FIX IT!

SNL's Keenan Thompson has a great idea to solve our financial crisis, FIX IT! Today we are facing enormous economic challenges that have gotten so bad the U.S. Government, led by a Republican Administration, has taken $700 billion to buy large equity positions so that we can prop up our largest financial institutions. If anyone else is thinking we are a bunch of socialist now, you are not alone. Now the U.S. auto industry is begging for some $25 billion of that money for themselves to fight off bankruptcy and it looks like the Democrats in congress are more than willing to help out this failing industry too. Who's next, the home builders? Retailers? Just about everybody except American taxpayers who are facing the largest unemployment numbers in 14 years and the 34th consecutive month where U.S. foreclosure activity has increased compared to the prior year. So how do we begin to "FIX IT" ? Perhaps it might give us some insight to look at our policies to see if our political rhetoric matches the results. 

The first graph I would like to start with is our GDP growth. GDP is defined as the total market value of all final goods and services produced within the country in a calendar year. There are several components that make up GDP such as consumption + gross investment + government spending + (exports - imports). 

So, every year Americans work harder to produce more and more for their country. It is only natural to assume that the American worker is being compensated more as a reward for their hard work. I mean, we do live in a free capitalist society where those who work the hardest are rewarded, right? Well.... not exactly. Actually, not even close when you consider inflation. Real Median Household Income has grown from $38,771 in 1967 to $50,233 in 2007. According to the US Bureau of Labor's CPI Inflation Calculator $38, 771 earned in 1967 would have the same buying power as $253,965 today. 

So, we know that as a country we produce more and earn less than we did 40 years ago. Well how many people is that affecting? Let's take a look at how many people fall into that income range. 

Looks like close to 75% of the population has not been able to keep up their standard of living. What impact does this have on our ability to accumulate wealth? Remember we are as President Bush liked to call it an "ownership society" now. Let's take a look at savings.

We have the lowest savings rate compared to the rest of the other industrialized nations. So we work harder, get payed less, and are not able to save much. So where does our money go? Hmmm.......

Healthcare?!? We spend most of what we produce on healthcare? Really? Well at least our free market system means we have the best healthcare in the world. Or do we?

Ok, so maybe we don't get the best, but hey at least we beat Russia! Well regardless of those numbers people need to provide for themselves. I know, lets look at tax cuts. They solve all problems. Give tax cuts to the wealthiest and more Americans prosper. We should be able to increase our revenues and start to pay off our debt. Thank God we had a fiscal conservative in office that cut wasteful government spending and returned more money to the people. 

Well..... taxes were definitely lower during the Bush years, but what happened to government spending? And aren't liberals supposed to be the ones that love big government? It looks like spending really went down under Bill Clinton starting in 1992 two years before Newt's Republican majority in congress. So, how big has that national debt grown to anyway?

 

Ouch. The highest ever. This is not looking good. Who do we owe? Debt owed to the public is debt that we owe various trust funds like Social Security for example. Who else do we owe?

That's comforting.  It sure looks like we have a lot to fix. I don't think Obama's plan of cutting taxes are the solution. Something tells me that we should start with rising wages and healthcare. What do you think?