The Unpredictability of The Effects of Regulatory, Monetary, and Economic Policy

Uncertainty Is the Enemy of Recovery

At Vanguard, we estimate that policy uncertainty has created a $261 billion drag on the U.S. economy.
By: Bill Mcnabb

Topic: The GDP was below what was anticipated for the year and many top analysts fail to see how this is possible in light of a thriving stock market. Companies are continuing are making money but are not dishing it back out into investments or hiring new employees. The author identifies the lack of optimism or faith in the system is because of a number of issues that reflects some inconsistency between policies and the unpredictable nature of the private sector. Supposedly the government will not achieve the desired GDP or see major improvements in the unemployment until a clear path is cut for corporations to follow in terms of handling the national debt and fiscal policy. Three economists, Stanford University's Nicholas Bloom and Scott Baker and the University of Chicago's Steven Davis, have done invaluable work measuring the level of policy uncertainty over the past few decades. "Their research (available at policyuncertainty.com) shows that, on average, U.S. economic policy uncertainty has been 50% higher in the past two years than it has been since 1985." The analysts the author of this article used at the corporation that he is the CEO from determined that changes in the U.S. economy were directly linked to Uncertainity in the Economy as major changes in employment and corporate investing occured following the debt-ceiling debacle in 2011 and the recent congressional sequester. When all of the finances are calculated, it is clear that if these major events that created pessimism in investors had not occured, the GDP would have grown 3% per year since 2011. This is what the author calls "uncertainity tax" because it takes a toll of nearly $800 a person by creating an economic drag. In addition, the U.S. labor market would have added roughly 45,000 more jobs per month over the past two years. That adds up to more than one million jobs that we could have had by now, but don't. The debt-ceiling debate placed a $112 billion drag on the economy and the sequestration is predicted to place an $85 billion drag. Vanguard, the investing firm that the author is the CEO of, says that there is too much fiscal responsibility and that affects both corporations and individuals "They ask: How does this affect my retirement fund? What about my college savings account? How does this affect my taxes? Would I be better off putting my savings under the mattress?" So what the question we all must ask ourselves is; are these cumulative social policies are worth arguing over, considering what their constant debate has already done to the private sector, or if we our willing to accept the imperfections in fiscal policy and move forward with a clear cut, and imperfect, plan?

Opinion: The number one priority for policymakers right now should be to develop a credible and argreeable plan of attack to create jobs and and make investors more certain in the economic welfare.
The key is to provide clarity to businesses, financial markets and everyday savers and investors. When these investors see a set plan that is proven to show any form of economic improvement, not necessarily the one that produces the largest GDP, lawmakers should seriously consider its implications because from what I've read in the article is that the economy would be in much better shape, and there is would be a lot more jobs if lawmakers had settled on policies a long time ago, rather than procastinate, and consequently, exacerbated the issue. I understand that every lobbyist, every delegate, every branch, every beauracrat has their own agenda, but they need to consider how uncertainity has effected the overall fiscal environment just in the last two years. The nice thing about the economy is that it has the ability to bounce back, all that is required is a clear-cut strategy set forth by our policymakers that gives investors and corporations the confidence to put more of their profits into the system.

Conclusion: Uncertainity is something that can easily be fixed. When you look at the facts of the issue, particularly how the U.S. economy has faired in the last 2 years with so much fiscal debate, it is clear that the indecision has done more harm than good. Policymakers don't want to set an agenda because they understand that investors are unpredictable when the economy is down. However, when the stock is up and the GDP is down, it is much easier to identify the uncertainity factor. Policymakers should move forward with an agenda while the stock market is doing well because after a clear and credible policy set is established, Investment firms will base their strategies and expansive portfolios around the new and clearly estabished policy, acting more as guidelines for them to operate. It is not wise to wait around trying to create the perfect policy set and resolution to the deficity while the economy becomes worse and worse.

Спасибо за чтение!

