The solution to our problems...Tax the rich?

My position is that the businesses that make up the 70% of the economy that is based upon consumer spending are not going expand production and hire more people if consumer spending is trending negative. Which it is. As I said before, some sectors are probably not expanding because of uncertainty. But the ones that make their money from the other 70% of the economy have a bigger reason to not expand. Falling demand.

Now, if you want to argue that the lack of consumer spending is being driven by uncertainty, I would agree that is a big part. Savings rates are trending up so that means that the lack of consumer spending is not all do to consumers having no money. But I totally disagree that the consumer spending based businesses are going to expand production without consumer spending rebounding.

 

tom, where will you work if your wish comes true & our businesses are all closed up?

 

How would I know what percentages the other entertainment industries are down...or even up? It just doesn't surprise me nor should it surprise you that when people have very little discretionary spending cash they don't waste what little they have of games of chance. Just like in times of bad economies and high unemployment people go back to schools and take classes until the economy gets better. Our business school, our nursing school, our engineering school, our law school have all exceeded their expected enrollment numbers for fall. In hard times, people tend to know what is of value and what isn't. This is no dig at you personally, it is just the same as it was the last two recessions.

 

Was waiting for you to notice that we were engaged in a "chicken and the egg" debate.

 

You are actually wrong about this. In moderate recessions, casinos along with all of the other sin stocks perform rather well. This economic downturn has taken people to the very brink. There are some people that actually have to choose between the ticket to an NFL football game and the beer. And it is not an easy decision. It doesn't surprise me that my industry is down so much, and plenty of people with very little discretionary spending will waste in on a game of chance. But those people with no discretionary spending can't, and there are far more of them now than there has been for a very long time.

 

Well, it'll put all of the people in the sh*tter together at once. Maybe then, enough attention will be paid to the problem to address it. Where will I work? Doesn't really matter...long as I just "work hard", at whatever it is, I'll be good. Maybe I'll polish knobs.

 

It can be, especially if there wasn't any money out there to spend, but recovery can come without thinking of it as a chicken and egg situation if there is money to spend. Right now, people are saving more and have been reducing debt and spending less. A natural recovery can occur when they decide that they have regained enough of their lost savings from the recession crashes and have reduced their debt enough to feel comfortable. At that point, they can decide to spend more leading to more demand in the economy, etc.

Now if there was no money out there, then yes, I think it would be a chicken and egg scenario. If consumers overall were not able to save, not able to reduce debt and not able to increase spending, we would be screwed and it would be very hard to break that cycle.

 

Your point sounds logical but it isn't necessarily demand that will jumpstart the economy. The supply chain begins, in most cases, before demand. Businesses plan ahead & base their supply on projected demand. These forecasts are determined by many different factors, mainly confidence.

 

And that is why it is also logical to believe the negative trend in consumer spending for all of 2011, which is related to consumer confidence (which is lower than it has been since 1980, btw) is a lot of what businesses are making their long term plans on. If demand has been falling the entire year and negative for the most recent month released, a business is going to look at that to project future demand unless they are really dumb. And it would not be easy to survive the last 3 years as a business by being dumb. There is money out there that businesses could use to expand - many of them have cash - but the expected demand has changed because of what has happened in 2011.

Look at the economic forecasts that came out just this week (or last week - not sure because I only saw them yesterday). They are making warnings about consumer spending and it having a 'dire' impact on the economy, talking about consumer confidence that is very low right now and predicting very low growth for the rest of this year and all of next year. These are revised projections based upon the reality of what has happened in 2011.

And if you look at what they are saying, the economy needs to grow above 3% to see any real expansion and hiring. That 3% is not going to happen the next 2 years if 70% of the economy is trending negative. And it is doing just that.

 

I'm not disagreeing with your logic, I'm simply saying that isn't how it works most of the time. Have you heard the term "pent up demand"? We use that to make forecasts all the time given how the economy has performed over the past few years. Something may sound dumb on the surface but there is usually a method to the madness.

 

Sounds like a great and sound theory. Until you ask the logical question of where does the money come from to pay the salaries of the public sector jobs? Or does that complicate your thinking too much?

 

Oh sure, if things had progressed from 2010, I am sure you could look at the numbers and forecast that demand was going to release and increase soon and you would prepare for it. And if businesses didn't prepare for that by hiring and expanding, I would be wondering why. Unfortunately, 2011 has been worse, not better. And now they are predicting the rest of 2011 and 2012 will not be good either and that the economist predictions of the chances of another recession are rising. 'Pent up demand' probably will stay 'pent up'.

 

Taxes on those that are doing pretty well in this bad economy would be my preference. Shared sacrifice. We ARE a very wealthy country and we are not broke. We simply let those that are able to buy off our elected officials write tax laws that is favorable to themselves. What have the wealthy been asked to sacrifice? Anything? I can't think of one thing the wealthy have been asked to contribute. Neither can you is my bet but I bet you can come up with a Right-wing talking point that involves class warfare. We bailed out the wealthy bankers and they are more profitable than ever and we had to do it because they were too big to fail. I'm tired of the wealthy in this country holding a gun to our heads and I'd like to see sacrifice on their part for a change. The middle class is tapped out and still they want more from us.

 

Don't forget GM... Old wealthy GM.. "Too big to fail" and all that jazz....

 

That was a little different. We were paid back, it saved millions of jobs, and we saved an entire industry. Even though I disagreed with bailing out private industries with tax payer money at the time, it turned out to be a case of government help that not only helped a specific company, it helped thousands of workers that didn't end up on the unemployment rolls.

I'm still not entirely comfortable with bailing out private companies that have failed not because they were victims but because they made bad business decisions again and again. The company deserved to fail but it was the workers that would have paid the higher price of that failure. It's a judgment call.

 

Show me where it says they have paid it all back. The last I heard, we (the government) were out billions that we would never recover.

 

You're right that they haven't paid us back in full but that doesn't mean that they will never pay us back. Last I heard, they were ahead of schedule and making healthy profits.
The point was that we accomplished something that helped people keep their jobs and at this point the investment seems to have been worth making. I'm going to leave this in the success column unless it is proven to be otherwise.

 

Then please tell BO and your fellow lefties to stop calling for tax increases genius!

 

True. George Bush signed on to the GM bailout. Anything he does is wrong. We should have known better. Right?

 

They pay the overwhelming bulk of the taxes