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Economy

The economy is built on a million plus small businesses and thousands of medium to large corporations.   When these businesses and corporations are doing well, the economy grows.  When these businesses’ performance underperforms, the economy slows and can even enter into recession.

The economy is measured by the total sum of all the final products and services produced to determine the GDP: Gross Domestic Product.

GDP = C + I + G + (e – i)

Where:

  • C = Consumption
  • I = Investment
  • G = Government Spending
  • e = Exports
  • i = Imports
  • (e – i) = Net Exports (commonly called Trade Deficit when negative)

It is estimated that 70% of the GDP is private consumption by the public that is spending to purchase products and services.  Thus the public has a major influence on GDP, reflected in the economic condition of the country.  When the public is spending, businesses perform well and the economy grows.  When the public reduces spending, business falters and the economy falls.  Sometimes the economy can be sustained by government spending, capitalists investments and business export of goods and services.  Investments tend to lead the economy when increasing (growing) and tends to follow the economy (shrinking) when the economy's going down.   Throughout this cycle, the economy is creating and deleting jobs all the times. 

Normal growth for our economy is +2.5% to +3% annually.  Extra ordinary growth is +3.5% to +4.5%.  Expansion growth is 7-8%. Slow growth is +0.5% to +1.5%.  Recession occurs when we have negative growth for two consecutive quarters such as -0.5%.

During the last quarter of 2008 and first half of 2009, our economy experienced negative growth.  Consumer spending has been cut from 70% of the GDP to a very low amount thus GDP is suffering. Government spending and exports tried to keep us in positive growth but was not large enough to have a major effect.  Consumer spending patterns have to get back on track for the economy to grow.

Many things factor in to control consumer spending patterns: either downward or upward.   When one individual or group can control the spending patterns of the consumer, they can in effect control the economy.  Consumer spending patterns convert to demand for products and services thus affecting the performance of small business and corporations.  When spending (demand) falls, businesses slow down, hiring slows and layoffs increase all of which can result in fear on part of the consumer.  Thus a vicious cycle is started with fear, hoarding money (spending less), then more fear until a major slowdown or even a recession is created.  A ruinous self-fulfilling prophecy occurs as people criticize the economy and pessimistically began to buy the whole package of lies.

The rhetoric from the Democrats over the years 2006 - 2008 has affected the spending of the consumer causing them to fear a recession, thus causing the economic slowdown we are currently experiencing.  Fear is driving the economy down.  Fear brought about by the Liberals and Democrats.

Thus what is created is a “perfect storm”: low consumer demand, more unemployment, low investment capitalization, and trade deficits.  The government’s job is a balancing act of controlling the “perfect storm”.  The balancing act consists of many players:

  • President – Providing Leadership (Bully Pulpit)
  • Congress – Establishing Rules of Behavior (Commerce Laws, Security Laws)
  • Central Bank – Federal Reserve (Cost of Money, Availability of Money)
  • Business – Managers (Decision Making - How much to produce and when)
  • Citizens – Labor and Consumers (Demand Generators)

This current slowdown seems different.  It is because of the fear induced by the naysayer – Democrats and Liberals.  It started in 2007 and was expected to last 18 months after the President Obama entered office.  What the Democrats did not anticipate was the mortgage crisis and the oil crisis.  They took a chance with the economy just to elect their candidate for President.  Their gamble backfired resulting in unintentional consequences which caused the economy to move into a major slow down.  Had Democrats had not started this slow down, the economy could have handled the mortgage and oil crisis more easily. 

In addition, the credit crunch is now a major problems. Democrats are blaming De-Regulation. De-Regulation does not mean NO regulation. From the list above, Congress is responsible for the Rules of Behavior (regulation). The democrats hindered the creation of new regulations over the past eight years thus enabling this failure in the credit markets. Again the Republicans will have to clean up the mess the Democrats have created.

Thankfully, last year, the business sectors were supported by trade exports.  The government stepped in and provide money (TARP) to solve the credit crisis. This year, government has stepped in and provided a stimulus package to pump up GDP. The problem with the stimulus package is that most of it won't take effect this year or next year. Also, stimulating production (supply) and not stimuling consumption (demand) is the wrong medicine for the economy.

Before the credit crisis, investments were holding because the outlook of the stock market was good.  Things were looking dimmer as the stock market dropped in late 2008 and early 2009. But with the Bush determination last year to stop the credit failure in the markets, investment in the market have turned around during 2009. But Consumer spending needs to be revitalized and stabilized. Credit for consumers and small businesses needs to be revived.

The Liberals and Democrats are in a Bush bashing, recession obsession continuing to talk down the economy even after their candidate won the election.

Help us fight these problems with long term solutions to change how our Nation works: No Income Tax and Limit Borrowing of the Treasury.

Read Desktop article on Dream/Vision for Our Nation