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Devin Kearns
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I once watched a TED talk about government spending and its impact on the market. Essentially, the TED talk deduced that the government is the by far the number one investor in education and technology for both the private and public sector. The government has financially backed multiple ventures that brought jobs and innovation to society so I find it interesting that some economist believe the government should spend more. In order for the deficit to decrease the government needs to either generate more revenue from taxes, spend less, or spend frugally. I recommend the third option. This article offers suggestions on how to fix the financial problems of the country but in my amateur opinion I think the author is wrong. I think the government effectively supports the market as much as it should for a free market economy. However, the government could allocate money in a way that is conducive to long-run growth and stability. I would like to know how and who the government borrows money from. I know China is a huge investor in our economy but where else does the government borrow money and are there ways for the government to generate more cash globally?
The argument about minimum wage hikes is fought across more industries than just the restaurant industry. They all argue that raising the minimum wage will decrease their ability to be as successful financially, with higher expenses and a need to raise prices. However, even if raising the minimum wage modest amount doesn't affect the success of a restaurant, a big hike in federal minimum wage could also not be as detrimental to restaurants. This would mean that consumers have more money to spend, which further implies they would be able to afford the raised prices. This brings up the question of why raise them in the first place? if the market will adjust to the amount of money consumers have, then wouldn't the market be in the exact same predicament only with more money at hand. I think the smartest solution would be to adjust the minimum wage with inflation and price of living for specific areas. The restaurant industry will survive any type of hike in wages.
I never thought the cause for such high unemployment during the Great Recession was a matter of structural or cyclical effect. I thought people were out of jobs because firms couldn't afford to hold onto as many employees as they once were. My thought was firms are so intertwined with the market that win the housing bubble burst, it sent tons of firms into free fall and they had to make cuts. A structural argument for unemployment does not make any sense even if you do not look at the wage rate at the time. I would be interested to read the cyclical arguments for high unemployment during the Great Recession. Also, I'd like to know if I am thinking about this too simply.
The most impactful part of this article was the recognition that the top percent of the population not only have a majority of the money, but the power as well. Tony brought up the Citizens United case in an earlier comment and I wanted to hit on that as well. Unlike Tony, I agree with the ruling of the Citizens United case, to an extent. If the economic opportunity of all citizens was more equal than it is today, then the case would not have received as much flack as it did. It should be your right to contribute to a campaign with as much cash as you wanted. The problem is, the people who have the cash to make huge waves in the political arena had a higher chance of being financially successful than people who did not have the advantages they had. This is the underlying problem with the case. Because the income market is unequal, the ruling seems unfair but if the income market was equal, the ruling would seem more fair.
Although it is unsettling that oil prices and global use of oil has enormous power over the state of the market, what strikes me as the most disconcerting is the power China has over the state of the global market. Currently, because China is not using oil in as much volume as they have been in the past, almost every western market is experiencing huge backlash. This made me wonder if it is good that our nation relies so much on the success of China? And also, what would be the consequences of becoming less integrated with the Chinese market? These questions seem to appear in economic policy talks and many politicians are taking both sides which makes the answer seem like it is going to be a compromise between the two. In the globalized world, it is naive to think that we can fully separate from extremely powerful nations like China. Being connected with China allows for low prices on goods because of low production costs. The United States also reeks benefits whenever the Chinese market grows which is good for investors. Connectedness also allows for more technological development because of the intermingling between people in both countries. The domestic well-being of China can increase if both countries contribute to each others success. However, if we are interconnected with China and the markets crash, there could be huge consequences. For instance it would decrease the amount of employment in the United States which lowers the amount of income each person has, which reduces the amount of spending done by each member of the society. This would lead to the paradox of thrift and companies suffer which leads to lay-offs and bankruptcies, etc. With these two extremes possible, it seems that a compromise needs to be in place. Having a policy where we can reek the benefits of being connected with the Chinese markets while disconnecting when markets crash. Having such safeguards seem unrealistic to me but I think they would ensure that the success of each nation would benefit the other while the failure of each nation would be confined to the nation itself.
Devin Kearns is now following The Typepad Team
Jan 25, 2016