subject: Government Harms The Economy [print this page] The primary economic factors that will impact the health of the housing market going forward will be interest rates, jobs, income, and consumer confidence. The Springfield Illinois housing market was down substantially to begin 2009, through May, then rebounded on demand driven by record low interest rates and the first time home buyer tax credit.
Interest rates are projected to remain low at least through the summer. Fed Chair Bernanke has committed to keeping the cost of funds rate near zero until an economic recovery is solidly proven. The threat of inflation will be closely monitored, and could reverse the current interest rate policy. The 3.5% jump in wholesale prices in November was unexpected, however does not establish a trend, yet.
A jobless recovery is what most economists are predicting. In my opinion you can't have a recovery until people are working again. The strain upon governments at all levels for benefits such as unemployment raise the cost of government, while simultaneously fewer people working reduces governments income with fewer tax receipts.
The city of Springfield announced that there is a projected deficit of $8.5 to $12 million dollars in the upcoming year. The mayor indicates job cuts will be necessary to balance the budget.
Sangamon County officials have ordered budget cuts again, however this time it looks as if jobs will be cut to meet those mandates. Especially in the Sheriff's office which will have the unintended consequence of negatively impacting public safety in rural areas.
The state has an estimated $11 billion deficit and will have to look at jobs as part of any legitimate move to balance the budget.
The local medical community , among other vendors, is starting to feel the impact of a state that cannot pay its bills. Many vendors are waiting six months to a year for payment for services and products provided. This will impact vendors budgets, and the number of people they employ.
The Federal government continues to heap on to unsustainable debt by passing a $1.1 trillion budget, a nearly $500 billion omnibus spending bill with 5000 earmarks, while the senate moves to pass health care reform to be sent to conference with the house.
Nobody knows the true impact of the final version, however the budget gimmickry used by Reid to stay below Obama's $900 billion ceiling to remain deficit neutral is proven false by numerous independent studies, and by the governments own HHS Medicare actuary.
The costs the first ten years is estimated at $2.5 trillion, the next ten years at $3.4 trillion. An unsustainable amount of cost that will lead to massive cuts in Medicare, and tax increases upon all Americans, beyond the 13 taxes included in the bill. All according to studies which can be found at The Heritage Foundation, or HHS.
The final analysis is that all these government actions do more to kill job growth than to create a climate where the private sector can create jobs. According to The Wall Street Journal, small businesses that account for up to 70% of all new jobs in a given year, are not hiring until the outcome of the health care bill, and cap and trade bill are known.
The two bills combined are estimated to cost the economy up to three million jobs according to Heritage, and at a time when unemployment is in double digits, millions are running out of benefits, millions more are underemployed working several part time jobs when full time work is needed.
The health care bill for example is opposed by over 60% of the public. Everyone surveyed agrees that there is a need for reform, however they oppose the Obama, Reid, Pelosi version which is too expensive, and is effectively a de facto takeover of 1/6th of the U.S. economy.
None of these government actions inspire consumer confidence which will be necessary to sustain any type of recovery in the economy or the housing market. When the vast majority of Americans are concerned about their jobs, about government mandates that cost them money through higher health care costs, and energy costs; consumer spending will continue to fall. This leads to less demand for products and services causing more unemployment.
Government doesn't produce anything. Our federal government is simply out of control. Trillions in deficit spending never seen before, nationalizing health care, cap and trade or EPA rules that will kill American industry, failure to capture our own natural resources until an alternative energy source is found, and impending onerous taxation is guaranteeing future generations a lifetime of debt and a lower standard of living.
The path that the Obama administration has the economy heading down is unsustainable. The interest payment alone on Obama spending plans will rise to $700 billion a year by 2019 according to the Congressional Budget Office.
What are the solutions that would help the economy grow, increase the number of jobs/taxpayers, and keep the cost of living reasonable? The election of politicians that believe in smaller government, fewer rules and regulations, lower taxes, and faith in a capitalist economy that has provided Americans the highest standard of living in the history of the world.
The congressional elections in 2010 will determine which path Americans will choose to follow.
