I like Obama in general, and it may be true that the stimulus will help the economy in the short term. But so far this crisis doesn't look the same as the Great Depression all over again. I think we would survive without the stimulus. I don't like to see so much being added to the national debt. The stimulus is a shot in the dark intended to maybe have some effect on the short-term problems, but it will definitely cause predictable, long-term effects. The national debt is going to be a really big problem someday.
In particular, our relationship with China is that we import goods, and export debt. This cannot go on forever: our credit rating as a nation will be reduced over time if we keep doing that. And our relations with China are friendly only to the extent that we depend on each other: if it were not for all the trading, the ideological differences would loom larger. So when China eventually finds that they don't need us so much, relations will sour, they will stop buying our debt, and some kind of conflict may develop, depending on how China's own government evolves over time.
When that happens, we will not be in a very good position if we already owe them too much of our national debt - that is, debt which we never intend to repay. In the last 100 years, there were only a few years in which we made progress in paying off the principle of the loan; the rest of the time we just paid the interest.
The country needs to do the same thing that every individual household needs to do: become self-sustaining again. I still have much more faith in the free market to efficiently create wealth, than I have in the government to figure out the right places to spend money, and hope that for every dollar they spend, there will be a multiplicative effect. They themselves don't know how to predict those multiplicative effects, which is why the stimulus bill consists of a random assortment of pork. They can't decide what will work, so they do a little of everything they can think of. Most of it will end up being wasted money, I think.
Further comments, not submitted to the BBC comment box:
Tax cuts are great, but when the tax cut is thought of as a kind of spending, and is financed by more national debt, we still have it hanging over our heads, collectively. Why does no-one even talk about the concept of the balanced budget anymore? Clinton was the last president I remember who had this goal. Right now, the government should look for corners to cut, to waste less money on things that we don't need at all, or on programs that are ineffective. Spending cuts should finance the tax cuts. If individuals spend less on taxes, they will spend more on goods and services; and if companies pay less taxes, they can afford to hire more people.
As for how we got into this pickle, it was insufficient regulation. This is where government can help the most. The government's main purpose is to level the playing field, to make the markets safe for everyone. The banks went crazy and invested in hot air (CDOs, CDSs and generally in mortgages given to people who couldn't afford their McMansions) because the regulations which prevented them from doing so, which had been in place since the Great Depression, were removed a few years ago.
We can never expect any corporation to have a conscience. We must realize that a corporation is an amoral entity: it will seek to maximize its own profit, and it cares about nothing else. Real people work for the corporations, and some of them may be quite humanistic, but it only takes one, or a few, amoral people in high management positions to set the course of the company; and it is precisely that type of person who is the most power-seeking. So on average, corporations are selfish and greedy. Therefore we depend very much on the government to regulate what the corporations can do. When the regulations are insufficient, economic crises occur. The crisis itself was not in the interest of these corporations (large banks especially), as it turned out: but, they could not see the crisis coming. They maximized short-term profits at the expense of long-term survival. Funny, how the people buying the McMansions, the banks that financed them, and the government are all on the same page now, isn't it?
The Democrat party line is that the government can really spend us out of a crisis, by creating jobs directly. FDR may really have pulled it off: I'm not sufficiently well-acquainted with that part of history to judge it for sure. Maybe Obama will pull it off, too. But I do know that for such actions, there is a huge long-term cost, and a huge short-term opportunity cost as well: that which the government plunders from the people, and spends arbitrarily and capriciously, cannot be spent by the people on the things that they need most.
And having chosen one path, we cannot see everything that would have happened, if we had chosen the other path. We do not know for sure, if FDR hadn't embarked on all his spending programs of that period, if the economy would have bounced back as resiliently, or if it would have turned out even better. Maybe the Glass-Steagall Act would have been enough, all by itself. I think it is the first order of business now to restore an appropriate level of banking regulation, to prevent the next crisis.
Second, it is important to incentivize American employment. That is not to say that H1B visas are all bad, or that global trade should be curtailed. If it's more efficient for low-skill workers in other countries to do some jobs which we prefer not to do, and for Americans to do the creative work, so be it. But when the government is already spending trillions on bailouts, I most certainly do not want to see the companies who are receiving American taxpayer money, spending that money to pay wages in other countries! And I do not want to see them spending tens of millions to pay each high-level executive, either. Obama has very rightly called for a cap on executive compensation in such cases. Now that the government meddling has started, we might as well carry through and make sure that our money is well-spent.
I think our food supply, and our energy supply, should be self-sustaining. There is no excuse for the world's bread-basket to be importing large quantities of food, as we seem to be doing these days. I think something is wrong with farming regulations, but I haven't been able to pinpoint what exactly. As for energy, that's another tangent, a complex topic which I won't take space to write about here. Suffice it to say, I think Obama's moving in the right direction on that front.
I would hope we never see such a real-estate bubble again. (Although, that's an overly optimistic hope: it tends to happen periodically.) I have a big problem with people who think that just because they bought houses at inflated prices, or used their perceived equity to refinance and buy crap they didn't need, for the sake of living large, those high prices are now "normal". When you buy a house, it's really in your own best interest to shop around and find a bargain. And it's never in your own best interest to add to your own long-term debt: the bank actually expects you to repay it some day. But the majority now seems to think the government ought to re-inflate the bubble so that they can re-sell their houses at a profit. This is extremely harmful for anyone who is buying his or her first house. For a couple of decades around the World Wars, and the Depression, cheap housing was a priority, especially for the returning soldiers. (The American Dream, as we know it today, was born during this period. Suburbia, lawns, gardens, cars, highways, the whole thing.) Now, because it's been a while since we had a major crisis to force us to work together as brothers again, greed has taken over. (9/11 didn't disrupt the greed: the fallout from that was heavy-handed government, not a popular movement to take care of each other.) The cost of housing is not related to its true value. I think the government should be concerned more with leveling the playing field for ordinary people, not for restoring lost profits to speculators and greedy people with poorly-thought-out plans to simulate wealth that they don't actually own. And again, the government's approach should not involve throwing money at the problem! It doesn't have to, and it doesn't help either.
I think of the ideas I have heard so far, the idea of reducing interest rates for over-leveraged homeowners makes the most sense:
- the banks gave the people the rope to hang themselves, so let's allow them to bear the burden of their mistake, and learn how to "make it work" rather than foreclosing
- the people were dumb enough to buy into it, so let's encourage them to pay off the debt for the rest of their lives, as opposed to just ducking out and going bankrupt, which is bad for the economy as a whole.
That is, it makes sense as long as the banks are simply forced to offer low interest rates, only to this class of people who got caught with their pants down, this one time. If the government provides cash for banks to run at a loss, then it doesn't make so much sense.
- the houses are already built, so somebody might as well live in them. Then maybe we don't need to build much more, for a few years. There's nothing at all wrong with that.
- It's always good for the environment, to make do with what we already have.
Me, I'm still happy with my WWII-era house, which I bought in 1997, before the bubble. In a few more years I'll probably have it paid off. I would like to see today's young people get the same kind of chance that I did.
And people need to understand that the American Dream can be a nightmare too: you have to support your own lifestyle. If you want to live large, you have to work hard at a job you don't like, typically. Or get creative. If you get creative and invent the next big thing in the process, that would rescue the economy like nothing else. Going bankrupt and then muddling through the rest of your life after that, doesn't have any upside, from the collective, whole-country perspective.