Implementing economic conservatism would make the current bad economic situation much worse and could even threaten social stability. Cutting taxes would deprive the Government of resources at a time when its disbursements are the only thing that are keeping the recession into a depression. We would have even bigger Federal deficits with no guarantee that the beneficiaries of the tax cuts would behave in ways that would stimulate the economy.

Cutting Government spending at a time when consumers and the private sector are cutting back on purchases and investment would further depress and deflate the economy. The result would be even higher unemployment, business failures and foreclosures. A restrictive fiscal policy in the midst of a massive collapse in demand by consumers and businesses would be devastating.

Cutting regulations would just give us more AIGs and more reckless and irresponsible behavior on the part of the private sector. If there is one thing we should have learned from this catastrophe is that is that in the absence of strict regulation the private sector will engage in behavior that will destroy the economy.

Ending welfare is bad economic policy since welfare recipients spend nearly all of their benefits which adds to demand for goods and services. Furthermore, In this economy, a loss of government benefits would impose real suffering on a large number of people who would have no means of providing food and shelter for their families. This could lead to serious social unrest and must be avoided.

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Having Pelosi stop flying jets coast to coast for her pleasure every weekend, Obama from flying on Air_Force-I to Chicago for a haircut to the tune of 57,000 every time he revs the plane would help. Cutting out programs like spending thousands to study frogs, fencing in fish, and giving 900 million to the Gaza would help the starving people in our own country. As long as Obama, Pelosi and Geithner are in office, the economy will NEVER get better. America no longer has an ounce of faith in any of them or anything they say, no matter how many tv hours they take or internet virtual anything. Get the picture, we DON"T TRUST OBAMA.

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"Implementing economic conservatism would make the current bad economic situation much worse and could even threaten social stability. Cutting taxes would deprive the Government of resources at a time when its disbursements are the only thing that are keeping the recession into a depression. We would have even bigger Federal deficits with no guarantee that the beneficiaries of the tax cuts would behave in ways that would stimulate the economy." I agree with you in this point! Kenedy

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Joseph,

You really don't understand economic conservatism. What you describe is actually economic liberalism. Your words, "executives cannibalizing the system, or mortgage lenders fudging loan application data, or lenders creating mortgage types that were untenable, or bank officials shifting risk through sold mortgage bonds, or ratings agencies granting very generous ratings, or risk monitors ignoring risk indicators". This is economic liberalism in a nutshell and what is wrong with the economy. Without economic liberalism we wouldn't have had the, "too many people, mostly poor and lower-income people, taking out mortgages and loans they shouldn't have had in the first place."

The politcal view of the majority of executives who put is in this mess is very liberal. They bent the rules and used high ranking democrats in the federal government to change regulations enabling the massive leveraging of debt that put us in this mess. There were some republicans at fault as well. Overall liberalism is what put us in this mess.

Your assumption dealing with business management is 100% correct, "Namely, that when labor costs go up, that's always bad for business and corporate earnings; and conversely, when they go down, that's always good. Further research and case studies would reveal that, in fact, once labor costs fall below a certain level, indeed very bad things happen to the economy." I came to the same conclusion in my many classes at the Tepper school of business. This has been going on since the 60's and the Great Society programs. These programs have been destroying the middle class for 40 years.

The economy can only run with a healthy middle class and a healthy median income that matches median expenses. The flaw in your reasoning is that increased government spending and liberal policies are the answers. The only way to sustain a healthy middle class is economic conservatism.

Today a single welfare mom with three kids can live better than a young working class married couple. $700 a month in food stamps, $199 rent for a HUD backed property that would go for $1000 a month on the open market. Not tomention the actual welfare payment that is very substantial, often times $1400 a month. There are millions on this program and it costs US taxayers hundreds of billions per year. Real estimates put the cost of welfare close to $1 trillion per year spread through the levels of government. This doesn't even account for medicaid which is also another few hundred billion per year.

So what do we do, we cut taxes, cut government spending, increase regulations, and we end welfare.

The most important thing we can do is give more money back to the working class. We can't increase paid wages but we can increase net income. By cutting taxes we increase net income without increasing payroll exosure. Further reducing government spending will enable further tax cuts which will again increase net income.

Deregulation is a big problem. Capitalism needs to be regulated to prevent monopoly and massive corporations that are too big to fail. You must regulate to create competition. None of the mergers of the past 20 years should have been allowed to go through. You don't regulate corporate profit or increase corporate tax. You regulate the playing field to make sure it is fair. You prevent investment banks from entering into the commodity market unless they belong there. You prevent corporations from using influence to force competition out of business.

Ending welfare is paramount. This must happen. I don't feel sorry for any person on welfare. The vast majority abuse the system and expect a free ride. If we end welfare and these people starve then that is what they deserve. I'm sorry if that sounds cruel but if I have to work to feed my children then they should as well. It would also prevent the massive explosion of the welfare class. This class with quadruple in size over the next 20 years. You have welfare moms at the age of 20 with three children. They do this because there are no consequences to prevent this from happening. In a real economy, not propped up by government spending, this person wouldn't even be able to feed herself let alone three children.

The tax burden for liberal social programs is overwhelming the middle class. In order to pay for welfare, social security, medicare, and medicaid we will have to increase tax levels to 75% of income just to pay for it all. The working middle class is shrinking. Many young couples are either not having children or stopping at one. They will not replace themselves as hard working middle class wage earners. Instead they will be replaced by the welfare class.

