Reaction Paper

Name:Ashley Waller|Date:10/17/12|Class:|Reaction Paper #:2|
Title of the Article:Consumers Unlikely to Rekindle the Recovery|
Date of Publication: July 2, 2012Author: Casselmen, Ben|
Summary:In this article, it talks about how we should not rely on the consumers for the economic recovery. As Americans returned to work, the theory went; they would have more money to spend on everything from clothes to vacations to houses. As demand rose for products and services, businesses would be forced to hire more workers, leading to even more spending. This virtuous circle would boost confidence around boardroom and kitchen tables alike, finally giving the U.S. economy the momentum it needed to ride out the inevitable storms to come. Many factors today make it hard for people to make a living, which makesIt hard to raise families. Although many prices are going down, others are coming back up again. |
Reaction: In the past, Reagan and Bush raised taxes repeatedly and increased fees for lower and middle class percentiles. At the same time they borrowed heavily to undertake a number of Keynesian stimuli-huge increases in war material and procurement, lots of base expansions to reward Republican states and with the economic boost of federal taxpayer's money. The side effect of this was that it was against the law to export technology for defense to foreign countries. Now our military electronics depend on Chinese parts that have proven defective. Boeing outsourced its advanced composite materials building to cheap countries and basically shot itself in the foot as the parts don't meet specs. The race to the bottom by the GOP right in its efforts to destroy organized labor and the social safety net developed 1905-1968 has handed our defense technology to actual Communist countries-PRC, Vietnam-and ruined much of America's ability to support a consumer based economy at the same time. The only way out is to raise taxes on the wealthy, on capital gains, and on inheritance and invest the proceeds into green energy and infrastructure improvements. In the Article it says, Gas prices have fallen in recent weeks, which should put more money into consumers' pockets. Despite the slowdown in job growth, the unemployment rate has fallen to 8.2% from 9% a year ago. The housing market is showing signs of stabilizing, which could make homeowners feel wealthier. And household finances are on much firmer footing than at any previous point in the recovery. Deutsche Bank economist Joseph LaVorgna notes that household liquid assets as a share of liabilities, a measure of financial health, are at their highest level in a decade. Although this should allow optimism, when prices in one particular field go down, the prices in another go up. It says that the impact goes beyond the unemployed. With so much slack in the labor market, there is little upward pressure on wages. Adjusted for inflation, hourly earnings are lower now than they were when the recession ended in June 2009. This makes it harder for a lot of people to make a living because the hourly earnings are lower now, than when they were before. I agree that there doesn’t look like there will be a turnaround in the job market and unemployment rate. Many people struggle to find jobs and making a living for their family is very difficult. I think that if the consumers contributed more to the economy and bought more things that are made from America, it would put more people to work, because there would be more money into the government. Americans struggle every day to make a living and although it is more expensive to buy things from America, it would greatly help the economy and unemployment rate. |