Is our future bleak or bright over the next few years? This question plagues pundits, economists and politicians alike as our economic crisis moves through its course.
Not unlike a cold or flu, the economy is ill, and while stimulus packages and housing reform legislation serve as medicine, the illness must run its course, whether it be long or short in duration.
We believe the present economic crisis will worsen over the next years before it takes a positive turn upwards. In making such a broad and disconcerting statement, we are particularly careful to discern the facts from emotions.
Our unemployment figures remain on a downward spiral, and there are very few solutions to rapid job creation that would equal or outpace the current negative figures. In plain speak, we cannot create half-a-million jobs a month to offset the half-million job losses.
During the Great Depression, Roosevelt’s New Deal created many new jobs, but at the great expense of massive government spending on such things as the Tennessee Valley Authority, WPA and other programs intended to create work in construction, the arts, social programs, government services, etc.
Our nation is presently in record-breaking debt, exceeding 9.5 Trillion Dollars (yes, that’s Trillion with a T). The present Administration’s budget handling has, sadly, been very poor, with record deficits each year, wiping out the previous surpluses. Clearly, you cannot spend excessively and offer tax reduction simultaneously with positive consequences. A lesson for present and future governments around the world.
With the employment market week, consumer spending is going to remain low, along with consumer confidence. Oil, still high, plagues the economy as it drives up costs for everything consumers buy. This is creating a serious seed change in personal economics – with everyone spending less – and greater division of wealth than ever before. Such issues create the risk of political or social unrest and have, historically, created the foundation for revolutions, wars and turmoil.
One only need look at this economics of Germany after the 1919 Armistice up to the rise of the Nazi regime to see that economic crisis tends to bring extremes. Similarly, high unemployment and food costs with a depleted economy were the fundamental causes of the French Revolution of 1789.
To create cures for the present situation, the new Administration, whether it is Republican or Democrat, will have little choice but to find creative ways to finance major capital projects to create jobs in a wide variety of employment sectors, from construction to small business.
A recently published article suggested that over the past few years, more Americans have left their jobs to run their own enterprises – to be their own bosses. High numbers of these individuals are failing – as they discover the limits of marketing their services or products. It is more often these, and not sub-prime mortgage holders who are failing to meet their debts.
Overall, we will face a few years of economic woes before we see strong and consistent positive numbers. Times are more likely to be tougher than better over the next 12 to 18 months.