The Economy's a Wreck, But We Can Fix It | Newsweek Inside Business

Yes, It’s A Wreck, But We Can Fix It

NEWSWEEK's Business Roundtable looks at why the government's efforts to right the economy haven't yet worked—and what might do the trick.

PHOTOS

Wailing Wall Street

Financial district now a magnet for protests, performances

NEWSWEEK

Published Oct 11, 2008

From the magazine issue dated Oct 20, 2008

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The Rearview Mirror
Craig Barrett, chairman of the board of Intel
First all the headlines, political debates and government actions were centered on the Wall Street "financial rescue package" (it seems that it is not "politically correct" to refer to a "bailout"). Then Detroit came looking for $25 billion in government-guaranteed loans to retool for more energy-efficient cars. This raises the question of where the Department of Energy has been spending its annual $25 billion budget to fulfill its charter of weaning us from foreign oil—maybe we could just give the department to Detroit and save $25 billion? Next consider the $290 billion Farm Bill and you have to ask if everyone in Washington is looking in the rearview mirror.

Where are our investments for the 21st century? Why can't we get a permanent research-and-development tax credit or fund the America Competes Act, which increases the basic research funding of the National Science Foundation and top universities? I'm afraid the bailout is typical of the current attitude of Washington—prop up old industries and forget about tomorrow. Sure we get great promises in campaigns, but in practice we starve the new ideas. Joseph Schumpeter and Adam Smith, our great free-market theorists, must be rolling over in their graves. Instead of allowing creative destruction we are propping up failures. We need to invest in smart new ideas. I think it goes without saying that the $700 billion bailout is doing exactly the opposite.

Down the Rabbit Hole
Robert Reich, former secretary of Labor under President Clinton, now professor of public policy at University of California, Berkeley
Nine straight months of shrinking employment spells recession. And it's likely to get far worse before it gets better. The problems aren't only found in hobbled credit markets. They're also found in hobbled consumers.

The $700 billion bailout hasn't worked because the Treasury and the Fed have still not fully and convincingly explained how it will be used to restore confidence. Instead, they've issued a hapless and feckless set of policies—letting Lehman go, propping up AIG, creating shotgun marriages between other banks, and now talking about government taking equity stakes in other financial institutions. It looks to all the world as if American policymakers have no idea what they're doing.

At bottom, this isn't a liquidity crisis. It's a crisis of trust. No one's in charge. A lame-duck president commands almost no public trust; a Treasury secretary, who comes from the same culture that got us into this mess, can't explain what happened and what he's doing about it. Lenders of all stripes don't trust borrowers will be able to repay. Every major player is moving to safer ground—holding money, hoarding it, putting it under a giant global mattress.

Now that America is tipping into deeper recession and unemployment is mounting, more bad loans are cropping up because more people can't pay their bills. And as consumers pull in their belts, more businesses can't pay their bills. Which means more layoffs, and more bad loans, and a global sell-off.

Paulson is a train wreck happening as we speak!! Helping ease credit will not work when people have no jobs to get credit. We need jobs; jobs create wealth and spending and borrowing. Without them, all the money being issued to prop up our economy only, as usual, helps the affluent!! Asking them to borrow, when they have no means to pay back is like asking a bull to step inside a china shop and expect no damage. This is NOT rocket science; it is common sense, which unfortunately Mr. Paulson nor anoyone associated with this administration and this plan, is purely lacking!!! PEOPLE NEED A HAND UP RIGHT NOW; PEOPLE NEED JOBS TO RENEW THEIR PRIDE, TO SAVE THEIR HOMES, TO PURCHASE!!! tHIS IS THE ONLY THING THAT WILL BRING US BACK, NOT ASKING US TO BORROW MORE!!!

