See, this is what happens when two nerds get married and have little boys.

Monday, August 04, 2008

The heart of the economic mess

The heart of the economic mess

I think our blog readers will appreciate this article (it was on Reddit earlier today). The author makes some interesting points about the causes behind our economy's slump, as well as proposing an approach that would help solve the mess.

His hypothesis that, since wages have not kept up with cost of living, Americans have adopted 'coping mechanisms' since the 70s: both parents work, then work more hours, then borrow money. Now, we're at a point where "there's not enough purchasing power in the economy to buy all the goods and services it's producing."



Matt Duff said...

His arguments seems rather sound. And it raises an interesting question to me.

It seems as though his argument is that the rich are going to become richer. I agree with him. I think the divide between the haves and have not with grow even greater. But his remedy to me isn't going to lead to a reduction in that divide.

A progressive tax will not help the issue either. I think a problem with getting money is that it doesn't do any good in the long term when it is handed to the average person. For a person to really change things they have to change their perspective on work and other things, which is very difficult to do. Giving the have nots more of the haves money will not produce any recognizable change. I think the average have not, if he were given money, would just have a nicer car and a bigger TV. There would also be some who are raised out of poverty by it, but I think they would be few and far between.

So James and I, presumably by getting advanced degrees, will find ourselves on the better end of this equation. How should we feel about this? Do we want a progressive tax? I know I do not. I think I do a fine job of spreading my wealth and helping those around me with it. In fact, I think I do it much more efficiently and wisely than the government does. So should they have this power over my wealth (assuming I ever make any)?

I don't think there is an easy answer. I think the average hand out will not help the lower classes, and I think the average wealthy person will not give away their money to the needy. It is a catch 22. But I think I would err on the side of letting individuals decide to redistribute their wealth than let the government redistribute it.

Matt Duff said...

Also, I think human nature has a lot to do with this. Some people just do not want to work hard. Others do. While we would be foolish to assume that all the wealthy work hard and all the poor do not we must recognize that there is SOME causation between these two things. James will have invested 5-6 years of higher education. I will have done 7 when I am finished. We did put in the work to accomplish financial goals.

I think that in no matter what economic model you reside in there is going to naturally be people with less and more work ethic and drive. There will always be unemployed no matter how great your economic model is.

So his argument is that the cost of living has run past the buying power of the nation. I agree, I believe it has. The average person living in Maine cannot afford his now 350$ a month gas bill to drive to his work. The wealthy can afford this changes because it is out of their excess that they spend on the cost of living while their other money earns them more money.

Personally, I don't think there is a solution to this predicament. I think we can, on a local level, do a great amount of good to help those who wan to be helped to rise above their current living situation. But I do not think we are going to raise all the boats in the harbor by our efforts. But I think our system, one in which the divide between haves and have not s is rather steep, is the system that helps out the poorest of the poor the most. I grew up really poor to others, comparatively, in the United States, but I had every necessity a person could want. The amount of those who do not have every necessity is low. The average person is well off here.

I don't want to sound like a narcissist, but I don't think things will get much better. It falls upon individuals to make a difference locally.

Sorry, I am long-winded.