Stephanie Parenteau - Critique of "Unemployed Veterans"

Approximately two weeks ago, the House passed a bill with the motive to help unemployed Veterans find work, and also to redefine the qualifications for who is eligible for federal help under new health care reforms. Essentially, the bill was passed to stimulate the business cycle and reduce the economy. Tien thoroughly explains the potentials of the bill, and why she agrees with the House that the bill will do more good than harm and will in fact stimulate our deteriorating economy. However, I disagree with a lot of what this bill has to offer.

  In my opinion, the economy’s two main detriments are its unemployment rate, and the amount of government debt. This bill provides jobs for unemployed veterans by providing employers with tax credits. When an employer receives a tax credit, it reduces the amount of taxes being paid to the government, causing a chain effect that eventually results in government debt increasing. While providing tax credit for employers, the bill also states that it will provide education for veterans in order for them to become more qualified for various positions. Who is ultimately going to pay for this education? The government will be spending more money providing education and job retraining programs, and again will increase government debt.

Currently, there is a very large amount of frustration throughout the United States regarding unemployed students whom have received college degrees and even secondary college degrees. These unemployed students are obviously already well-trained and qualify for many positions in our business cycle that are just not available right now. Not only will this bill proposition result in more government spending, but it will reach an even more unemployment rate for students. I respect veterans tremendously, and do agree that something needs to be done to help for a lesser unemployment rate, but this isn’t a good way to do this. I’m not exactly sure how the government could provide jobs for these vets without increasing their amount of debt, but they need to primarily worry about government spending over anything else.

As for the other half of the bill, which explains that the government will redefine eligibility for federal help under health care reforms, I do agree with Tien that this will help decrease the federal debt deficit, and will make a lot of tax payers happy. Health care is one of the many assets that cause for so much government debt, due to the amount of money the government supplies for these reforms. I think that this part of the Bill will inevitably help the economy and reduce the government debt, while reducing the amount of angry tax payers that have to pay taxes for all of this health care. When reducing eligibility, the government is able to use this money for something else that could quite possibly be more detrimental right now than people with health care.

I do strongly wish for the government to somehow reduce the number of unemployed vets, and provide health care for people who are not financially stable. However, I only agree with the second half of this bill. The United States has the largest amount of debt in the world, and anything that we do to worsen this debt is not going to help the economy. More government spending and less tax collecting might help the veterans and the economy temporarily. But in the long run, it’ll cause the same problems (maybe not as crucial) as when the government was providing financial support for banks when the housing market crashed in 2008. The economy and the government will benefit, however, from the regulation of eligibility for financial support from health care reforms.

http://money.cnn.com/2011/11/16/news/economy/unemployed_veterans/index.htm?iid=SF_E_Lead

Critigue - America's Jobless

Colin Picard

In the article "America's Jobless," large amounts of people looked to find a way to apply for the job of miner in Australia. Such a job is incredibly difficult, and challenged my view that many Americans forced to work manual jobs, because they saw them as menial. I believed this from firsthand experience from my brother, who has gone through long stretches of unemployment through the reasoning that since he has worked for so long as a waiter, server, cook, busboy, and barman, it is time he can find a position like manager. I did not doubt that marines and miners could handle the job, but investment bankers and people with art degrees seriously considering it surprised me.

The main thing to consider is obviously the pay; give enough money, and people will do near anything. This apparently includes living underground for weeks at a time mining. The article argues that taking up the mining profession in Australia, while high-paying, is unnecessary, as those same would-be miners could find the same job in Canada or the Dakotas. I agree with the statement that many jobs go unfilled because people are simply not aware of them. People have always been willing to travel great distances for employment; my grandfather is a three-generation New Yorker who went from putting down land lines on Long Island, to serving in the Army during the Korea War, to retiring in Pittsburgh after twenty years with Bell Telephone/AT&T. The article seemed to argue that people often will not move for a job unless given extreme amounts of money, but I disagree with that. While $200,000 a year would convince ME to travel to work in Australia, $50,000 a year would get me to across the entire country.

It is unarguable that employers are willing release skilled, experienced workers in exchange for unprepared ones; which is a major reason young people out of college struggle to find jobs. The article's point that that particular miner was so highly paid was because of his experience is correct though. Mr. Salisbury, no matter how good a cook he is, cannot arrive with the same skills and abilities of the $200,000 miner.

"Original - Herman Cain" Critique by Wyatt Reeder

Greg Long explains Herman Cain's "9-9-9" tax plan. Mr. Cain's proposed tax plan is aimed at "leveling out" the sales tax, income tax and personal tax on businesses. Some see this idea leading to the revival of the US economy. However, it does not quite make sense to me. While it is said in an animated film, used to generate support for his campaign, that "$2 trillion would be added to the GDP and 6 million jobs would be created", it fails to highlight that the tax on some households making below $20,000 would indeed increase "nearly 950 percent". While this would not seem like much of a burden to a millionaire or billionaire, someone trying to scrape by on welfare and provide for their family would be in even more trouble. This does not seem "fair" by any means to me.

While corporations do play an important part for our GDP, if we are going to be fair about things, why should they receive breaks just because they provide jobs? Companies such as BP Oil, which in 2006 spilled 4.9 million barrels of crude oil into the Gulf of Mexico, not only dodged much of the promised restitution and damages, but also under Herman Cain's running platform, would receive tax cuts and rake in more money. It is instances such as these that make Americans distrustful of big business. The fact that individuals want to not only forgive corporations and allow them essentially free-reign, but prostrate their control over our economy is appalling.

I have to disagree with Greg when he says that the simple answer to our national crisis is taxes. Although there has been an increased amount of spending on the part of the government, I would say that it needs to stay the same. This does not mean that change in ways it is spent can occur. There have been unwise decisions, but that can be expected. The people of the United States are not ready for a change as drastic as the "9-9-9" plan that could possibly destroy families that are already suffering, simply because they might have had bad luck. It is not right to say that while someone "rich", whether they make their money through hard work, playing a game or entertaining millions should not have to pay their dues. That is what America is, is it not? "The Land of Opportunity", where one can make their dreams come true? But who is to say that there are not those who are as talented, or those who do possess the same work ethic and determination and are simply less fortunate? Make a reasonable tax plan, if any, and make smarter decisions when spending.

