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The State of the Economy

AIR DATE: Tuesday, January 29th 2008
POSTED BY: DAVID MILLER
Download the mp3 for this show.
Photo credit: daviddmuir / Flickr / Creative Commons

According to the New York Times, polls show that the economy is now Americans' top concern. Not so coincidentally, the White House and the House of Representatives agreed on an economic stimulus package last Thursday that would send checks of up to $600 to individuals who earned less than $75,000 last year. The last time the government issued tax rebates like this was June 2001, when people received up to $300. Before that, you have to go back to 1975 to find a similar rebate.

So what, on the eve of President Bush's last State of the Union, does this mean for us? Economists seem to have more questions than answers. Will people spend their refund checks or save them? (What will you do?) Will there be a recession or is it just a temporary downturn? And closer to home: What does the country's economic forecast mean for the northwest?

And to get really close to home, if the definition of a recession (with thanks to Wikipedia) — "a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year" — seems far removed from your daily life, what's your measure of the state of the economy?

GUESTS:

 

 

Tagged as: congress · stimulus · tax

Photo credit: daviddmuir / Flickr / Creative Commons

I would rather see my tax money go to programs that stimulate corporations to pay their employees fairly and stop outsourcing. Giving out refunds so that everyone can spend more money at Wal-Mart seems strange to me.
shaneprychun —
Deleted
neal888 —
Read Alan Greenspan's book that came out Fall 2007. He states in the book that we are ALREADY in a recession yet the Bush administration refuses to admit it -- and Greenspan is a Republican too.
mydogatemyemail —
As an unemployed woman I agree with that proposal and extending the unemployment benefits. I won't shop at Wal-Mart, regardless of how much money I could save. My son says I could be a greeter there. My vision of hell.
l.knee —
I think that there should be a large re-think about this extension of our national debt. I think the worst thing is that President Bush as personally ruined the US economy. He failed miserably in the deep south after Katrina. If more had been done there then we would have had more taxable income.
Chrissy4605 —
As much as I love to Bush bash, these budgets were passed by a Democratic Party majority Congress. Bush only implemented the budget that our Democratic Congress passed. We can't blame him for Nancy Pelosi lacking a backbone.
mydogatemyemail —
According to the nonpartisan Tax Policy Center, the tax rebate go to the top three quintiles of economy. Specifically, those who don't need it, and possibly won't spend it in such a way as to relieve the economy. We should give the money to those who would spend it immediately. That will give the economy the boost it needs.

Jerry Ketel
jerryketel —
Notice how both parties can completely set aside the issue of the Deficit when it comes to handing out money to voters. But handing out money is a better short term solution than the Fed trying to fix the Economy with low interest rates. That tactic will lead to '70s era inflation.
Bill Swindells —
The following link is a chart that was released by the House Democratic Caucus last week. It shows the state of our economy and country today vs. 7 years ago.
http://thinkprogress.org/wp-content/uploads/2008/01/rchart4.gif

We are at the beginning of the ARM loans interest jump. With the weak dollar, 455,000 forclosures to date, another 2 to 3 million ARM loans set to jump, and more strict lending standards, it is easy to see that there is little hope to save our stuggling economy. A $145 billion stimulus plan will do very little to stimulate a $13 trillion economy.
Nickel Arcade —
One of the problems we're facing as a country is that we've been educated to live beyond our means, using credit card debt. Is the answer to encourage more spending? Is it maybe time for us to rethink our spiraling trend of buy more, get more debt? The tax rebate, nice as that money will be, is to encourage more spending, not less. We're simply slapping a temporary patch on the leaky boat, we're not fixing the hole.
Mary Rosenblum —
Mary, you are so correct. American's see the federal government driving up the deficit and say to themselves that if it is ok for the government to run up a large debt, then it must be ok to run up a high personal debt. Neither situation is healthy for our national economy.
mydogatemyemail —
Individuals do not change their spending habits based on a one time "gift" of a few hundred dollars. At best, the proposed plan will create a short term boost, but even that is doubtful given the amount of debt currently being carried. It's far more likely the this money will mostly be used to pay existing debt.
What the country needs is a significant investment in infrastructure. Giving people jobs does change spending as the change in cash flow is anticipated to be permanent, not a one time windfall.
ericthered —
Eric, I agree with you that this "boost" is only a matter of perception. The payment itself will not effect the economy. The payment will act only as a Prozac to the American consumer making him feel good about spending additional money of his own.
mydogatemyemail —
I am sceptical of the benifits of the stimilus package for one important reason. We are going to borrow the money from China to hand out to the American people. Most people will spend that money on either 1. products from China or 2. on energy costs thereby padding the rich energy industry.
Instead make sure that you spend on American goods and local services to maximize the impact on YOUR economy.
unhtroy —
I think I'll save the money for the longterm so I can pay future taxes which will inevitably be raised to pay for this stupidity and the war. We won't be able to borrow from China forever.
skeptictank —
I will be spending my rebate on a new mattress which is made in the US because that is my patriotic duty. NOT apparel which is made largely in Asian countries.
CasandraMShannon —
Way to go Casandra, however, I challenge you to make sure the mattress and all components in it are American made.
mydogatemyemail —
It's important to remember that this isn't "free" money. The last time the Bush administration decided to give me a tax rebate, the IRS took most of it back the following Spring. Most folks I know can't afford to owe the government extra money at tax time. Any money I receive is going straight to a bank account, and I won't touch it till after I have filed my 2008 tax return.
Galaxina69 —
I would rather see our government invest this money in creating good jobs for Americans.

