Our market economy is driven by the fundamental concept of supply and demand, e.g. how much of a product the market can offer correlated with the amount of that product the public is willing (or able) to buy at a certain price. Or, as Dr. Pinckney Walker described so eloquently here in his 1950s Econ 101 class, the number of widgets and digits available combined with customer desire determines not only the price but also the replenishment factor.
That our economy was in serious difficulty when President Obama assumed the mantle of leadership cannot be disputed nor can it be denied that a number of measures have been initiated to jumpstart it and deliver the nation from a serious recession. These have included the Troubled Asset Relief Program, providing up to $700 billion to strengthen the financial sector and address the mortgage crisis; the stimulus package or American Recovery and Reinvestment Act of $787 billion in tax rebates, unemployment benefit extensions, shovel-ready job creations and assistance to states; and the Cash for Clunkers , or Car Allowance Rebate System, Program.
Interpreting his election as a mandate for change, the president issued to the Congress, and to his administration, an ambitious program to include closing the military prison at Guantanamo Bay, curtailing the emission of greenhouse gases with cap and trade legislation and overhauling the nation’s health care system. This was all to be done without raising taxes on the middle class as much as one dime and, in the administration of health care, providing more and better care for less by eliminating fraud, waste and abuse and reducing Medicare payments to physicians.
I will not address the pros and cons of these and other economic stimuli, enacted or projected, as it would be repetitive and have little bearing on the pre-ordained notions of benefits and liabilities derived therefrom. Instead, there is a real connection between the economic uncertainties of the present and how they relate to or are affected by the ongoing legislative and executive efforts of change. Regardless of the old Alka-Seltzer commercial approach of “Try it, you’ll like it,” any amount of sugar coating or appeals to the mantra of “Hope and Change,” recovery will depend largely on confidence in the economy among consumers and producers alike.
Currently, there is little to encourage optimism among either. The unemployment rate has reached more than 10 percent despite the ARRA package, touted to create shovel-ready jobs, stimulate new growth and employment and inspire confidence. There has been a net loss of 3 million jobs since the stimulus package was signed
Moreover, the concerns over the price of the pending health care overhaul and the America Clean Energy and Security Act (cap and trade) in new taxes, hidden costs and the current pace of government spending have applied the brakes to consumer spending, additional hiring, entrepreneurial start-ups and workplace improvements. The small business community, provider of the bulk of new jobs and opportunities, is fearful of the proposed formula for paying employee health insurance or being fined for opting out.
Individuals are likewise concerned that their government is not only intent upon requiring them to purchase health insurance but also levying fines or prison time for noncompliance. And, producers and consumers alike are skeptical that the carbon tax can be revenue neutral inasmuch as the majority of our energy is fossil fuel produced.
While I am not an advocate of governing by polls, a recent comparison of public opinion by Politico.com had the economy as most important with 45 percent of respondents citing that as their primary concern and 21 percent, 20 percent and 4 percent saying government spending, health care and environmental issues, respectively. While health care and climate issues are in need of reform, it would appear prudent that the administration back burner them in favor of a return to something approximating full employment.
The private sector must take the lead in restoring the economy – the government provides the climate to encourage investment, manufacturing, production of goods and services and consumption. Jobs provided by the government are largely make-work projects with exceedingly short-term benefits and result in no real marketing product (supply) for which there is a demand. President Roosevelt’s Works Progress Administration provided jobs during the 1930s; however, the Great Depression was ended by World War II and not the New Deal.
While there is merit in health care reform, the jury is still out on the necessity for climate control. Nevertheless, rushing either legislation for an electorate of whom less than half are on board, coupled with double digit and rising unemployment, is economically unsound. Tight money and reluctance to spend lessens the demand for goods and services – the result is a proportional reduction in production or supply.
And, when much of the funding for reform is derived by additional taxes on those who are best able to create jobs, a cycle of diminishing returns at the least opportune time is launched. Promises pledged in the heat of campaigns are a necessary part of politics but, one must govern from reality. Unchecked and rising unemployment means less taxes and fewer sources of government revenue.
Government’s role in the economy is to create opportunity and an atmosphere of public confidence and enthusiasm. Out-of-control spending of borrowed money merely deepens an existing hole.
J. Karl Miller retired as a colonel in the Marine Corps. He is a Columbia resident and can be reached via e-mail at JKarlUSMC@aol.com.