The real issues that put is in a recession are as follows:

1) Deregulation of the securities and commodities markets. This enabled investment banks to use massive leverage to create paper wealth out of the transfer of debt.

2) Relaxing rules regulating trade using international exchanges. This allowed for the rapid explosion is oil prices that truly pushed the economy over the egde. Until this is fixed we will be at risk of implosion every day.

3) Liberal economic policies that created the massive subprime loan problem. These banks never should have been allowed to make these loans. It caused the massive overvaluation of the housing market and the false economy built on equity that was not there.

4) Massive government spending that creates a tax burden on business and individuals that is too large for a healthy middle class to exist.

5) A welfare state the rewards incompetence and artificially props up a sub-economy, namely Walmart.

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Again and again over the last 60 years radical (and not conservative) purist, neo-liberal, Friedmantite capitalism has proven to be unpopular for the general lower-class, working population (the majority), because it ultimately leads to a lowering of quality of life. Money is slowly but surely funneled into the pockets of the rich and used to create more money, in an unstable and dangerous manner, whilst making it harder for the average Joe to live a secure and productive life.
All the modern examples of liberal capitalisation offer a conclusion that can be seen as obvious if only people could use simple logic. The goals of economic policy for the coming century need to reflect the simple idea that money is useless in and of itself. A productive and succesful economy is one in which people live an increasingly better quality of life. This should be the goal, however the modern logic places the creation of money (wealth) first, to the detriment of the majority of the population. The improvement of the quality of life for the majority is paramount in the US right now, and worrying about how to make money must take second place. The neo-liberalisation of a capitalist economy is a failed idea of the most epic proportions and must be allowed to die to make way for philosphies like "Parecon" and neo-liberal socialism, or quite seriously, the instability of the modern world and its economics will more than likely lead to the extinction of interesting but fallible species. Wake up and use your brains people!

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You could write a book on economic theory but it doesn't mean a lot when it defies logic. The only way a nation can build wealth is through exploitation of natural resources or by creating or improving a product. Either sell your oil or build widgets. Government workers can not create wealth. Services that we swap with each other just result in dollars traded back and forth. They do not create new wealth. Any economic plan that fails to recognize that truth is doomed to fail.

The size of the government work force at all levels will soon reach half of our workforce. A large portion of the rest is employed in the service sector. We are left with a small proportion involved in activities that actually create wealth. One worker has to create enough wealth to maintain the living standards of three to four families just for us to tread water.

Our living standards are falling because we are consuming our wealth instead of expanding it. Government consumes wealth. The bigger it is allowed to grow the more our living standards will fall. Measure any country in history. When the government begins growing faster than the wealth creating sector(natural resources and manufacturing) living standards fall. No economic theory or government command can change that. Either we start creating more wealth than we are consuming or our living standard will continue to fall. Keep going down the road we have been going lately and it will accelerate. You would be surprised how fast and far an economy can fall.

Kudos for figuring out that things get worse when wages fall. That is the symptom. It is time to quit handing out pills to ease the symptoms for a few hours and cure the disease.

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Yes, the answer by JL on the economy is correct. Except for: cut "get rid of the welfare system period and add: "All churches, and non-taxed entities should only qualify for that tax break, if they pick-up and totally fund those programs that the american peoples taxes, generally fund/cover. This would allow/keep some of the billions of dallars in donations that generally leave this country, to who knows were, to be used to fund the return of the economy!

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What I personally believe is that the economy of the United States is the largest national economy in the world.

The U.S. economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national.

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Hate on welfare all you want, but getting rid of it tomorrow won't begin to solve any problems.

In 2008, welfare programs made up about $350B of the federal budget -- less than half of what has been slated for deadbeat executives in the finance industry. Personally, I'd rather see some single mom get a few bucks to feed her kids better food than some executive get a 6- or 7-figure bonus.

What would you have them do? Take all that money from the poor people and give even more to the suits? I hope you feel patriotic and righteous as the rioters come for you...I'll be cheering them on.

Oh, and taxes...you think cutting taxes will get businesses hiring again? Think again. Any /conservative/ will tell you that raising taxes on a business will just hurt the employees and the customers, because the business owners will protect their profits -- and they're right. But the obvious corollary (which they love to leave out) is that when you lower taxes, especially in a recession, the businesses will still just pad their profits; they won't hire a soul until the market has already started to turn around. That's why Economics 101 tells you that employment is a lagging indicator.

Good companies figured out long ago that 10 happy, engaged, well-trained, fairly-compensated employees are more productive than 100 miserable, pigeonholed, barely-qualified, shamelessly-underpaid employees -- at least in knowledge-work industries, which theoretically is where the U.S. still has an edge, at least for now.


Want to get good bang for your buck?

Short-term:

I'm in total agreement with regulation. Capitalism turns to cannibalism if left unwatched. Mergers need to be beaten down. Compensation needs to be checked. Ethics needs to be enforced -- hard.

Hunt down all the obvious conflicts of interest and eradicate them. Boards and CEOs shouldn't set each other's pay. Ratings agencies shouldn't get paid to give good ratings. Fund managers should get paid based on results, not how often they trade your money around. Brokers should have some kind of accountability for liar loans and such -- and so should borrowers, but I can see a dumb borrower getting snowed, while the broker darn well knows better.

Long-term: Spend on education. Start with the ratings agencies and 4th grade math, but after that, focus on significant, mandatory financial education in high schools. Focus on teachers too; a lot of them suck, and should be paid accordingly, but a great teacher is definitely worth 6 figures.

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