Economics was never my thing. It always felt like fuzzy math to me, especially when it comes to how theories are applied to practical use. I have a simple understanding of supply-side, law of diminishing returns, John Maynard Keynes, and Milton Friedman.
So forgive me if I half-heartedly try to explain, from my perspective, about the confusing and contentious issue about whether or not the U.S. government should raise the debt ceiling in order to prevent a Greece-like economic meltdown. With credit given to Wikipedia, this is the definition and explanation of the “debt ceiling”.
To give an example, a debt ceiling is this (don’t quote me because I’m trying to understand this myself): I’m asking to extend my credit line because it’s possible that I’m going to hit or exceed my credit limit, due to economic troubles, whether it’s my own doing or not.
That’s the layman’s term of what a debt ceiling is. The issue facing Congress and the White House is should the United States increase their debt ceiling (or credit line) to create space to continue running the day-to-day operations of the country, the programs that are funded, and services to provide.
Given the situation and the understanding that I know so far, I feel that the debt ceiling compromise proposal that was voted in favor by the House this evening is not the one that best suits the public. Look at it this way: you may be doing well financially, but you may not be totally out of the woods. And there are a lot of people who are struggling to stay afloat after losing their jobs, houses, or whatever the recession has taken from them.
Something could happen (surgery, car trouble, life-changing events, etc) in which you may have to do some shifting around of your financial pocketbook. You may have to ask for a loan, or extend your credit, with the binding agreement that once things get better, you will do everything in your power to pay it off.
Basically speaking, you are asking the bank, or the person you are asking, to have confidence in you during this dire time.
This is what the government is asking Congress and the citizenry: “If you let us extend our credit line (raise debt ceiling), we will work hard to get this nation’s economy out of the hole it’s in. All we are asking is for your trust and confidence.”
Confidence. The key word in all of this. Place the Congressional partisan bickering and gamesmanship to the side for a moment. This isn’t whether Speaker Boehner‘s plan, the original proposal, or the planned compromise will work. The real story is public confidence.
The public’s confidence in the economy is in question.
Right now, a large sector of citizens are not confident that the government can find ways to end this recession, short-term or long-term. If that confidence and trust is lacking, the government is in trouble, regardless who is in the White House and who is the majority party in control on Capitol Hill. Bureaucrats and policy wonks are going to feel the heat because their suggestions and processes are not working. We can elect new people, but how plausible will that be? The crux is the policies that are being made by policymakers and those who are charged with executing them.
It’s not working.
Trying to make sense of government policies is like asking uber British civil servant extraordinaire Sir Humphrey Appleby (of “Yes Minister” fame) to give you a straight answer.
There is a lot of questions that is being asked of the President’s administration and Congress. Why was Dr. Elizabeth Warren pushed aside and not be allowed to run the new Consumer Financial Protection Bureau she worked to establish? Was it because Treasury Secretary Tim Geithner didn’t want some academic wonk tell him how to police his Wall Streets buddies?
How much influence does Wall Street has with the making of economic policies? Is Congress, most of them from both parties, swimming in the back-pockets of Wall Street to protect their own financial self-interests on the market? How will the GOP be able to force the government to have a balanced budget? Is Wall Street the financial “Teflon Don”?
When it comes to self-interest, some people are willing to go to great lengths to protect that, and that in turn gives the public the right to question and be concerned.
Is it good to have some debt, as long as it’s not too big? Anyone who has pays off all of their bills and only use cash can still be denied for a credit card, a house, or a loan, because they have never had to deal with debt before.
With this in mind, voters may vote on party lines, but more importantly, they’ll vote by their pocketbooks. Which idea or plan will put another extra dollar in their pockets and which plan or idea will keep the public from having to fork that extra dollar over. Which is why when everyone received those stimulus checks several years ago, Wall Street and the government wanted us to spend it, not save it. Spending it would give businesses and the economy a boost in sales, thus bumping the economy up. If we were to receive another stimulus check, I bet you that most of us will not spend a dime of it. We’re mentally and physically keeping that money in our pockets…in case if we really need to use it.
The Great Depression didn’t last 2 weeks or 2 years. It was a long hellish decade-long period. The 70’s was a tough decade with the OPEC crisis and a recession bump. The Farm Crisis of the 80’s was another one. It takes years for the public to have confidence again in the government to get out of a hole. Always have, always will. The public today does not have that patience to wait and get by. It’s a “hurry up and fix it now” mentality.
I am now convinced that three years into this recession, we have a long way to go before the economy will settle down enough for the public to be confident again. And that does not mean that the President and the Speaker of the House should act like petulant kids and walk out on each other. It means that talking tough amounts to nothing if there is nothing to back up the talk.
Confidence and trust are always a tough sell, when it comes to money, how it’s handle, and how much we trust our government and bureaucrats to not screw it up.