Tamika Rickman – Critique on “A New Method to Save Our Economy”

William Reitan explains how the economic times are different and more promising today than the economy in 2008. During the recession in 2008 the government bailed out banks by giving banks large sums of money to compensate for the loss of money giving out to homeowners. Today the banks are lending money more carefully and analyzing their balance sheets and working with their reserves and available capital more closely. I would agree that the government bailing out the banks was a good idea because it helped banks to recover from a great loss due to the price of homes falling and homeowners were not able to pay off their loans. Also the government also helped to increase the money supply in the economy; therefore preventing inflations or deflations and a further decline in the economy. The government also prevented millions of people from losing their homes and becoming homeless and jobless. However, this action severely hurt the government by further increasing their debt and then having to increase taxes for taxpayers to bail out the government. The government’s actions went against the belief of capitalism, whereas, the markets control supply and demand, not the government. This may allow the government to gain too much control, increasing their power over capitalism. Businesses and banks have to work together to stimulate the economy and not depend on the government to help bail them out in order to reach some type of financial stability, otherwise the government will further sink into a large debt and will depend on the citizens to pay their way out which will just prolong the recession. I must admit that some government assistance is needed to help solve the economy but some structure is needed to help stabilize the cause, such as, the money is given to the banks as a bail out but a repayment must be paid within a certain length of time to avoid raising taxes and prolonging the government’s debt. Handing out large sums of money in a crisis without some type of structure and having tax payers pay the price is not the answer because it is truly hurting the economy. I also disagree with the idea of helping of other countries to pay off their debts, especially when other countries have no interest in helping us. Our interest in other countries is one reason why we have such a large debt of our own. We spend so much time being involved in other countries issues that we neglect our own. So many companies move overseas which hurts our economy because we are losing businesses and jobs bank in the states. The government needs to focus on encouraging companies to remain in the states and increase the exports of materials and decreasing the amount of imports. Other countries have to find solutions on their own to extinguish their debts while we focus on becoming the super power once again.

"Should the Fed buy bonds?" Critique by Colin Illar

In response to the blog post "Should the Fed buy bonds?", there are many things to look at. For one, the post was very well written. The author adequately organized the post to include background information of the article as well as plenty of analysis regarding economic concepts included in the article. My only critique as to the way the article was written would be a little more expansive of a summary of the initial article. The blog post had a much bigger focus directed to analyzing the economic concepts involved in the article such as quantitative easing and Federal Reserve policies. If a broader summary of the article was given in the post, it would be easier to compare and contrast the various policy options for the Federal Reserve.

As for the analysis of the article, I find myself agreeing with the poster on a few concepts and disagreeing on others. I do agree with the analysis that more quantitative easing may not be a good policy measure by the Federal Reserve. As the article and Cole's blog post point out, quantitative easing has been tried twice before with minimal to no effect on the economy. It has kept interest rates low, which was a success, but this has not led to the desired effect. I also agree with the poster's argument that the Federal Reserve cannot fix this problem on their own. Other factors have been strongly affecting consumers willingness to spend in the economy and on bonds that are available at such a cheap rate due to the low interest rates. The easiest explanation to this could be a severe lack of consumer confidence in the market. The confidence could be affected by many factors, including the gridlock regarding new legislation to create jobs, continuing stagnation in employment numbers and increasing bad news regarding the economy, such as news that American Airlines, one of the largest airline companies declaring bankruptcy following one of the biggest travel weekends of the year. All these factors can drown out news of low interest rates and expansionary policy measures by the Federal Reserve, so until consumer confidence is stabilized, the Fed's current options will continue to under perform.

Regardless of all the analysis I agree with, I still find fault with the last statement made by the poster, that time will fix the low consumer confidence. I think that rather than time leading to more consumer confidence, I believe that more time with this little improvement will create more of a downward spiral regarding confidence. As younger generations graduate college and look for jobs in an uncertain market, it is likely to me that the low confidence will spread to the new additions to the labor force. The fed and the government need to try everything they can regarding the economy to create a higher confidence in younger people who are more likely to spend with less things to pay for.

Charla Henley-Critique Blog Entry #2

In response to Madison Phillips--"Higher Education and the Economy: The next bubble to burst?"

In response to Madison’s “Higher Education and the Economy: The next bubble to burst?” I would like to first say that it is an extremely well written and well thought out piece. However, although it is strong and I truly enjoyed reading it, I think there’s some room for more economic connection. Many significant numbers are presented in her post in regards to debt. Here, Madison provides that “Grubb continues in saying that the 2008 reported average debt of graduating seniors was $23,200.” Economically speaking, if we have graduates fresh out of college in double-digit debt as presented here, that is going to decrease confidence in spending and probably increase uncertainty. In my opinion, graduates are going to be less likely to make long-term investments—such as buying a house or car or even putting significant amounts of money into savings or the stock market—because they are worried about their debts and unwilling to risk falling further into debt. Recent graduates may also hesitate to make purchases to furnish their houses or apartments, and may shop for cheaper groceries and other necessities for the same reason. Ultimately, I see graduate debt as a decrease to the product demand curve and I wonder if that will also raise prices and have a negative influence on product supplied.

Earlier in her post, Madison wrote that, “The New York Federal Reserve Bank places the total amount of debt due to higher education costs at $550 billion, and even suggests that this number could be underestimated. It has been said that the total amount of outstanding debt from higher education could surpass $1 trillion in the near future.” The values presented here frighten me because we are talking about billions of dollars in debt. However, it is important to remember that this number is a compilation of everyone’s debt due to higher education. After a quick search on Wikipedia, I was able to find that the United States had than 18,248,128 students seeking higher education in 2008, according to the US Department of education. If we divide the estimated $550 billion total for graduate debt by the estimated number of students seeking higher education in 2008, the number is $30,140, which is only slightly more than what Gibbs presented in the first point I mentioned. Moreover, Madison pointed out that, “’The 2008 census reported average earnings of those with advanced degrees, (a master’s professional or doctoral degree), totaled $83,144.’ Those with bachelor’s degrees made $58,613, while people with high school diplomas had average earnings at $31,283. These numbers show that education really does, or can, pay off in the long run.” Madison is right to say that in the long run, the pursuit of a higher degree does indeed pay off. Clearly people pursuing these professional degrees are, on average, better off than those who choose otherwise. The students who seek a professional degree, who may average about $25,000 in debt, are making the money to pay it off. Therefore the argument that says that the amount of debt is too high for the degree earned to matter is false.