Please investigate this idea to help American. A straight fix is better than working all around the problem. To create main street jobs, have middle Americans to put money back into the economy, and get rid of fear, will be to stabilize the American people first. Could this work ? A stable home could stimulate the economy. Instead of working all around the problem, The government should use taxpayers money directly on the taxpayers by paying off our mortgages to be paid back to us taxpayers with little or no profit at first. Start by fixing the root of the housing crisis will implode new money as well as bailout money into the economy at the same time. Free American families from the threat of becoming homeless will have Americans ready ,willing, and most of all able to help our economy out of crisis. Middle class and upper class united will be a blessing for the American economy. Freeing up cash to spend is better than trying to freeing up credit to charge, because, the misuse of credit is the problem. 911 has proved that we all are Americans and we will come together for the greater good of America because we all know that together we stand, and if we stay divided we will all keep falling. Even the wealthy can lose parts of their American dream. Our government MUST invest in the American people ,in turn, the American people WILL invest back into America. When everyone unite for a common good you get results. We MUST stop giving presidential power to the industries to help Americans. The power of America belongs to WE THE PEOPLE OF AMERICA. In return we can install solar panels, buy hybrids , conserve energy, create jobs, and invest in our American economy while being lead toward a unified America . Industries are getting taxpayers money to help us, but they are mostly helping themselves. Let's take the straight and narrow fix. Taxpayer money to taxpayer mortgages. This will pay only principal money, and banks only lose the rest of the interest. Homeowners in trouble due to the fault of the economic meltdown still owe the principle but at 1% for 3 years and in return we will be able to buy things, not charge things, to turbo charge the economy . banks will be saved because they will get their money back, and jobs will return because we have a demand for services again. To be productive, please add ideas that could help even more americans. we have to start somewhere. Be constructive not destructive and pass it on for more construction THANK YOU!

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Posted By: kpwood @ 03/23/2009 11:28:14 PM

I believe two things would tremendously help the economy back onto it's feet: 1) Stop laying people off and hire people. Most companies laying people off are still posting profits each quarter, USE THEM. 2) Bring jobs back from overseas. Bring back help desk and manufacturing jobs to Americans, bring money back into America. Then, and only then, will there be money to spend in America.
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Posted By: 4carol @ 11/25/2008 3:55:15 PM

Paulson is a train wreck happening as we speak!! Helping ease credit will not work when people have no jobs to get credit. We need jobs; jobs create wealth and spending and borrowing. Without them, all the money being issued to prop up our economy only, as usual, helps the affluent!! Asking them to borrow, when they have no means to pay back is like asking a bull to step inside a china shop and expect no damage. This is NOT rocket science; it is common sense, which unfortunately Mr. Paulson nor anoyone associated with this administration and this plan, is purely lacking!!! PEOPLE NEED A HAND UP RIGHT NOW; PEOPLE NEED JOBS TO RENEW THEIR PRIDE, TO SAVE THEIR HOMES, TO PURCHASE!!! tHIS IS THE ONLY THING THAT WILL BRING US BACK, NOT ASKING US TO BORROW MORE!!!
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Posted By: SC-HOPEFUL @ 11/13/2008 9:13:39 AM

Please investigate this idea to help American. A straight fix is better than working all around the problem. To create main street jobs, have middle Americans to put money back into the economy, and get rid of fear, will be to stabilize the American people first. Could this work ? A stable home could stimulate the economy. Instead of working all around the problem, The government should use taxpayers money directly on the taxpayers by paying off our mortgages to be paid back to us taxpayers with little or no profit at first. Start by fixing the root of the housing crisis will implode new money as well as bailout money into the economy at the same time. Free American families from the threat of becoming homeless will have Americans ready ,willing, and most of all able to help our economy out of crisis. Middle class and upper class united will be a blessing for the American economy. Freeing up cash to spend is better than trying to freeing up credit to charge, because, the misuse of credit is the problem. 911 has proved that we all are Americans and we will come together for the greater good of America because we all know that together we stand, and if we stay divided we will all keep falling. Even the wealthy can lose parts of their American dream. Our government MUST invest in the American people ,in turn, the American people WILL invest back into America. When everyone unite for a common good you get results. We MUST stop giving presidential power to the industries to help Americans. The power of America belongs to WE THE PEOPLE OF AMERICA. In return we can install solar panels, buy hybrids , conserve energy, create jobs, and invest in our American economy while being lead toward a unified America . Industries are getting taxpayers money to help us, but they are mostly helping themselves. Let's take the straight and narrow fix. Taxpayer money to taxpayer mortgages. This will pay only principal money, and banks only lose the rest of the interest. Homeowners in trouble due to the fault of the economic meltdown still owe the principle but at 1% for 3 years and in return we will be able to buy things, not charge things, to turbo charge the economy . banks will be saved because they will get their money back, and jobs will return because we have a demand for services again. To be productive, please add ideas that could help even more americans. we have to start somewhere. Be constructive not destructive and pass it on for more construction THANK YOU!