Monday, January 23, 2012

Fragile State

Paul Krugman discusses his vision of where our economy is and where it's headed. While he is being cautiously optimistic, he does point to some numbers that indicate a step in the right direction. As usual, Krugman counters the American situation with that of Europe.

In Europe, according to Krugman, the problems of the economy have been made worse because the solutions of those lawmakers have ignored the problem driving the recession: personal debt. Krugman points out that the single greatest drag on our economy at the moment is the debt held by the average consumer.

It's debt that keeps people from investing, keeps people from buying and taking risks with their money. And, with the added uncertainty of the job market, it's no wonder that investment has been slow in getting started. But new numbers are showing that the trend may be starting to turn. Mostly, it has to do with consumer debt and construction numbers, which are both tied to housing. If housing turns around, helped along by construction and consumer confidence, the markets will come back to life.

Of course, this kind of thing doesn't happen overnight. Just as the housing bubble that led to the crisis took several years to grow (not to mention the time it took to create the right regulatory system), it will take a long time to get out from underneath that mess. Much longer than any one president has in office. The best way to see results is to pick a plan and stick to it. In other words, don't change things in the middle of a recovery. This is one of the big issues that's facing Europe. They are constantly changing their approach to how they address this issue. They are struggling through a worse time than we are because they are working off of the conservative playbook.

To relate this back to American politics, take a moment to consider the policies of the GOP candidates. Even if you don't agree, imagine what their policies would do to personal debt in this country, and by extension, the American economy. Their policies, things like cutting social benefit programs and unemployment, would cause personal debt to skyrocket. This would further slow the economy, since people would be less likely to buy, and we would see a slump. On the other hand, if we continue to fund these programs, giving people a hand in managing their debt, we have a chance of pulling ourselves out of recession. Things like food stamps are temporary aids to help families get through tough economic times. That way, they do not become slaves to their debt, often times debt that is a result of education or health care costs beyond their control.

Lifting the burden of debt from the shoulders of American citizens is a great step to moving forward in our economy. If we can do that, we may very well see ourselves on the road to recovery. Again, it will take time. America is not known as a patient nation. But we should try to be, for our own sake.

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