New Budget has drastic effects on the Lower Class

Obama’s proposal hurts people with disabilities

 By Mike Ervin, April 12, 2013
http://www.progressive.org/obama-social-security-
Topic: The article discusses how Obama's budget proposal will hurt government programs that many people in the lower class rely on as a primary source of revenue. By accepting the new Consumer price index's method of calculation there will undoubetdly be discrepencies in the code that the author has identified as social security supplemental security Income, which has always had a strong relationship with the OMB. "For example, more than 8 million Americans with disabilities, including more than 1 million disabled children under age 18, depend on Social Security Supplemental Security Income (SSI). The average monthly SSI payment is $520, which is a meager $6,240 a year. For more than 57 per cent of those receiving SSI, this is their only source of income." When doing that math, the amount of many that would be saved if this budget were to be accepted as is rounds out to $10 Billion a year. The author recognizes that the impact on the 57% individuals  who rely on this form of welfare would be significant. Using the chained price index, those receiving SSI payments would begin to see a drastic decline in monthly payments. According to the Arc, an advocacy group for people with disabilities. In 20 years it would be $341 less, and in 40 years it would be $680 less. For those who are already struggling to the point where they are capable of qualifying for SSI payment, these decreasing payments will take a massive toll on them. Obama has made it clear that he is in full support of a growing middle class, but it seems that he forgets so often that there are people below it.

Opinion: This is one of the issues that I discussed in my last post. Obama has created a budget that is based on compromise and therefore, he had to make cuts where he believed they would go most unnoticed by the republican party. I'm not saying that the Obama administration did the wrong or right thing, but I would advice the President to keep the lower class in mind, becaus there are powerful interest groups out there who carry more influence than one might think. Their power lies not in their size, but their sentimental value. This is one of the few times in politics where we should remember that we are human beings and we are compelled to feel for one another. When the lower class and disabled, as small of a demographic they may be, is constantly bulldozed over in legislation, the press will take notice. While this story in particular, regarding the indirect cut of funding to a single program may not be pressing news, it speaks volumes about the current financial urgency that congress and the Obama administration are in. The issue with the budget is that there is simply not enough to go around. Clearly and reasonably, the largest programs will not have any funding cut and may even receive more funding. However, this leaves no funding left for the smaller programs that may need it more than the others. When the DOT is so pressed for cash that they are forced to cut welfare and social security programs, subsequently ensuring the loss of livelihood for millions of Americans, we can confidently say that the deficit is in pretty terrible shape. Obama wants to institute this policy because he believes that welfare is too generous. However, it would be much more effective to make sure that these SSI payments are implied on a case-by-case basis, that gives the people who need it most the proper amount and those who are taking advantage of the system less.

Conclusion: I see the socialism in the idea that I am trying to defend, that programs should be given money based on their needs, not on their importance to the political scheme, but there is some validity to it. The federal government cannot simply push these issues on the carpet. This is simply because the effects of the change in the CPI will be so noticeable and drastic that someone will be forced to answer at sometime. Telling an entire class of Americans that they must accept 1/3 of the payments they began with by the end of the decade because some people took advantage of the system is simply unethical and unconstitutional. Obama should be focusing on how we determine who receives SSI and other forms of welfare, not just cutting the program as a whole to fit the budget. This would be what I consider a  "blanket-action" because it does not take those who really NEED it into consideration.