More specifically, so many of our state and federal agencies are still using paper, slowing productivity and costing us money every year.

We could create many great jobs for skilled americans by investing money in the the computer infrastructure of our government and this investment would cut cost and increase productivity. Not to mention boosting the income of many of the Portland based tech companies.

Money spent well is different than just spending money.
ejeinowski —
I agree as long as the jobs that are created are filled by people here and not to imported H1B's or shipped offshore.
arborkin —
Paul Krugman outlines the problems well. http://www.nytimes.com/2008/01/25/opinion/25krugman.html?_r=2&oref=slogin&oref=slogin
This idea comes from Voices for America's Children: "a temporary funding boost to states in the form of a Medicaid funding increase so that children and their families continue to have access to health care services during a time of economic uncertainty. The Congressional Joint Economic Committee estimates that an economic downturn could add as many as 1 million new SCHIP enrollees and another 1.5 million individuals in Medicaid in 2008."
This begins to address a shameful hole that is growing and will stimulate our economy in the service sector. They ask us to call our Senators and urge them to reach out to Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA).

krisalman —
We recently retired so won't qualify for Bush's "rebate" and are cutting way back on our plans because we aren't able to sell two of our houses. Our original plan was to sell these homes and build a new one along with out buildings on our farm.
I think the rebate won't come anywhere near the root cause of our economic problems. It may be a short boost but it won't last.

IMHO, the "uncertainty" and down turn is due, in part, by the too-fast exportation of high-tech and other middle and upper-class wage jobs as well as the importation of foreign workers who perform for less than going wages.
Perhaps for a future program, you would discuss the off-shoring of high-tech jobs and wages.
arborkin —
This stimulus package is nothing more than a backdoor approach to another round of corporate welfare. Why do we need to bail out banks that use questionable lending practices with a handout? I have a small business that is in a major transition in the type of products produced. I had to plan and save for the impact of the change in the business. Why do I have to underwrite the greed of the Bend area bankers running up speculative real estate prices with shoddy loan practices. Never in the history of economics has a country been able to spend their way out of debt! Da!
j1bird —
Your guest says that Oregon has a low percentage of "subprime" loans, but that's not to say we have a low percentage of risky loans. I read recently that about 30% of the loans made in the Portland area in 2006 were interest only and option ARM loans.
skeptictank —
You are right, skeptic, and we also have the problem of having such an artificially inflated price of homes in Oregon. Our crash will be people paying off $300k-$500k mortgages on condos/homes that once the real estate market settles are worth only $200k-$300 after the adjustment. Furthermore, most of our property taxes in Oregon are based on these inflated prices. When the housing market readjusts to the lower home values, then property tax revenues will also be cut by the same ratio.
mydogatemyemail —
If the conforming loan limit is raised it will mean more loans for California and less loans for the rest of the country. For example, a $720K loan made for a house in California could have been 2 or 3 loans made in Oregon.
skeptictank —
Bend is in a recession and we are going further into it. Housing sales have come almost to a standstill. Only around 50 houses will close in January, which is about 20% of our boom years, and only 40% of last year. There are over 1800 single family homes listed in the MLS. With the average sales for the last three months we have about 25 months inventory. Housing prices are 30 to 35% above levels that would have been predicted based on fairly standard 6% price increases from 1998-2005. Many houses listed in the $400k range should be $300k. If you bought a house in Bend after the beginning of 2005 your house is worth less than what you paid. Many of the these houses were bought with 100% financing, and other people took out a HELOC on their homes in 2005 and 2006. It's not good here and we are teetering on the edge of a big crash.
jonestim —
One thing that keeps getting misquoted in today's conversation is the "unemployment rate." Guests are saying that we have a 5% unemployment rate nationwide. This is a misstatement as the 5% figure is the number of people RECEIVING unemployment insurance payments. This figure does not include those who's benefits have ran out, did not qualify for benefits, or did not file for benefits. Many economists place the actual employment rate at about 12% of Americans out of jobs.
mydogatemyemail —
Your guest stated earlier that our manufacturing sector will be helped by a weak dollar. Americans have seen a cost of living increase and a decrease in the standard of living so if our economy is based on consumer spending and many manufacturers have outsourced jobs, how does a weak dollar help?
Nickel Arcade —
Isn't continual growth unsustainable?

