Economy Vexes GOP at South Carolina Debate
The Republican presidential contenders might want to watch a bit more CNBC or Fox Business Network. The first question from moderator Chris Wallace of Fox News at last night's GOP debate in Myrtle Beach, S.C., was about the chances of an impending recession and what actions the candidates would take as president to prevent or minimize one. In short: Are they in favor of short-term fiscal stimulus and, if so, what kind?
But Mitt Romney, John McCain, and Rudy Giuliani all gave answers mostly about what they would do to ensure the long-run growth of the economy and appeared unaware of the fiscal stimulus debate currently happening in Washington and being closely watched by Wall Street. Only Fred Thompson seemed to have actually read the morning papers or been thoroughly briefed on the subject. And only Mike Huckabee, and Romney to a lesser extent, made a real effort to acknowledge American's widespread economic anxiety. It will be interesting to compare the GOP debate answers to the stimulus plan Hillary Clinton is supposed to unveil today. Anyway, here's a brief analysis of how the candidates responded to Wallace's critically important question:
Romney said the main thing the government should do is stop the housing crisis but didn't specify how. He then went on to talk up his plans to cut middle-class investment taxes, get America off foreign oil, and invest in science and technology. Again, all long-term stuff. If he thinks short-term tax cuts or spending increases are a bad idea, he should probably at least say so and explain why.
McCain argued that the federal government needs to rein in spending, saying deficits are "what caused interest rates to rise. It causes people to be less able to afford their own homes. We need to stop the spending, and that way, we can get our budget under control and we can have basically a strong fundamental fiscal underpinning." That answer basically makes no sense. Interest rates have been dropping—both long and short—and seem poised to fall further. What's more, his simple "crowding out" argument about how government budget deficits affect interest rates is disputed by many economic conservatives. McCain also echoed Romney's call for energy independence and more government R&D spending.
Huckabee mainly tried to diagnose what was wrong with the economy—housing bust, high gas prices—with no short-term solutions or fixes other than supporting President Bush's mortgage plan.
Giuliani treated the possible recession as some sort of vague, economic hypothetical and ignored the fiscal stimulus debate. He then talked up his ginormous $6 trillion tax cut plan and added, "But that's not the only answer to how you deal with a possible recession. You also have to cut spending as significantly as you cut taxes. You have to be willing to impose cutbacks on each one of the federal agencies, the civilian agencies. You have to be willing to engage in regulatory reform so that we have a picture here in the United States where we're not regulating businesses out of the country." I am pretty sure that spending cuts as a way of dealing with a downturn went out with Herbert Hoover. Moreover, Giuliani hasn't offered spending reductions anywhere near the trillions of dollars in taxes he wants to cut. Points to the mayor, though, for understanding that some tax cuts may well pay for themselves, but not all.
Ron Paul said the economy is already in recession and blamed it as economic blowback for the Fed's loose monetary policy earlier this decade.
Thompson said the Fed is the first responder when recession looms but made no mention of Chairman Ben Bernanke's aggressive rate-cut comments from earlier in the day. But Thompson did make mention of a key fiscal stimulus measure that Bush may propose: "We need to look seriously at whether or not we should do things such as speed up depreciation schedules for businesses, those that create jobs, have a deduction for capital expenses instead of having to capitalize them, things of that nature." Thompson also held out the possibility of tax cuts or rebates for lower-income Americans if the economy worsens and said Congress needs to extend the 2001 and 2003 tax cuts to add more stability to the economy and certainty to business and consumer expectations.
Tags: candidates | debates | presidential election 2008 | Republicans
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Fed Tinkering Will Worsen Recession
Anyone who knows anything about economics knows that we are either bordering on, or already in a recession. The DOW is down over 200 points today, and probably over 800 this month, and will continue to fall. This recession would have taken place years ago were it not for the intervention of the Fed. Eventually, artificially low interest rates result in serious inflation. I don't know why so many people fail to understand this simple logic. Ron Paul is the only Republican candidate being honest with the American people, and you paid scant attention to, and made no analysis of his assertions in the debate.
If the market and the economy tank fast enough, Ron Paul could presumably win the presidency, Republican nomination or not. Voters will remember his prescience.
Why I Support Ron Paul
As the DNC said in ‘96 ‘It is the economy stupid’.
Our Nation produces 13.1 trillion dollars of wealth each year, and of that the government takes 2.4 trillion dollars and spends 2.6 trillion dollars. Since the government spends more than it takes, it has developed a debt, which is currently 10 trillion dollars. We have promised to make future expenditures above and beyond what we are currently spending, to an amount of 58 trillion dollars between 2017 and 2040. This works out to an average of 2.5 trillion dollars a year. In addition to this, 4 trillion dollars of the debt will also need to be paid back without any additional sources of revenue, although existing taxation can be increased.
To put this in perspective, imagine that you work for a company that earns $131,000 of annual revenue, they pay you $23,000 a year, and your budget is $26,000 for the year. At the same time you have $64,000 on the credit cards and $46,000 that you have borrowed from your 401k, and just signed a 30 year mortgage for your parent’s house for $580,000, but the property is condemned. And this is all okay because you have $6.59 in the bank. Your parents are going to give you $1,000 a year until 2017, and then they need you to start paying them back.
We have established significant control over air travel, but our boarders are open, illegal immigration is not under control, our ports are not secure, and our visa system has not been updated. If the government thought that terrorism is a serious problem, they haven’t done anything to stop it, yet they have stripped our rights and liberties under the banner of terrorism since October of 2001. Although we haven’t plugged any of the holes in our system, there hasn’t been a terrorist attack on U.S. soil for over 6 years. The government spending and the economy will destroy this nation in less than 33 years.
I believe that Ron Paul is the only candidate from either the Republican or Democratic parties that will even attempt to fix this.
(Numbers have been obtained from the CIA Fact book.)
Economy
Duh! The economy IS in a recession. Ron Paul is right.
While the vast oversupply of housing is worked out of the market just where exactly are all the people previously involved in the housing market going to earn a living?
Builders, Realtors, closing agents, lawyers, appraisers, lenders, landscapers, furnishing suppliers, sub-contractors, roofers, swimming pools installers, painters, surveyors, etc., etc., etc.
All looking for a different source of income until building picks up again.
Oh, and don't forget the BILLIONS of dollars that the banks and mortgage lenders are writing off and will continue to write off as 2008 continues. Oh yeah, and the losses that retirement funds and pension funds will take for having bought those mortgage backed securities which are currently worth next to nothing.
But hey, what're the odds that all those big losses will put people out of work? Nah, couldn't happen, eh? Never mind that it was the FED's lowering of interest rates that spurred people on in the I-cant-afford-it-but-who-cares sweepstakes of sub-prime financing.
Sure, the FED can continue to 'stimulate', but it will only be a tiny band-aid for a gaping wound.
Has the recent 0.5% drop in rates done anything to stop the sliding stock market? NO. The DJIA is making new lows on almost a daily basis.
Sure FED, throw some more gasoline on that fire. Maybe there's someone out there foolish enough to think that will 'fix' the problem for good.....you know.... a "journalist".
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