When the New York Federal Reserve Bank or any department releases numbers like the one presented above (“$550 billion”), as a total, it makes matters seem so much worse than they are. As Madison also pointed out in her post, the media makes reference to many schools with higher tuitions when they report average debt. The reality of the matter is that many graduates have less debt then they report but their reports make the readers or viewers feel like education, and the pursuit of it, is not all it used to be. Economically speaking, it is not ideal that these reports are coming out and making education look too expensive because education is very important in ensuring economic growth and advances in technology. If the media keep making education look like it isn’t worth the investment, people are going to stop seeking higher degrees. While higher education is not the only way to ensure technological advancement, it would not be beneficial to our nation to have people pass up higher education just because it is an investment.

In response to Madison’s title “Higher Education and the Economy: The next bubble to burst?” I’d like to call attention to her statement that a bubble is something that is overpriced but has great support. I’m not so sure that education is really a bubble because I think it is priced where it needs to be to allow demand not to overhaul supply. If we made education cheap and everyone pursued a higher degree, there would be no distinction between the “higher” piece of higher education; because everyone would receive the “higher” education degree. The price of the schooling is supposed to help balance out the supply and demand of a higher education. That is why the prices keep rising. Not everyone can pursue the degree or they’ll be nothing “higher” about it.

Ultimately, I think the only concerns I have in regards to higher education and the economy are that graduates have low confidence and high uncertainty of where, how, and when to spend their money, so as not to plummet further into debt; and how the media portrays educational debts. I think higher education is priced where it needs to be to maintain its title of higher education, therefore I do not think it is a “bubble” waiting to burst. Finally, I think higher education is a necessity to promoting economic growth and technological advancement so I think it is important to keep up the number of students pursuing higher education. And great job Madison! I really enjoyed your original post!

http://en.wikipedia.org/wiki/Higher_education_in_the_United_States

Critique on Graduates Returning to the Nest- Kim Ceres

“As new graduates return to the nest, economy also feels the pain” is an article that explains the affects of graduates moving home on the economy. This article describes how recent graduates move back to the nest in order to save money. Which is beneficial for them but it has a dramatic affect on the economy. Recent graduates that do not move back home have the potential to have a large affect on the economy due to the fact there are a lot of goods that they would need. New graduates need items such as cars, refrigerators, silverware, etc. Before reading this article I never realized the effect that recent graduates have on the economy. In addition, I found it to be very interesting how much the current economy is affecting students. Especially to the extent in which, that students are opting to move home instead of paying for housing. I thought it was interesting how Anuk brought up the argument that companies do not want to hire students right out of college due to lack of experience. I disagree with the argument that companies are less likely to hire students right out of college because a lot of times companies would rather hire new workers. This is because they are cheaper and usually have stronger computer skills. Although, I feel that lack of experience could be an issue for some professions that require more experience in a particular field such as a head of a department or an upper level manager. I agree with the argument that since graduates are moving back home this has a strong affect on the economy. I agree with Anuk when she explained how the economy is “losing” out on the recent graduates’ consumption. Due to the fact, that since they are moving back home they will not be needing to purchase larger items such as refrigerators, microwaves, and other household appliances. This decreases the output in the economy since, graduates will be consuming much less than they would if they were not living at home. In addition, I agree with the argument that since aggregate demand is decreasing due to the lack of consumption, it results in a surplus in the economy. In turn, decreasing the level of production and increasing unemployment. If recent graduates had more faith in the economy it would help to increase consumption dramatically and raise GDP and hopefully help to decrease the unemployment rates.

Roanoke College Economics: Dr. Kassens on News 7

Roanoke College Economics: Dr. Kassens on News 7: Dr. Alice Louise Kassens was interviewed by News 7 today in front of West Hall to comment on consumer sentiment in VA and Black Friday sales...

Cole Brundage, Critique of "The Indebted Ones"

This very informative article discusses one of America’s largest financial issues, the extreme increase in student debt. Referring to a chart in the article, in 2001, there was a total of around 50 billion dollars in student loans. Now, only 10 years later, student loans are getting closer to 110 billion dollars. This is a significant problem that will require some type of reform to get past. Stephanie did a quality evaluation of the original article. In the first paragraph, she mentions that the unemployment of college graduates is 11.5% and the unemployment of non-college graduates is 4.4%. Looking to the original article, I think she got this backwards. However, I very much agree with her statement about how the more education you have, the more likely you are to be able to find a job. I also agree with her statement about how this desire for additional education naturally causes an increase in student debt. Overall, the job market has become intensely more competitive than it once was. More and more people are attending college now compared to in the past, this levels the job applicant field to some extent, making it more and more difficult to set yourself apart and above the crowd of other potential applicants.

Stephanie also mentions that there has been an increase in delinquency of student loans. This is very unfortunate but is a sign of the times. People used to be able to almost instantly get a job as a result of an education. This job would allow them to easily repay their student loans. With the difficulty of job acquisition almost constantly increasing, even highly educated persons are having more difficulty finding a job, and thus more loans are becoming delinquent.

I agree with Stephanie’s statements about the extended contraction phase of the US economy. Her explanation of fiscal and monetary policy is correct. Her statements about the government changing bankruptcy laws to allow people to discharge student debts under bankruptcy are plausible, but I personally feel as though this would be a bad course of action. I think that bankruptcy is an unreasonable provision to begin with, and lawmakers should not let people get away with paying back fewer debts. I think it could be reasonable to allow people to bankrupt away their student loans only if lawmakers forced people to not be able to bankrupt away some other debt. Student loans are an expression of people trying to make themselves better, and if it doesn’t work out perhaps they should be able to bankrupt them away, but they should then be forced to pay something else back. It is not fair or reasonable for people to be able to bankrupt away all of their debts. I very much agree with her statements about how taxpayers would be hurt if student debts become bankruptcy eligible.

President Obama’s proposal to forgive outstanding debt after 20 years is, in my opinion, completely ridiculous. If you borrow money, you should have to pay it back. However, if it came to a compromise, this would be better than allowing people to bankrupt out their student loans.