Compromise Evident In Budget Proposal

A Good Grade for a Responsible Budget

By: Alan Blinder

Better late than never. As it turns out, much better.

http://online.wsj.com/article/

Topic: The article discussed the recently released budget and how, although it may be late, it is the most likely modle to pass in a less partisan congress. The author also notes that this budget as all do, carries unrealistic optimism, something that the republican party has taken most literally. It is better to have an optmistic plan than a pessimistic one, correct? However, it is important that the budget be based on credible numbers, sensible priorities, appropriate macroeconomics, and putting spending and taxes on reasonable trajectories for the future. These are the four dimensions that the author focuses his article on. First, the numbers. A good budget is based on credible numbers, this does not mean closing loopholes and making cuts on programs to be named later, where funding is cut and added must be explicit and clear. By doing this, the House Republicans will be able to see exactly what programs are receiving more funding. The political reality of the budget must also be recognized. In the budget Obama calls for increased taxing, the intial purpose (to increase revenue) will not pass the republican dominated congress but it is also possible that congress will make adjustments that would used the increased revenue in order to decrease tax rates as a whole. It can be predicted that the guideline provided by the OBM will be utilized a great deal in the house. The national budget reflects the priorities of our country. What we have been dicussing in class is how congress holds the power to make or break bureaucracies through managing their funding, from the budget we can see increased emphasis on some agencies while others have fallen to the wayside, this is often seen as creating a balance between funding current issues and allocating enough funds for future, unpredictable matters. This is where the compromise is extremely clear. Obama has even made cuts to SS and Medicare in an attempt to gain more bipartisan support in the house, this is a wise tactic that he will most definitely see results with. What the question really comes down to is how will this plan suit for the future? will we see a lowered unemployment rate due to increased government spending that so often comes with revenue increase? Or will we see a decreased deficit as the government practices fiscal austerity?

Opinion: I believe that the president has proposed a budget that is extremely moderate, in that it is much more conservative than what most democrats had expected. The Obama administration definetely has prioritized the budget and that is a GOOD thing for both parties. Without this compromise, it is likely that the republicans would not approve the budget that was predicted;with the full fledged programs of medicare and social security. The budget is also effective in reducing the deficit and allocating the funds to relieve the GDP. However, I am not ignorant to the fact that the programs that have been trimmed by the administration will demand an increase in tax beyond the 10 year window. The author and I concur that the budget will benefit some social programs in the future but this will not be at a great cost. 

Conclusion:"The two parties disagree over such priorities is normal. But today's disagreements are extreme. The president's budget priorities are slightly to the left of the political center, slightly to the right of the Senate Democrats, and far to the left of the House Republicans. " Obama has been forced to adapt his budget to get Republican approval in the House to avoid another sequester. I think I speak for the general populous when I say that this is in no way the ideal situation for the Democratic Party. However, bipartisan efforts, as I eloborated on in my last post, is becoming more and more necessary in today's divided government. The budget proposal is predicting republican reaction and in order to save as much time as possible, it has been rather streamlined; meaning that the cuts that would most likely generate debate and republican resistance, have already been determined by the executive himself.

 

 

A Plea for Party Loyalty

My Unrecognizable Democratic Party

The stakes are too high, please get serious about governing before it's too late.
By: Ted Van Dyke   http://online.wsj.com/article/

Topic: The article discusses how the democratic party has created a system in which bipartisanship is difficult and nearly impossible to achieve. The author, a life long democrat, alludes to the democratic party of the past and remembers when it was possible for parties to work against each other while moving forward. He believes that Obama was elected because of his persona and his willingness to move forward with a bipartisan agenda. However, the sequester and number of other recent examples suggest otherwise.Modern political history indicates that big midterm Democratic gains are unlikely, and presidential second terms are notably unproductive, most of all in their waning months. "He rejected proposals of his own bipartisan Simpson-Bowles commission, which would have provided long-term deficit reduction and stabilized rapidly growing entitlement programs. He opted instead to demonize Republicans for their supposed hostility to Social Security, Medicare and Medicaid."   the author is not necessarily argueing against the democratic parties ability to achieve goals and move forward with legislation, but their inability to coordinate with the republicans, this is an interesting example of party realignment. If republicans were to be involved in legislation, it is possible that they would share in the blame and rewards that their constituents feel when bills or laws affect them. However, as republicans have failed to be included in bipartisan efforts, they cannot be held accountable.  The author states that Obama's victory wasn't based on public affirmation of his agenda. Instead, it was based on a four-year mobilization of core Democratic constituencies, and on fear campaigns in which Mitt Romney and the Republicans "were painted as waging a 'war on women,' being servants of the wealthy, and of being hostile toward Latinos, African Americans, gays and the middle class. I couldn't have imagined any one of the Democratic presidents or presidential candidates I served from 1960-92 using such down-on-all-fours tactics."

