Felicia Muftic: Be thankful; it could be worse
Grand County, CO Colorado
Tomorrow is Thanksgiving, and even in these tough times we have some reason to give thanks. It could have been worse.
We could have had Depression II and the world economy could have collapsed as it did in the 1930s. Instead, we have had the Great Recession. We could have 16 percent to more than 20 percent unemployment as we did in the ’30s. Instead, we are fuming over 9.6 percent. We could have had the total collapse of Wall Street. Instead, our IRAs have nearly regained their pre-2008 values.
Thankfully, the worst did not happen, but It was still a terrible political platform for Democrats to defend in the midterms. We may quarrel that bailouts should have had more strings attached or we can complain the 2009 stimulus did to create more jobs than it was designed to do, or not enough taxes were cut. But both the bailouts and the stimulus kept us from going over the brink. At least most of the bailouts have been repaid to the treasury with interest, and at least 3 million folks were kept from the unemployment lines.
Thankfully we are learning some lessons. The need for bailouts of large financial institutions because their failure could yank the rug from under the entire financial system are things of the past because of provisions in the Wall Street reform legislation.
Long term, we must deal with the debt and mover closer to balanced budgets. It may take us years to get our economy’s house in order, according to Ted Muftic, chief investment officer for a capital investment firm who follows these matters closely.
I posed a couple of questions to him and let me share his answers with you.
Would extending the Bush tax cuts one or two years add significantly to the deficit.?
We know that permanent extensions of tax cuts to the wealthy would cost the treasury $4 trillion by 2020, completely offsetting the savings realized if all of the painful spending cuts being proposed by the debt reduction commission were adopted.
According to Ted, “I don’t think the Bush tax cut for the rich for two years will have any meaningful impact on the dollar, growth and the U.S. economy.
From the fiscal standpoint, Ted agrees with the commission recommendations, but does not believe the special interest money influencing Congress will allow it to be adopted.
Will the Federal Reserve’s in effect printing more money to put into the economy result in inflation?
To hear the right wing’s howl of protest over those measures, you would think we are committing a mortal sin. No, says Ted.
“The U.S. is running at way below “capacity” right now, meaning that there are few constraints in the production of goods and services, factories are running way below full utilization and there is room for a lot more employment. We have a ways to go before there is structural inflationary pressure. … (Federal Reserve chair) Bernanke wants to avoid Japan-style deflation where there is widespread sentiment that asset values only go down and that therefore investing is dumb and saving is smart.”
My own memory of economics 101 needed refreshing about “deflation.” According to the definitions I researched, it means lower wages and lower prices. More savings and lower wages would not encourage consumer spending or market growth. Lack of market demand and sales are the main stumbling blocks small businesses face to economic growth or job creation, according to at least three surveys (NFIB Small Business Economic Trends, Bank of America, HispanicTelligence ) Lack of access to finance is way down the list.
As we cook this turkey of the economy, let us not stuff it with hot air ideology and unrealistic wish lists. We need both cuts in spending, raising revenues, and boning up on terms like deflation and its consequences.
Support Local Journalism
Support Local Journalism
The Sky-Hi News strives to deliver powerful stories that spark emotion and focus on the place we live.
Over the past year, contributions from readers like you helped to fund some of our most important reporting, including coverage of the East Troublesome Fire.
If you value local journalism, consider making a contribution to our newsroom in support of the work we do.
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User
It may seem hard to believe, but applications for new businesses in Colorado continue to outpace previous years.