financial articles, I'd like to be on it.

[SJackson]

Methinks this is an effort to dwell on the negative which DECREASES confidence rather than dwell on the positive which INCREASES confidence.

I don't think so, 2004 may well turn out to be a transition year, moderate GDP and earnings growth. Thats only a negative if expectations are too high.