Opinion: While I do not agree with Dyke's dennounciation of his own party, I did find this article refreshing in message the author was attempting to get across. What the author believes in, is while the democratic party holds substantial power, and continues to be successful in its application, seeking bipartisanship will add valuable perspective and insight into legislation. An interesting examples the author refered to was in 1965, Lyndon Johnson had Democratic congressional majorities sufficient to pass any legislation he wanted. But he sought and received GOP congressional support for Medicare, Medicaid, civil rights, education and other Great Society legislation. He knew that in order to last, these initiatives needed consensus support. "He did not want them re-debated later, as ObamaCare is being re-debated now." Looking forward to the future is important, and that is one of the few issues that I can see with the policies and agendas of the Obama administration, the bills he is pushing forward are successful but are totally lacking the majority support of republicans. Therefore, it is easy to assume that when the chief executive is a republican, he or she will push forward an agenda and policy set that counter-act what obama has done in his administration, seeing as those bills do not hold an party-based influence.

Conclusion: The topic proposed in rather complex. While the republican's control the house, one would think that they would be able to dictate legislation. Howevever, it is clear that the most valued legislation has strays from the republican ideology. It is easy to assume that the congressmen who are voting in favor of the legislation being passed and introduced by democrats, their districts are receiving some form of direct or indirect benefit. I digress, The president must start considering the future implications of his and his party's actions. Dyke makes a valid argument. When a republican president is inevitabley elected, or even a democrat, it will be up to him to reverse the effects of the Obama administration by moving the parties back towards a bipartisan regime. Considering that this article comes Van Dyke, who has served in democratic national administrations and campaigns for several decades, it is fair to assume that this is a pressing issue that neither party is ignorant to.

Sequester may not be so bad

Sequester two-step

A plan for moving forward  By Kevin D. Williamson

http://www.nationalreview.com/sequester-two-step-kevin-d-williamson

Topic: the article discusses how the recent sequester has not dratically or immediately affected any of the regular government workings, comparing it to the mess that was the clinton-gingrich government shutdown. However, this is not to say that both sides are satisfied with the results. The issue is that politicians were not able to effectively prioritize programs and institutions that should receive the most or the least funding.  The author notes that the executive will play a prominent role in the ultimate result of the sequester and the budget to come. "Obama's most important constituencies are those receiving direct payments from the government, in the form of either paychecks or welfare benefits. So he is courting Republicans, hoping they’ll sit down and hash out another broad, long-term deficit deal." Republicans should not be oppossed to it, because being flexible in one area may result in a reward in the other. The author really sticks the republican perspective as it is a NRO article, which is probably the most bias source in my library. What is needed now is a simple, two-step program for achieving a better sequester regime. So what it comes down to is this rather simple 2 step plan, hence the title...Step One: Pass a simple, straightforward bill that keeps the sequester spending controls in place but empowers federal-agency heads to decide for themselves how to divvy up the non-cut “cuts” among their programs. Step Two: Do Nothing. The spending controls imposed by the sequester will not be the end of the world, but adding an element of flexibility will require the administration to make some difficult choices. While the author's plan does make sense in a way, I disagree with his explanations of how they will affect our government funding, my interpretation will be explained below.

