Not a Happy New Year Ahead
If you think the economy is in trouble now, just wait. Bloomberg looks ahead a few months and predicts things will be getting even worse. Its survey of economists predicts a slump going well into 2009, as consumer spending finally slows down after its longest expansion on record.
What's also interesting about the Bloomberg report is that economists see only a temporary boost to the economy from the stimulus checks, the last of which were sent out in July. When the stimulus package was approved back in February, the idea was to either prevent a recession or to limit any possible downturn. But the rebates don't seem to be doing much to prop up the economy, according to the survey. It notes the impact of the rebates will be all but gone by the fourth quarter of this year. Here's more on the gloomy outlook, from Bloomberg:
Household spending, which has grown every quarter since 1992, is projected to stall in the last three months of the year as the impact of tax rebates fades, wages fail to keep up with inflation and property values fall. The jobless rate, now at 5.7 percent, will reach a five-year high of 6 percent in early 2009.``The consumer is very much squeezed,'' said John Lonski, chief economist at Moody's Investors Service Inc. in New York. ``The downside risks swamp whatever the economy's upside potential would be.''
Either the economy was in far worse shape than anyone realized when the stimulus package was approved, or the benefits of the checks were overestimated. It's probably a combination of both, and a warning for the next time Washington decides to fix the economy's structural problems by sending out free money from the government.
Comments:
Posted 08/11/2008 09:36am with
Interesting that the government sees a need to give its citizens “stimulus checks” just to keep the economy floating until “a rescue ship arrives on the scene”. Of course they, the government, is not the rescue ship for the people anymore. They’re the liferaft for the large financial institutions that can’t be allowed to collapse. The real problem that no one wants to confront is the economy itself. And from what I’ve seen, its torpedoed itself, taking on more water than it can pump out, and is slowly making its way to a shoal to beach itself and die.
What I find strange is no one has yet admitted that the real cause of the current economic problems is a result of employee wages remaining flat for the last eight to ten years while the business profits have been soaring. If that were not the case, then why are the stimulus checks necessary to pump money into the system?
From all indications, people have been “dipping” into the home equity as if it were a saving account to meet their financial needs. And with the price of homes rising as they did for the last eight years, money invested in a home appreciated more than if it were held in a saving account. Could explain why we have such low performance record in personal savings. No need to go into credit card debt cause its part of the same problem ... need for extra cash to meet expenses that a normal paycheck could not.
What really scares the business community is a President and Congress actively pursuing legislation to remedy the shortfall in employee wages and benefits at business’s expense. They may even bring back the dreaded unions that business has all but drove into extinction. While many people have their objections to them, unions did keep business in check with workers needs and payscales for both union and non-union were close in order to keep a trained and qualified workforce.
In short, if trickle-down economics, which the republicans are so fond of, worked in practice as the theory implies, (the economic-political argument that the increases in the wealth of the rich are good for the poor because some of such additional wealth will eventually trickle down to the middle class and to the poor), we wouldn’t been seeing this economic meltdown today. Seems the theory evaporated somewhere between the top and the bottom and we find ourselves in an economic morass of our own making.