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Bernanke wants consumers and businesses to spend towards a recovery
Fed Chairman Ben Bernanke
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TEXT OF STORY
Bill Radke: Alright, consumers, alright, businesses -- the recovery is in your hands. That's essentially what Fed chair Ben Bernanke said today in Jackson Hole, Wyo.. He declared the Federal Reserve is ready to do whatever it takes to support the recovery, but that central banks can't do it alone.
Marketplace's Alisa Roth explains what that means.
Alisa Roth: What Bernanke's saying is that we need to start spending money again. Businesses, too.
Mark Thoma's is an economics professor at the University of Oregon. He says the idea is that monetary policies -- for example, lowering interest rates -- can only do so much.
Mark Thoma: And so at some point, you have to see people willing to take investments, start new businesses, expand, do all sorts of things, which will start to bring employment back and start to bring confidence back.
That sounds like a circular argument. We have to spend money to improve the economy. So we'll feel more confident and spend more money. The argument may make economic sense, but a lot of people, including Thoma, think it's going to be a hard sell. Businesses already have lots of capacity they're not using. So why should they invest in more? And regular people, they've lost their jobs or are afraid they're going to. Or they want to pay off the debt they've been running up for years.
Robert Frank is an economics professor at Cornell's business school. He says it's the government that needs to start spending money. He suggests something like a national project to repair the interstate highway system. It's work that needs to get done, and it's big enough to get the economy going.
Robert Frank: The construction workers would get salaries, they would spend them in stores, the merchants would stock new merchandise, they'd place orders to refill depleted inventories, factories would start producing again.
And that in turn would give other businesses -- not to mention the rest of us -- the confidence we need to restart the economy.
In New York, I'm Alisa Roth for Marketplace.
punish those who really caused the financial mess we are in. Dick Cheney, george bush and the bankers and high level overpaid executives that stold from the public. but no one in high places has the courage to go after the true villains, the rich who walk away the billions they stoled from the People! Until the revolution takes place, I'm standing on the economic sidelines. If social security it taken away fron us there will be blood in the streets oo the non-caring rich!
I'm sorry, but isn't this story from last year? I know the date says August 27th, but this was the plan 400 days ago!!!!
Big Fat DUH!!! That's how we got the stimulus. But what was lacking still after 600 days is people are not spending. The recovery is on our hands now more than ever. Will the people whining about a recession please stand up and buy something.
I know some people are in debt, some are out of work, and some are watching America's Got Talent. But for the rest of the able and mobile and well funded, please get out there and buy stuff you normally buy, eat at the restaurant you regularly eat at before the recession and take the vacation you normally take.
I'm sorry, but a lot of Americans just learned/relearned how to be fiscally responsible and he wants them to go back on a spending spree? Foolishness.
It's time to accept that we can't buy our way out of our double bubble (Dot Com, Housing) hangover and just accept that we will have to work our way back on the fundamentals instead of rampant consumerism.
There is one way to put spending money into people's pockets, reduce their monthly mortgage payments to manageable levels (to avoid short-sales or foreclosures), and help the economy: Make all closing costs on a refinance or new mortgage immediately deductible.
People looking to refinance with the recent lower interest rates are facing thousands of dollars in costs up front. If they were deductible the same year, they would have some of that money to spend on household items and other things that could spur the economy. Most mortgage refinances can save people hundreds of dollars a month on their single biggest expense.
Or, they might take the tax and/or first-year savings and convert some of their traditional IRA to a Roth--and the government benefits by collecting taxes on the amount converted this year.
Altogether a win-win situation.
Or, Congress and the IRS can leave things alone, so millions are paying high mortgages at high interest rates, unable to afford the up front costs and non-deductible fees, points and interest (currently spread over the entire term of the loan) to reduce thier monthly expenses through a re-fi.
No change in the tax code means no change in people's ability to help spend the nation out of the recession.
Bernanke is right about one thing. It is up to the business community to stop tightening its belt and predicting more misery. Talk about your self fulfilling prediction.
If a company wants more customers they can start by giving their employees a raise, so they have more to spend. That will get the economy jumping again.
No, no, no, no, no! We've been trying the "have the government spend our way out of the recession" plan for almost two years now, and it has made the problem *worse*. As we knew it would from every time it's been tried before, here, in countries around the globe, and even in the ancient world. Insanity has been sometimes defined as "doing the same thing again and expecting a different result." Let's try the remedy that we know will actually eventually produce the results we want: reduce the size and influence of the government.
Saving the economy, creating job....
Economists are discussing public works projects to create jobs. They are also questioning the absurdity of asking consumers in this economy to spend more in order to stimulate the economy.
There is a powerful solution to both challenges which can be propelled by a presidential challenge to America, much like John F. Kennedy’s challenge to put a man on the moon.
The challenge we need to hear today, would actually help us to remain on earth a little while longer.
Leading scientists believe we have the natural and technological capacity to generate all the energy we need in this country with alternative, CLEAN energy like wind and solar. The costs of these technologies have finally come down to a reasonable level. The key ingredient which is missing is the electrical infrastructure (transmission lines) to move the electricity created by wind and solar into the mainstream electrical grid. Wind turbines and solar panels out in a dessert or on a mountain need to be connected to cities, etc.
That transmission system is the public service project and the supreme national campaign that could create jobs, independence from foreign oil, prevent further BP disasters, clean our air, and create a clean energy industry that make us leaders throughout the world. People could then spend money, as the economists wish, NOT on throw-away consumable, extravagances, but instead on their own solar panels, which would provide them with cheap energy and the opportunity to sell their excess energy back to the grid. The spending they did would boost the economy and be an investment in their own private future.
And unlike the man on the moon proposal, this public works American challenge proposal, is about the man on the earth. Global climate change is spiraling out of control. An America off oil might actually preserve us an America that is still habitable.
Let’s tell the president there is no greater mandate nor opportunity than this. Let’s create the infrastructure in the next four years. Let’s demand it be the nation’s top priority—for jobs, for the economy, for the planet we still depend on.
