Friday, November 28, 2008

Two Concise Reasons Why We Face Certain Economic Doom

The two main reasons why our economy is doomed for failure are:
1) America (and Americans) consumes more than it produces.
2) America (and Americans) borrows more than it saves.

Under these conditions, the American standard of living can only be sustained by selling off assets that we have accumulated in the past, and/or borrowing money with a promise to repay it in the future. Obviously this can not go on indefinitely, there will come a day of reckoning. This day may be postponed slightly with government bailouts. But bailouts will only exacerbate the problem because they will undermine the foundation of our capitalist system. Also, the demand for continuing government bailouts will become insatiable. Bailouts will lead to the eventual insolvency of the federal government.

The only way for us to build a sustainable economy, that will come back healthy and strong, is to produce more, consume less, save more and borrow less. Politicians and citizens are unwilling to face this undeniable hard truth. We must manufacture more, import less, consume less, borrow less and save more. This will mean higher consumer prices, higher interest rates, lower wages and less amenities for most Americans in the foreseeable future. We must also become energy independent, by drilling for more oil, building more nuclear power plants and through technological innovation. This will mean higher energy costs in the short term.

If we do not collectively make these sacrifices, the results will be devastating.This strong medicine will stabilize our current economic woes and build a stronger and more prosperous American future.This is the only responsible way to insure economic stability and the future prosperity of America.

However, politicians on both sides of the isle, are calling for the exact opposite. They are lowering interest rates, which discourage savings and encourages borrowing. They are encouraging consumers to borrow more and spend more, by making consumer credit more widely available. The government is borrowing trillions of dollars, through huge federal budget deficits, to finance "economic stimulus packages", bailouts and ever-growing government programs. Federal bailouts will reward mismanaged, corrupt and unprofitable corporations. Bailouts also tempt businesses and government officials with corruption. Bailouts also stifle the growth of healthy, profitable companies, because they are competing at a disadvantage with government subsidized companies, who are crowding them out of the market.

The government is also signing "free trade agreements", rather than putting tariffs on imports. This motivates us to buy cheaper goods from overseas, rather than producing more goods here. Often American companies can not compete with foreign companies. Foreign companies often do not have the same high environmental standards, safety standards, labor standards and high taxes that American companies face. It is unfair to have American companies compete with foreign companies without tariffs to level the playing field. Without tariffs, America's manufacturing base will continue to erode. We must produce as much as we consume in order to sustain our economy in an unstable world economy and for reasons of national security.

The American "standard of living " is unsustainable under the current conditions. Rather than accepting this "truth" and making appropriate sacrifices, government is mortgaging America's future, in order to buy us a little more time of "living beyond our means".

A fitting analogy would be, the prospect of surgery and subsequent chemotherapy for a cancer patient. Surgery and chemotherapy will ensure pain and suffering in the short term, but the patient will have an excellent chance of recovery. Postponing the surgical option, and improving the patients "quality of life" with painkillers, will certainly insure the patients death. If, we as a nation, do not choose the more painful option in the short term, we face almost certain catastrophic economic failure and possibly the end of America as we know it.


D said...


I agree for the most part, but I'd say instead of tariffs, we need completely free trade, no tariffs on either end of agreements. I'd like to see lower taxes, special tax breaks for manufacturing businesses and an ease on the many restrictions placed on American businesses to allow them to better compete.


garyganu said...

Which restrictions on American business would you like to see eased in order to allow them to compete better in an global market?

I will list some of the major restrictions that our government places on American business. These restrictions grossly increase their cost of doing business as opposed to foreign companies from China and Mexico, for example.

1)US companies have restrictions placed on children, under the age of 16, in the labor force.

2)US companies place restrictions on minimum wages.

3) US companies require workers to be covered by "Workman's Compensation"insurance,"unemployment"insuranse, social security and medicare.

4) US companies are restricted from dumping waste in waterways, in the air or in unregulated landfills.

5)US companies must comply with strict OSHA (Occupational Safety and Health Administration)regulations, which protect workers from unsafe working conditions in factories, mines, and other businesses.

6) Us companies face safety regulations which, among other things, prevent them from using lead based paint in children's toys or produce tires that are likely to blow out and cause crashes.

7) US food companies are strictly regulated for food safety.

7) US drug companies are required to have costly trails and get FDA (Food and Drug Administration) approval before being allowed to put medications on the market.

7) Factories, commercial buildings and homes, face strong building code regulations. These regulations are intended to reduce building, fires, collapses and accidents. Also these regulations help buildings stand up to hurricanes earthquakes and other natural disasters.

US auto manufactures face strict safety and environmental regulations to make sure that vehicles on American highways are as safe and pollution-free as possible.

These are just some of the US regulations that I can think of off the top of my head. Although many of these regulations go too far, and some may not be effective, for the most part these costly regulations on US business help America to produce the safest products, under the safest, cleanest and most humane conditions. This is done in a manner that keeps American waterways, air and land, cleaner and healthier than most other nations of the world.

There are only two options that can level the playing field when competing with foreign businesses. The first would be to place tariffs on imports. The second would be to remove the regulations that I listed above, which make the cost of doing business in the US, more costly than doing business in other parts of the world.

The US has grown to be the freest, most prosperous, most benevolently powerful nation in the world. We provide the safest products for American consumers as well as the safest and most humane working conditions for its workers. It would be a step back into the dark ages, to reduce or eliminate many of the regulations that have protected American workers and consumers through the industrial revolution.

It is clear to me, that the only way to level the playing field, when competing with foreign businesses, is to place tariffs and regulations on foreign imports, so that US industries can compete with them while still maintaining our high American standards.