In Conclusion, the original article, as well as Stephanie’s evaluation were very interesting to read. It is amazing that student debt has become as large as it is. It would be unfortunate for taxpayers to be required to pay for more things that are, as I might put it, “not their problem,” but the country seems to be moving more and more in that direction with bailouts of banks and automakers.

blog post I critiqued: http://kassensecon122.blogspot.com/2011/11/indebted-ones.html

Greg Long - Critique

Greg Long – Critique on “A New Method to Save Our Economy”
Will Reitan does a good job of explaining how the economic times of today are different and more capable of turning the corner than the in the bank catastrophe in 2008. Instead of banks haphazardly loaning money out as they did during the economic boom, they are carefully analyzing their balance sheets and working with their reserves and available capital. I would not agree that bailing out the banks was a good idea but it did save people their entire fortunes. I would argue that bailing out corporations goes against everything that capitalism is. Capitalism states that the markets control supply and demand and if your business makes it then you get rich, if it does not make it then better luck next time. George Washington and Thomas Jefferson would be rolling in their graves if they knew how big our government has gotten. The entire foundation of the United States is on the individual and small government, only to help us in times of war and safety. Tax payers such as you and I should no way be paying for other people’s mistakes, which is literally what we have been doing since the Bush bailouts and now into the Obama madness. Government needs to take a huge step back and only act in times of war or great suffering. The markets need to work by themselves in order for this system to truly work. Government intervening is simply just playing sides, pitting one group against another. For this entire situation to be solved our government needs to stop spending and balance its books, keep the taxes low, cut everything except for national defense and let business thrive and our country grow until every single person here has a job, has food on their tables, and a roof over their heads. It in simply inexcusable for the strongest nation in the entire world to have thousands of people live without homes and children without food. Manufacturing needs desperately to return here, just ask the people of Martinsville and Danville. The only way that can happen is to have a business friendly atmosphere, free of taxes, regulations, and government intervention. Policy makers need to realize they are the problem and need to get up out of the way and let us be like what we were pre World War I at the least. I think the age of common sense has left us long ago.

Roanoke College Economics: Consumer Sentiment in Virginia-A joint venture

Roanoke College Economics: Consumer Sentiment in Virginia-A joint venture: Over the summer, Dr. Wilson, a Professor in the Public Affairs Department and Director of the Institute for Policy and Opinion Research, app...

America's Jobless

            After reading about a miner working in Australia making $200,000 a year, an unemployed chef from Virginia inquires about how to apply for such a job. Though he isn’t the only one, hundreds of others are also inquiring about the job. Most are mainly from the US, men and women, with and without kids. The question is, why exactly does this job seem so appealing even though it is a very tough job? As we have discussed in class, unemployment is a huge issues in the US. The majority of the people mentioned in this article are structurally unemployed. Mr. Salisbury, a chef unable to find a decent job, veterans just coming out of war not being able to find jobs in their own country, and a woman with a master’s degree in Arts stated “I have a master's degree in art but with this economy, that's like nothing." Even though people may have the talent and are qualified, in the current state of the economy that the US is in, finding a job is extremely hard, especially if that specific skill is not needed.

            Later in the article it states that even though so many people are interested in the job, the labor market in mining in Australia is still pretty low.  The employer needs to think about the cost of hiring new people and to transport them to Australia. Many people stated in the survey that they were willing to travel in order to provide funds to their family. What they failed to realize is that travel expenses includes a great deal of money that needs to be spent, not to mention the Visas that needed to be made for the travel. Even if they do get hired, it is not guaranteed that they will be making $200,000 a year. The person who makes $200,000 a year has been working there for over seven years and has seen many major accidents happened, and also has the experience to do the job without minding the hardship that comes along. Such a worker is hard to find and the employer does not want to spend a large amount of money on uncertainty. As we have learned, uncertainty plays a major role in Economics. Whether the economy is doing better or worse, the employer is afraid to lay off and have to risk the chance of needing to hire new people if the economy does change for the better. And the other extreme may also happen. The employer is uncertain that the economy will stay better and is then afraid to hire new employers just to risk having to fire them due to the economy going bad.

http://online.wsj.com/article/SB10001424052970204517204577046222233016362.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Tien Nguyen 

Unemployed Veterans

On Wednesday November 12, 2011, the House passed a bill to help unemployed veterans seeking jobs as well as federal contractors facing a new tax burden in 2013. Veterans feel more financial hardships than most U.S citizens because they find it difficult to find jobs after returning home from active duty. This is because most jobs are already occupied and the economy is suffering. Veterans risk their lives to fight for their country, but their own country does not help provide jobs in return. However, the new bill will do just that. The bill is fully paid for and would even reduce federal insufficiencies by $2 billion over the next decade, stimulating the suffering economy. The bill gives employers tax credits of up to $5,600 for hiring veterans who have been unemployed longer than six months and a tax credit of up to $9,600 for hiring long-unemployed disabled veterans. The October unemployment rate for veterans who left the military after 2001 was 12.1%, leaving about 240,000 veterans out of work. The bill will help reduce the unemployment rate and help create a positive reflection on the state of the business cycle. As for the tax credits for businesses, will cause business to invest more and help boost the economy. The tax credit may also cause the prices for goods to decrease because businesses will have more disposable money.

The bill will also provide education and jobs retraining program for unemployed veterans and it will create a project to help veterans to use their training to get licenses in different fields in the civilian work force. Improving education will provide businesses with more productive workers, in this case veterans. Businesses are more likely to hire well trained veterans to help use capital more effectively. By providing the veterans with a better education will most likely keep them in the United States to improve the economy instead of foreign countries.

The government will also redefine who is eligible for federal help under new health care reforms, making it more difficult for some to qualify for Medicaid or subsidized health care coverage. This will cause a higher demand for health insurance, helping insurance companies, causing people to spend more of their own money in the economy while providing the government with more money to help in other critical areas and programs to help boost the economy. The bill raises the threshold level to qualify for government help by including nontaxable Social Security benefits, as well as the taxable portion, as income. This will help increase the money supply in the economy. The White House has said it supports the bill because it would "reduce unemployment and ensure that our veterans leave the military with the tools they need to succeed in the civilian workforce."

http://money.cnn.com/2011/11/16/news/economy/unemployed_veterans/index.htm?iid=SF_E_Lead

Anouk van Gaalen

As new Graduates Return to Nest, Economy also Feels the Pain

(November 16, 2011, New York Times)

Currently there is a lot of uncertainty in the economy. Businesses are uncertain, consumers are uncertain and everyone is trying to get through this time the best as they possibly can economically. This usually means that people will hold back: consumers will not spend as much as they normally would, businesses will not hire new people very quickly and they will not make new big investments.     

