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Is Another US Recession Unavoidable?
Are things getting better...or are they getting worse?
It’s no secret that much of the news today about the US economy is not hopeful. The statistics and policies in the US and in many other places around the world are quite damaging to the prospects of recovery.
On the face of it, one could say that the facts are not favorable. But one thing I have learned in this life is that one’s attitude toward facts is more important than the facts themselves.
Why do I believe this?
For one thing, in most cases, things aren’t as bad or as hopeless as they seem. Not even this economy.
Of course, it could get worse, and it may get worse, but it also could improve, for many different reasons.
And on the flip side, things are usually not as good or perfect as they may seem at the time, either.
Another reason I think attitude is more important than facts is that facts change all the time. What may appear to a cold hard fact today, may be just a temporary situation that seems more daunting than it really is. Also, just because someone says that something is a fact doesn’t mean that it is so.
For example, in the 1970’s, the scientific fashion was that another ice age would be the result of industrial pollution and that eggs were bad for you, just to name a couple “facts” that weren’t facts at all.
Facts don’t speak for themselves
What does that mean?
It means that facts don’t always speak for themselves.
In methods of inquiry studies, it has been shown that quite often, our approach to a problem, even the very definition of a problem or fact, is greatly influenced by our own experiences and prejudices.
That is to say, to a larger degree than we care to admit, we see what we want to see.
But more than that, we measure, count, and include as valid those factors that we are able to include and discount the rest as statistically insignificant.
This applies to economics as much as any other discipline, and maybe even more so.
If you’re a Keynesian, like this administration is, from what lens do you “see” the economic facts? You view the economy from a perspective that the government ought to plan and control the economy.
And if, like today, the economy is struggling, what is the answer? Why more control, more planning, and more debt of course.But what is squeezed out of this viewpoint and its calculations?
The ability of people to do things for themselves, to change their behavior, and the ability of the market to correct themselves.
But if you view economics from a rational behavioral standpoint, then you realize that people—and business--will behave according to what conditions are in place.
An excellent example of this is the message that is communicated by our leadership.
A statist, like the one we have in the White House today, can only tell us so much about how things are going to get better by government spending more money, raising our taxes, and regulating more. That’s his frame of reference. It’s where he lives.
The "change" he brought us was more stifling federal intervention into our lives, our businesses and into our wallets. Such change did not bring hope, but only more poverty, a dismal economy, and more national despair.
Back in the '70's, Carter’s view of the facts were that Americans had to adjust the facts that government had created, and expect less for themselves and to give more to their government. He told us to get used to a lower standard of living as a fact of life. Contrast that viewpoint with the election of Ronald Reagan, who did not believe in government as the driver of the economy, but more as the steward for creating the right conditions for people and business to thrive.
By telling people that they would be able to keep more of what they earned, people’s view of “the facts” changed overnight. By slashing regulations by about one-third, business was released from the shackles that government had put upon it and activity picked up. And a renewed optimism, led by Reagan himself, returned to the mindset of most Americans, even though unemployment was at 7.5% when Reagan took office and rose to 10% by 1982 as the Fed raised rates to kill inflation.
In a nutshell, Reagan had much more faith in individual Americans than he did in the federal government.
Go back to what works
That is why how we approach a situation is key to our overcoming it. The way to change “a fact” is to look at it in a different way, see what’s not working, and go back to what we know works.
Were there problems with the Bush 43 policies? Of course.
How did this administration change it?
By spending much more, regulating much more, and believing in the American people much less.
And the result?
Today, falling wages are a huge problem for many Americans as is unemployment and under employment. And outsourced jobs and downward wage pressure from cheap immigrant labor doesn’t help either.
Then there is the high unemployment, which is officially at 8.3%, but is actually much higher when those whose unemployment benefits have run out and are therefore, no longer counted.
There is also the fact of people losing their homes and their retirement savings. All of these facts are true today, but do not have to mean that we are chained to them forever.
It should be obvious that blind faith in government is misplaced and counterproductive. The place to look for renewal and hope is in the American people themselves. After all, over 70% of all jobs in the country come from small businesses run by individual Americans.
Therefore, it is obvious that the leadership of this country needs to put its faith where it belongs: in the American people, and not in federal programs, regulation, or taxation.
And as individuals, a big factor for our economic recovery is for each of us to have faith in ourselves and in our own abilities, and not rely on the federal government to rescue us, because it ain’t gonna happen.
This is not to say that that is all it takes for a recovery to happen, but these are certainly places to begin.
And those are…The Gorrie Details.