the visible hand

it is the theory which decides what can be observed – einstein

Totally Spent

Posted by ecoshift on February 13, 2008

I tend to agree. One $600 check just isn’t going to cut it. That’s barely one half of one month’s payments even for those living on the margin – it’s a drop in the bucket for those living halfway up the ladder.  Now, $6,000 might generate some economic activity, might even allow a few people to get current on their mortgage payments…

But, in the long run, wouldn’t we all rather have a raise that would let us save up and qualify for full doc 80% LTV loan to buy a modest home?


Totally Spent – New York Times
By ROBERT B. REICH
Published: February 13, 2008

WE’RE sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn’t a normal downturn.

The problem lies deeper. It is the culmination of three decades during which American consumers have spent beyond their means. That era is now coming to an end. Consumers have run out of ways to keep the spending binge going.

The only lasting remedy, other than for Americans to accept a lower standard of living and for businesses to adjust to a smaller economy, is to give middle- and lower-income Americans more buying power — and not just temporarily.

Much of the current debate is irrelevant. Even with more tax breaks for business like accelerated depreciation, companies won’t invest in more factories or equipment when demand is dropping for products and services across the board, as it is now. And temporary fixes like a stimulus package that would give households a one-time cash infusion won’t get consumers back to the malls, because consumers know the assistance is temporary. The problems most consumers face are permanent, so they are likely to pocket the extra money instead of spending it.

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