Can economists turn their attention to figuring out new economic principles based on sustainable practices rather that the outmoded model of continual growth?
virginiabruce —
If the stimulus package goes through the government might as well keep mine. I'm a single parent, working two jobs (one full time and one part time) and for the first time since I've had my son I owe the federal government money. Since he is 17 at the end of the year I am unable to take the Child Tax Credit, which would allow me to get money back for the year. My frustration is about working 55-60 hour weeks to make ends meet and constantly hearing about a stimulus package that isn't going to help me at all.
wendikali —
well I will ask the question that has not been asked outloud. what about the hard working middle class people that struggle to stay afloat, but yet owe taxes and will never see this money? how simple is the formula in choosing "who" will spend the money? and what is the cost, again, for printing/mailing these funds and who pays for it?

my experience as a small business in the construction industry, people are "thinking" about remodeling and sitting on that for now. business is slow. my kitchen table discussion is about what on sale at freddies, buy one get one.

thank you.
ms qdub —
That is exactly our situation. We are postponing significant building and remodeling (or doing the remodeling ourselves) because we can't afford to do otherwise based on the economic downturn.

We won't qualify for the rebate but if we did, it would go specifically to hiring people like you. Assuming you hire only legal workers, this would have a direct, positive impact on the Oregon economy.
arborkin —
I will spend half of my rebate on "things" I don't need and use the other half to pay bills.
I don't feel a responsibility to spend on "American Made" goods; I do feel obligated to spend or pay down debt (allowing me to spend later) with the rebate.

Good show today...it's getting better.
SusanH —
I will be sending the $600 check back to George Bush on the basis that we might be able to bribe him and Mr. Cheney to leave office early. That would be payment enough for me (not that I don't need the money), and I really believe that if he and Cheney would leave office early, this would be stimulus enough and the economy would zoom up!
beeve@isp.com —
Bravo, Brenna from Portland. Your point concerning local interests over special interests and the definitions of those terms wins out.
gabriel —
I'd like to hear the economists on the show throw out some suggestions for how people can get through tougher economic times without borrowing money they won't be able to pay the interest on later, or buying stuff they don't really need.
h sofia —
To tell you the truth, I am shocked to see our congress-critters cooperating enough to do anything. The refund will be next to useless in dealing with what ails our economy, but I am still shocked that they managed to do anything. I believe our government is broken.

It feels like we a re-living the 70?s. Gas prices rising rapidly like they did in ?74 and again in ?76. A nation tired of the lack of morality in Washington DC and ready for someone to shake it up.

In ?76, we elected a man that was unsullied by the dirt of DC, but that was completely unsuited for the Presidency. It looks to me like we will do that again too. The nation staggered into an era of high inflation and no economic growth, and if I had to bet, that is where the USA will be spending the next decade.

It is a shame really because this nation?s problems are solvable. We could generate our electricity with nuclear power. We could make our oil with gas-to-liquid and coal-to-oil plants. We could make our own toys. We could make our own cars. We could make our own clothes. We could make this work. A capitalist economy is ultimately based on optimism and honesty: Neither of which seems to be abundant these days.

jaimeshawn —

Comments are now closed.

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