Opinion: The plan will force a bipartisan effort to prioritize spending as they never have before. When the legislation is present to force congressmen to recognize the legitimacy of both claims, each can come forward with the programs that they are unwilling to give up, limiting debate and controversy over the governments that both parties would hold with esteem. The fact of the matter is, there is too many smaller programs that the parties are unwilling to surrender simply because of the principle of surrendering any sort of leverage. Republicans have already made a move in this direction in the House’s continuing resolution, which would allow defense officials some flexibility in how they meet sequester targets."Conservatives realize that some programs are more worthy than others, and there is no reason to fund the USDA or spend nearly $300,000 a year for three official White House calligraphers while we’re taking funds away from meat inspectors." The sequester is the classic bipartisan compromise: an imperfect deal that nobody likes but both sides supported.

Conclusion:What we are forced to recognize as responsible citizen's is that there is never a PERFECT plan, but there are plans that hold our country together and uphold the values that it was established upon. Deeper reforms of the entitlements, federal spending, and the tax code will be necessary as well, but they all depend on something that will not be easy to achieve: reclaiming the Republican party’s reputation for fiscal prudence. "The best way to get a start on that is by allowing the sequester to become the new normal and by giving the administration the flexibility to help implement it more intelligently." Narrowing the specturm based on what our congressmen deem most valid and immediate will subsequently create an analysis of the budget on a case by case basis. So I guess the sequester is good in a way, it has brought to light the necessity of compromise and will provide the government with empirical data to create a new budget, based on the standardized sequester spending.

Interest groups play role in sequestration

Interest groups barrage Congress with sequester pleas

by Fredreka Schouten on Feb. 28, 2013,  USA TODAY News
http://usa-today-news/2013/02/28/interest-groups-barrage-congress-with-sequester-pleas/

Topic: Hematologists are sending tweets to members of Congress, warning that looming cuts to federal research funding threaten to slow medical advances for diseases such as sickle-cell anemia and lymphoma. Defense manufacturers have produced studies showing job losses will top 2 million. Lobbyists and interest groups have spent months and millions trying to forestall what now seems inevitable: automaticcuts totaling an estimated $85 billion that will kick in starting Friday without action by Congress and the White House. This sequester has been brought on by what most have identified as a byproduct of President Obama and Congressional Republican's unwillingness to compromise. Mthousand of elected officla and business owners are preapring themselves for the wost because the $85 billion might affect their industry or offic's ability to satisfy their district's interest.“With this degree of uncertainty, companies are already holding back on investments,” said Cord Sterling, vice president of legislative affairs for the Aerospace Industries Association, which has bombarded lawmakers with studies, outlining the economic toll if a planned 9% cut in this year’s Defense Department budget takes effect. Deficit hawks counter that the most aggressive lobbying and dire predictions are coming from special interests with a vested interest in government spending. "If you are a government employee or you have a government contract, the chances are that, at least in the short term, you will feel pain,” said Michael Tanner, a senior fellow at the libertarian-leaning Cato Institute. “But as far as the country and the economy overall, we are talking about cutting government spending back to 2009 levels,” he said. “The country survived 2009.”

Opinion: I finished my topic analysis on a positive note because yes, the country will survive, but at what cost? It is unfortunate that certain programs, particularly medical research programs, will suffer from our politician's inability to compromise and prioritize the needs of our nation. We've discussed in class how party alliances often rule supreme of national interest and I believe that what the sequestration has come to, is this. Republican Congressman are not incapable of understanding that (sticking to the theme) medical research is crucial and represents one of the lighter sides of industry, but they cannot rule out their party ideology which is to remain loyal to big business.Druker, a leading scientist in the medical industry, said he has relied on NIH grants, ranging from $300,000 to $500,000 a year, since 1985. “Our capability of making advances has never been greater,” he said. “But it’s a travesty that at the same time we can make such rapid advances, our funding is decreasing.” It is amazing how deep the sequestration has run, from national park to Oil industry, bringing me to my next point. Lobbyist are a commodity that must be purchased, and coalitions for businesses to become involved in may be difficult, when we recognize this, it is easy to see what portion of the population will receive the most consideration and exemption from the spending cuts. When the final sequestration plan is laid out it can be interpreted as the interest groups that spent the most on lobbyist were the least affected by the spending reduction and may even benefit from spending realignment.

