Four the Future - December 27

Today, a macroeconomic view of the national economy and a discussion of a real problem which begs for long-range planning.

• Many Americans are being more careful with their spending
  Source: Philadelphia Inquirer; November 12, 2010
  Summary: People’s spending habits are beginning to change. Looking for bargains is becoming a badge of honor. Bargain shops, including places like Goodwill, had a stigma, but those days have passed for many shoppers. One previously high-end shopper said, "My spending patterns will probably be a lot more conservative for the rest of my life."
  Opinion: Many people who lived through the Great Depression also had different spending habits from those who came after. When planners analyze economic growth projections, the prospect of a return of the ultra-consumerism of the last couple decades should not be accepted without significant evidence.
  
• Iron fences just aren’t for everyone
  Source: Spokesman-Review; October 9, 2010
  Summary: The income gap between the richest and poorest increased to the greatest level ever. It’s not all bad: the rich seem to like it a lot. The top 20 percent of the population made almost 50 percent of the income. Those making $180,000 per year saw their incomes go up. Those earning $50,000 or less saw their incomes decrease. The 400 richest people in America made more money than the lowest 50 percent combined, more than 150,000,000 people. This is not new. In 1780s France, there was a huge gap in incomes. Of course, there were some bad moments for the rich including "several uprisings, a few guillotines." In the end, it all worked out (due, in part, to the guillotines).
  Opinion: We don’t even have to go that far back. The 1920’s demonstrated what was going to happen. Regulations were put in place to prevent another Great Depression. The plan was to separate commercial banking (which provided loans for things such as buildings) from investment banking (which takes higher risks to increase profits). There are other factors, but when those regulations were repealed in the 1990’s, they created the conditions necessary for the housing bubble. However, Congress doesn’t seem to have the statesmanship necessary to fix the problem this time.
  
• Make Gov Work Sayrs Call-in
  Source: MakeGovWork; December 17, 2010
  Summary: The taxpayers with the highest incomes receive all of the same tax cuts as the middle class, yet the tax cut bill gives additional tax cuts beyond that. It seems unreasonable that people making $250,000 should be considered middle-class. The wealth inequality in America is causing inflation even as wages are going down, in part because the richest people in America, with their excess wealth, invest it in various industries. These industries are not worth more, but their cost does up because of excess investment case. Consequently, there is has been a succession of bubbles: the dot.com bubble, followed by the housing bubble, then the petroleum bubble. The people who suffer from this are the lower and middle classes.
  
  
  
  Opinion: Now, in this context, see how it affects the local economy, and the Spokesman-Review's uncritical boosterism....
• Modest hopes harbored for commercial real estate
  Source: Spokesman-Review; December 12, 2010
  Summary: The River View Corporate Center in Spokane Valley lacks tenants. There is relatively high vacancy in the region, especially in the valley, making it a renter's market. Vacancy in downtown Spokane for Class A office space is 8 percent, but 17 percent for Class B space. More people will enter the market when it hits bottom, especially when they realize the stock market won't perform as well. The tax cut deal in Washington, D.C., is buoying hope that there will be more investment in commercial real estate.
  Opinion: Please note that it's a problem that it's a renter's market, but, apparently, that the problem will be solved when Congress puts us deeper in debt by encouraging the richest among us to continue with their distortionary investments. Seriously, is this our only alternative?