A lot of students would normally start to find their own living area once they graduate: rent an apartment or buy a house and buy furniture, insurance, food, and a lot of other things you need to live by yourself. They create new households and therefore new expenditures for the market. But due to the crisis and the uncertainty the last couple of years the graduates are deciding more and more to move back home. The employment rate is really high again lately, which gives no perspective for the graduates. Companies are not very likely to hire them because they are dealing with the uncertainty as well and since the graduates barely have any experience they are not the first people in line to be hired. This means no income for the graduates and therefore hard to live by yourself. Moving back home seems the best decision.

But by moving back home instead of buying their own homes and furniture the economy “loses” a big part of the output of the economy. This means that the aggregate demand will decrease and the GDP will decrease, holding all else constant, since the expenditures of the graduates represent part of the Consumption in the definition of GDP (GDP = C+I+G+X).

The fact that the aggregate demand of the economy decreases results into a surplus in the economy, which will cause the aggregate supply to decrease as well. This means that the companies will produce less, which again means that they will need fewer employees to work for them. So by moving back home and not participating as expected in the economy the graduates are creating a vicious circle. They are moving back home, because they do not have the certainty of finding a job, but by moving back home the chances for them to get a job are even smaller.

If the economy does keep growing and new jobs are created even though the graduates decide to move back home and decrease part of the consumption it is likely that they will buy a home in the coming future, because most graduates do not want to live with their parents any longer than necessary.  

http://www.nytimes.com/2011/11/17/business/economy/as-graduates-move-back-home-economy-feels-the-pain.html?ref=business

A New Method to Save Our Economy

The economic situation in the
world right now may look like it is a repeat of 2008 but if you look closely
there are a few signs that make this situation a little more promising.
Examples are that credit bubbles are not as big as they were and private debt has
decreased a good amount since 2008. The most important sign, however, is
something that we just learned about in class. Banks have started to rework
their balance sheets. They are reworking them so that they have more capital
and reserves. Another decisive difference is that the losses from this economic
downturn are from government debt not because of housing loans. The 2008
recession happened because banks were not able to predict such a drop in
housing prices. When this happened, they took a beating because of all the
loans out there that were not being paid off. The government did its job by
supporting all of the banks by giving them money to help compensate for their
losses. Now, the government is in extreme debt and it is very visible. Doing
the same thing that we did in 2008 by just boosting capital is not a very good
decision. The government using public money to stimulate banks in our current
economic state just does not make much sense. Also, it would be a risky
maneuver because if a country happened to default, it would be a devastating
blow to the already very fragile U.S. economy. In other words, larger capital
will not gain the trust back of investors. The real solution to the problem is
much different than just blindly throwing money at the banks hoping this will
boost the economy. The solution is that the government needs to “neutralize”
the debt problems in Europe by making sure that the countries will pay off
their debt eventually. The government needs to help stop the crisis over there
and make it more manageable for countries to pay off their debts. The author of
the article finishes his statement by concluding his argument. He says during
the last crisis in 2008, governments around the world supported the banks by
just giving them money hoping this would help them recover from the extreme
decrease in housing prices which hurt the banks terribly. This method did not
recover the economy quickly at all. It also gave governments a lot more debt
which put them in a more volatile state and really hurt citizens. To decrease
the possibility of another large crisis, possibly makers need to be the ones
doing the work. They need to find a way for countries to pay off their debts
which will be the only way to revamp the economy. Solving the debt crisis is
the solution not blindly giving money to the banks.

Link: http://www.economist.com/economics/by-invitation/guest-contributions/unlike-2008-banks-exposures-are-there-all-see

The Indebted Ones

In the U.S., the current unemployment rate for the average student graduating from a four-year college is 11.5%. Those students whom completed secondary school look to face an unemployment rate of only 4.4%. Ideally, one's chances of finding a job in this economy are much higher when completing grad school. This then causes an increase in the number of student loans, thus increasing the amount of student debt.

In other countries, like England for instance, higher education is so much more expensive than that of America. As a result, America gives out way more student loans thus causing the student debt to skyrocket. Due to the rapid increase in the number of student loans in America over the last ten years, the delinquency rate has been affected as well. The Delinquency rate is the percentage of loans within a loan portfolio that has overdue or unpaid payments; it is directly proportionate to the number of student loans.

The United States' economy is in an "extended contractionary phase," or the second phase of the business cycle, in which there is an extended period of high unemployment rate. Current labor market weakness can be explained by weak growth, and weak growth is well explained by weak demand. This is when the government takes action using either monetary or fiscal policy, in the attempt to decrease the unemployment rate. When using the monetary policy, the government may decrease discount rate, decrease RRR, or buy bonds. Shifting the rate when using fiscal policy means that the government increases its expenditures or decreases taxes.

In this particular instance, the government can take action two ways. They could intervene by changing the bankruptcy laws. The current bankruptcy laws in the U.S. do not allow student debts to be "wiped out." Bankruptcy rules could be changed so that it is dischargeable to bankruptcy. However, this could potentially create problems elsewhere, mainly effecting current tax-payers. As students declared bankruptcy, the tax-payers would end up having to pay more taxes.

In the U.S., the student loan system is designed in a sense that students are paying off debt as a mortgage-like obligation. Other countries, such as Britain and Australia take into account one's financial background, making adjustments that are more ideal when taking on debt. With that being said, President Obama "proposed to limit loan payments for some struggling American graduates to 10% of discretionary income and forgive outstanding debt after 20 years." Discretionary income is the disposable income, or the income after taxes paid, subtracted by personal necessities, such as food, shelter, and clothing. If proposed, the government would be using fiscal policy to decrease government expenditures, thus decreasing unemployment rate.

Both of these actions would alter and benefit the increasingly high student debt. Essentially, tax payers would receive the short end of both deals; both scenarios result in a tax increase. However, the economy will not come out of this extended contractionary phase unless the government involves itself.