Conclusion:Many groups lobbying Congress already are turning their attention to the next fiscal deadline menacing Washington: late March when the government will shut down entirely unless Congress approves another bill to temporarily extend government funding. What we can take away from this event is that lobbyist play a major role in determining the future of our country and that their inevitable presence highlights an unfortunate flaw in our American system. Lobbyist represent the largest groups and coalitions in our Nation, but what about those who are too small to afford a lobbyist of their own or receive substantial consideration. Another interesting factor is lobbyist represent groups from both sides of the spectrum and often, one side has a more valid claim, the presence of lobbyist detract from one another and thus, result in some programs receiving more or less than they should in terms of national interest. Ultimately, Lobbyist have and continue to play a major role in the reorganization and reduction of federal funding.

Citizens rights v. Citizens protection. Where do we draw the line?

How Should We Treat American Jihadists?

he legal answer is not going to help
Andrew C. McCarthy The National Review
http://www.nationalreview.com/articles/341371/how-should-we-treat-american-jihadists-andrew-c-mccarthy

Topic: The author contends that the solution to handling and preventing acts of terror cannot be dictated by the law and responses should be determined on a case-by-case basis.Under the Constitution, Americans who join the enemy may lawfully be treated like the enemy, which includes being attacked with lethal force. In light of the recent debate over  the targeted killings of American citizens, forces us to ask, where does the protection and defense of our country overlap with the level of aggression that is necessary to carry out such defenses. The government's war powers cannot have explicit limitations, this would prevent the actions that may be required by unforseen threats. We must be able to marshal all our might to repel any conceivable existential threat. Yet the Constitution, the sole legitimate source of the government’s power to levy war, is, quintessentially, the citizen’s protection against aggression by that same government. Thus, the tension between government’s war powers and the citizen’s fundamental rights is a conundrum. The author refers to a number of examples of American's who became affiliated with jihadists and consequently, betrayed their country. Noting that the number of Americans who have done this,, it is clear that the issue carries a much larger connotation. That is, How can we preserve citizen's rights and protect the national welfare at the same time?

Opinion: To answer my question above^, there are a number of approaches that already provide a solution to the issues that the author of this piece seems to have little faith in. First, Congress has the ability to carry out protective measures under the "necessary and proper" clause. However, I do recognize that congress is limited in action if the threat is not immediate and I believe that is what the author found fault with. When there is a domestic threat, lets say a Islamic radical, that individual is entitled to practice what is guaranteed to them in the bill of rights until they commit a crime or make an explicit threat, leaving ways for many legal loopholes. If the government would attempt to supress this individual, they would become what every history book since the British Occupation of India has deemed as an oppressive ruler. I believe that the U.S. government and policy makers should not take any further measures to monitor these individuals under the presumption that this will be a slipper slope and may lead to an oppressive rule that only worsens as more and more precedents are established.

Conclusion: When an American citizen leaves the U.S. they are no longer entitled to the  same liberties and freedoms as they would be in U.S. soil. Therefore, when an individual leaves the country and connects with a group that acts contradictory to american policy and defense, they can and should be treated as a traitor. The fact that they have committed treason should nullify their citizenship.  There is much more to war than the article contends and I would like to clarify here; The U.S. military should not be focused on killing as if participating in a war of attrition, but rather seeking intelligence that can lead to the capture and legal prosecution of someone who has committed a crime against the U.S.. Drone strikes are an effective tool but are not necessarily the best tool. Terrorism is a heinous crime, but when we prioritize the capturing and interrogations of terrorists, the U.S. would be much more effective and fighting the war on terror, and subsequently, preserving fundamental American values in the process, particulary due process and other citizen's rights.