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.

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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.