Link:

http://www.economist.com/node/21534781

The Gamble on Germany - Wyatt Reeder

We all know about the ever-increasing trouble that is plaguing the European economy. Some say they are in worse shape than the United States. The collapse of Greece’s economy and the threat of the same fate to other members of the EU are making the future bleak for many, and for others, the search for a solid plan is needed.

Germany provides some chance of hope in the economic dark, due in part to their sustained amount of unemployment and GDP growth. This could be attributed to their exporting specializing mainly in luxury cars and goods. However, while it is deemed “volatile”, if the Germans were to suffer a decline along with the rest of Europe, it is believed by many that their recession would be shorter and less straining than others would. While U.S. unemployment in the 2008-2009 business year rose from roughly 7% to 10%, in Germany it only rose from 7% to 8%. This is because German employers were “extremely reluctant to let go of skilled staff”. In addition, many expect the number to actually decrease in the 2012 business year, promising an end to the recession. There is also pressure on unemployed to seek work, which is much different from what occurs in the United States, where it seems that whenever the media cover the subject of unemployed, it is always the same negative message about how everyone is upset that those without work “give up” on their search. If there were more incentive and/or assistance given, along the lines of reform to corporate taxes, then businesses would be more likely to not lay-off nearly as many, and keep more Americans working.

This all depends on the leader’s reform and usage of money. The Germans are planning to increase government spending, in hopes of preventing a further rise in unemployment. Families will see a 100 Euro ($136) monthly stipend for not enrolling children in day-care centers, money will be given for public roadwork projects, and taxes are proposed to be cut. This is the simple formula for expansionary fiscal policy: increase government spending and decrease taxes. Chancellor Merkel is attempting to curb the recession by spending money, in an effort to pump money into the economy through more wages for workers, and more money left over by the decreased taxes. In order to end the global recession, we cannot rely on a few strong economies. While it would help others, providing an example and also assisting those in need, the world’s leaders must come to their senses and make fiscally-responsible decisions that will give their people jobs and money to provide for their families.

http://www.economist.com/node/21538183

http://www.tradingeconomics.com/unemployment-rates-list-by-country

Madison Phillips- Higher Education and the Economy: The next bubble to burst?

As Americans assess the job markets
and encounter the difficulties faced in securing a job, they begin to think of
alternatives. It should be common knowledge that the United States is going
through tough economic times. The unemployment rate is significantly higher
than years passed and we have not seen a great improvement in the number of
jobs available to Americans. So, what are we do to in this predicament? Many
would answer this question with the noticeably popular alternative of higher
education, or rather, education beyond high school. Our minds have been
instilled with the idea that more education equals more money in the long term.
As years go by, we must stop and ask ourselves if this is truly the case. In an
attempt to improve the overall well-being of our economy, we must continuously
ponder these types of questions and evaluate the causes and effects of our economic
decisions. In 1965, Lyndon B. Johnson stated, “Economists tell us that
improvement of education has been responsible for one-fourth to one-half of the
growth in our nation’s economy over the past half-century.” This has been the persistent
belief of Americans and it is slowly emptying our pockets, but is this for the
better or worse? I will examine two different articles from the website
Economist.com, and discuss the two most popular stances on the issue of higher
education.
It has
been said that the next economic ‘bubble’ to burst is the higher education
market. In the past, one would not think to consider education as a market, but
recent statistics have proved adjacent comparisons even with the housing
market. In the article ‘Is it really the
next bubble?’, a known Facebook investor, Peter Thiel, is quoted saying, “To
call something a bubble, it must be overpriced and there must be an intense
belief in it. Housing was a classic bubble.” He goes on to say that people are
not getting what they paid for, in terms of job security and disposable income
averages. From our early school years, teachers, parents, family, and friends
repeatedly expressed the importance of education, graduating high school, and thus
being accepted to college. College attendance has become a societal norm among
Americans. The absence of a college education has evolved into a negative stereotype.
This can be noted as one of the reasons for the continuous rise in the college
enrollment rate. The article ‘Student
loans in America: Nope, just debt’ reveals shocking statistics. From a
report issued on October 26th by the College Board, it was shown
that “more than ten million students took out loans for the latest academic
year, and almost a third of students graduating from college, and 69% of the
ones dropping out, hold debt tied to their educations.” The New York Federal
Reserve Bank places the total amount of debt due to higher education costs at
$550 billion, and even suggests that this number could be underestimated. It
has been said that the total amount of outstanding debt from higher education
could surpass $1 trillion in the near future. The ‘Student loans in America: Nope, just debt’ article also points out
the idea of higher education as a circular process and waste of money: “The
size of the loan pool expands to enable students to pay ever higher fees to
schools whose costs expand because money is coming their way. That was just
about sustainable in the good times, a lot harder when there are fewer jobs to
be had.” So, are we really spending too much and taking on too much debt while
not receiving the jobs and incomes we expect?
“The
2008 census reported average earnings of those with advanced degrees, (a master’s
professional or doctoral degree), totaled $83,144.” Those with bachelor’s
degrees made $58,613, while people with high school diplomas had average
earnings at $31,283. These numbers show that education really does, or can, pay
off in the long run. In the article, ‘Is
it really the next bubble?’, a professor at University of California,
Norton Grubb gives his viewpoint of higher education. He believes, “The problem
is that there are no other routes to better occupations and higher salaries
anymore, except for those who have odd skills. My interpretation of his view is
that higher education is seen as the only option for better jobs and salaries.
He states that while a four year degree sufficed in the past, if we expect more
money, then we need to go beyond the bare minimum. However, this could mean
more out-of-pocket money and most likely more loans. Grubb continues in saying
that the 2008 reported average debt of graduating seniors was $23,200, which he
believes is relatively low. He also points out that the national media tends to
focus in on schools with substantial tuitions, when the majority of students
attend schools with significantly lower tuitions.
This
question of higher education has been extremely controversial and must be
explored further. If higher education is already being compared to the housing
market, then we could have a potentially devastating problem on our hands. The government has recently announced some
changes to the loan process to relieve some pressure on struggling graduates.
They must qualify, and they will receive payment relief, not debt relief.
Interest will continue to accrue to their outstanding debt. However, there will
be forgiveness after 20 years, rather than 25. This plan is said to be of no
cost to taxpayers, but we must be careful when believing those words. Whether
higher education can be considered the next credit bubble or not, it is a vital
issue that needs to be seriously considered.

http://www.economist.com/node/21534792

http://www.economist.com/blogs/lexington/2011/04/higher_education

Colin Picard

Colin Picard

South Korea’s economic success in recent years finds its basis in several economic, social, and technological factors. South Korea not only is a major exporters of manufactured goods, the most notable being cars, but also has a major domestic shipping industry, one of the largest in the world. The super corporations of South Korea that have survived the many economic disasters that have struck Korea are incredibly powerful. Korean society itself has traits that agrees with economic success.
South Korea has managed to survive the recessions of the recent history due to what forms its economy, primarily its position as an exporter and its large corporations. South Korea is a positive net exporter, meaning the value of its exports is higher than the value of its imports. Korea has the seventh highest net export amount in the world, giving it a major asset when calculating GDP, when many countries with Korea’s economic powers are net importers. Korea also has a collection of powerful corporations that, having been baptized in horrific economic collapses, control most of Korea’s economy, Samsung and Hyundai being the best examples. During the meteoric expansions of Korea’s economy, they suffered equally powerful contractions, but the companies that survive those contractions and recessions have immense power in both the economy and the government.
The labor force of South Korea is also exceptionally strong as a result of the societal beliefs of the country. The value put into education is literally a major boost to GDP, while the educations themselves are a major input for labor in the country. Gender equality in South Korea is one of the lowest. South Korea’s women, although highly educated, are usually not in the labor force. The elderly are often more likely to be unemployed; the corporations base their wage scales on years of service, so an easy way for the companies to save money is to cut the older employees who are making the higher income. The equality gap of South Korea is also exceptionally large, due to fiscal policy meant to encourage foreign investment in the country, which has fallen heavily since the recession began.
The corporations that form the main contributors of the GDP through Investment and Net Exports also are a major liability for Korea. South Korean politics is quite corrupt as a result of the competitive nature of the corporations and the economy is highly dependent on them. The companies are de facto family businesses, so if the family head mishandles the company, the entire Korean economy is threatened. Korea’s economy has pushed to the limit of its PPF, but the lack of government regulation leaves it highly sensitive to disturbances in the global economy.
http://www.economist.com/node/21538104

The Great Depression- Jules Klose

During the "Roaring Twenties," Americans expensive items while also keeping a close eye on the stock market. Although businesses were doing very well, wages were not necessarily going up with them. With large amounts of spending without much increase in wages ,a great imbalance between the rich and the poor came about. On October 29, 1929, also known as "Black Friday," the stock market crashed, triggering the Great Depression. Still to this day the Great Depression is the worst economic collapse in the history of the modern world. From the end of 1929 until the early 1940s, 15 million Americans were out of work and mass amounts of banks and business' failed.

President Herbert Hoover, who many people believe was the cause of the Great Depression, brushed the crisis off, explaining that everything will be back to normal in 60 days. Hoover, a strong believer in individualism, felt that the government should not offer relief to poverty stricken areas in the country. Franklin Roosevelt, who was the governor of New York at the time, created the "New Deal," which gave him enough popularity to be elected as president in 1932. Immediately after taking office, Roosevelt took action. During a four day span, the government created the Emergency Banking Relief Act in order to stabilize the banking system. Very early in his presidency, Roosevelt established the groundwork for the New Deal that ended up saving the United States Economy.

This was the major case when the United States government started to care for the citizens in need as well as regulating the economy. The New Deal that Franklin Roosevelt campaigned was a ground-breaking event that to even this day, changed the way our government deals with economic crisis.

http://www.pbs.org/wgbh/americanexperience/features/general-article/dustbowl-great-depression/

Greg Long - Original - Herman Cain

Republican presidential hopeful and former CEO of Godfather's Pizza, Herman Cain, has quite an innovative, and bold plan for America. Cain has acknowledged the fact that the current administration has left the economy in a complete mess. High taxes, more government spending, and more lost jobs, mainly to other countries, are all signs that our economy is getting worse and worse. One of the ways that Cain wants to right the ship is his "9-9-9" flat tax plan. 9 percent sales tax, 9 percent income tax, and 9 percent tax on businesses. This flat tax would replace the old complicated tax code that has made economic life miserable here in America. What a flat tax does is make so that everyone pays in proportion to what they make, not unproportionally like now. As of now the millionaires and billionaires, the ones that boost the economy, pay more in taxes than anybody not because they make more, but because the government wants to take from them all of their hard earned money just because they're more fortunate and, usually, more hard working than others. It is communist and evil to take something that is not yours and give to someone else (welfare) but that is for another time. What Cain's plan does is make paying taxes fair for everybody. Nobody should be unfairly taxed because they worked harder than others did. Every person would be paying 9 percent of their income to the government with the exception of those living below the poverty line (about $22,000 for a family of 4) who would not have to pay taxes. What the best part of Cain's plan is to lessen the tax burden on corporations who literally drive the economy. Without companies such as Ford, Kraft, Nike, and Microsoft, there would be no jobs and no opportunity to move up in society. Lowering the tax on businesses makes this a America open for business again and I believe that many international companies would want to expand here, bring jobs here, so they would not have to pay high taxes elsewhere. Critics of Cain's plan as how is this country going to make money? The answer is simple, taxes. The U.S. cannot keep spending and spending and spending without any regard for what this massive debt is doing for our economy. America is going to face tough times ahead of us and we will all need to cut back. Government programs must be either cut drastically or thrown out all together. Once America can balance the budget (spend less than what we take in, there's a thought) then we can grow stronger and stronger everyday, but until we do our economy and nation as a whole is going to fall right off the charts and into insurmountable debt, of which we will never be able to get out of. Herman Cain and his conservative view on the economy is exactly what this country needs. Cain's plan boosts the economy by giving coonsumers more money in their pockets and allows businesses to keep more of what they make so they can put that money back into creating jobs and keeping prices low for all of us. Cain's plan is fair for everyone and is exactly what this country needs too get going again. Article: http://www.washingtonpost.com/politics/herman-cain-tweaks-999-plan-to-include-opportunity-zones-for-lower-income-americans/2011/10/21/gIQAfBlh3L_story.html

Why the Super committee matters -- Colin Illar

One of the many indicators of an economy's health is the state of it's government debt. This is unfortunate, since the United States is currently facing a deficit of almost $10 Trillion. This problem has been a key talking point in the 2012 Republican debates and this past summer forced the government to a last minute budget deal that led to a decrease in our national credit store.

As part of the last minute deal, in order to appease both the left and right wing, a provision was instituted that requires a group of 12 bi-partisan congressmen called the Joint Selection Committee and widely referred to as the Budget Super-Committee are required to find between $1.5 and $1.2 trillion dollars in spending cuts by November 23rd or larger spending cuts will automatically take place from programs that both parties would want to protect. The terms of the bill require the committee to continue making cuts in December as well, but these first sets of cuts are important in all respects. From a political standpoint, neither party wants the 6 congressmen they each appointed to cave on any issues. Democrats will not want to accept any cuts to the entitlement programs that are a foundation of their platforms, such as Medicare and Social Security. At the same time, Republicans will refuse any attempt to raise taxes or eliminate tax cuts.

The lack of any progress can be concerning in many ways. For one, the gridlock in Washington led to this initial compromise in the first place. Rather than choosing to make large and effective spending cuts right away, the Congress chose to push back their decision, leading to a lowering of the US credit rate and causing further uncertainty in the markets. A strong initial spending cut of $2 to $4 trillion in the summer would have helped convinced investors that we are approaching the deficit immediately and effectively. By pushing back the cuts until now, Congress looks more like kids procrastinating doing their homework than a group of policy actors approaching important problems.

In order to make a major and effective dent in the deficit, Congress should have committed to larger spending cuts, which would create a greater sense of security in the market. Larger spending cuts now to programs that will increase our deficit in the future would also provide for better economic growth on the long run, and allow for continued spending now on infrastructure and other stimulus to help create more jobs and lower our unemployment.

A lot is resting on the shoulders of this "Super Committee", including the long term success of our government and the growth of our struggling economy.

http://www.economist.com/node/21538150

Charla Henley-News Article Blog Entry 1

South Korea’s economy

What do you do when you reach the top?

South Korea, one of the poorest nations in the world just fifty years ago, is now thriving thanks to a great deal of development aid from around the world. The author of this article states that,

“By the end of 2011 it [South Korea] will be richer than the European Union average, with a gross domestic product per person of $31,750, calculated on a basis of purchasing-power parity (PPP), compared with $31,550 for the EU. South Korea is the only country that has so far managed to go from being the recipient of a lot of development aid to being rich within a working life.”

South Korea is said to have bettered themselves by following in the footsteps of great nations before them. The concern now is that South Korea has “reached the top” and they will not be able to stay afloat with no “footsteps to follow.”

The article focuses on what South Korea should do now to maintain a stable economy but there is also a lot of information about how they managed to expand their economy and some things that did not help so much. For example,

“Yet in 2010, GDP grew by 6%. This year’s expansion is likely to be 4%. The unemployment rate is now a covetable 3%. Some of the recovery is the result of Korea’s happy dependence on China: it exports more capital goods to China relative to the size of its economy than anyone else, even Germany. But this is only part of the explanation (which is just as well given China’s slowdown). The government also initiated a public-works scheme that is mopping up over 2% of the labour force. It introduced an old-age pension and began, then expanded, an earned-income tax credit. All this from President Lee Myung-bak, who was once chief executive officer of Hyundai Construction and is widely assumed to be excessively friendly to big business.”

I wanted to focus on this quote here because there is so much to talk about within it. As we know, GDP growth displays economic growth, which was what South Korea needed. The fact that unemployment is so low shows that South Korea is utilizing all their resources. They have also made it a fact to export more than they import, which is also a key to economic expansion. The government in South Korea also created a number of jobs by initiating a “public-works” scheme, which ultimately brought more people back to work. Currently, the average woman in South Korea does not hold a job other than to raise her children. In the future, if South Korea needs to increase production more, bringing women into the workforce would help them to do that. Also in the quote I pulled from my source is talk of introducing a pension and an “earned-income tax credit.” These actions will help decrease uncertainty and allow people to invest more freely, bringing more money into the economy. Another great thing South Korea has going for them in their support of education. In this article, the author reports, “Korea spends a larger share of GDP on tertiary education than any rich country other than America. Given relatively low wages, this superbly educated workforce is hard to beat.” The fact that the workers are educated past a high school degree is promising because it is likely to increase the possibility for technological advances and ultimately greater economic expansion.

You may be wondering why there is need for concern in this article since South Korea seems to be doing most things right. The following quote helps to identify some of the concerns:

“But with Korea already top of the league tables, it is harder to generate further jumps in income from big increases in hours and skills. Indeed, the immediate problem is merely to maintain its excellence. According to Yeong Kwan Song of the Korean Development Institute (KDI), a think-tank, companies are starting to worry that graduates are emerging from university with the wrong skills. On some estimates, half of recent graduates are failing to find full-time jobs and are going into further study or part-time employment. So while general education remains good, some industrial skills may be declining.”

As displayed here, there’s concern that the increase in higher education may be decreasing the “worker” skills needed in South Korea to work in the industries that run the economy. Another concern is that the country is exporting profitably, but isn’t providing well for itself. As the author reports, “Over time, their [the small weak firms] performance seems to be getting worse. Korea, in short, has first-world manufacturing exporters and third-world services.” This is a concern because the third-world services are also declining instead of improving so if something isn’t done to improve them, certain issues could arrive within South Korea such as famine or disease. Any internal issues could cause economic contraction if it causes a loss of workers.

So does it all balance out? Or will South Korea see contraction as quickly as it saw expansion? This author seems to think that

“If it [South Korea] can increase public spending a little to reduce inequality and poverty, boost its labour supply by encouraging more women to work and avoid compromising its educational standards and penchant for hard work, then it should be well placed to pull ahead of Europeans and catch up with America, too.”

I think I can agree that if South Korea can increase public consumption and utilize the rest of its resources they will be in good standing but one of the bigger concerns that I had for South Korea was the fact that the internal services aren’t so strong. Perhaps an increase in public consumption would strengthen them, but regardless, internal services should definitely be monitored if South Korea wants to “pull ahead of Europeans and catch up with America, too.”

Article can be found by following this link: http://www.economist.com/node/21538104