It is tempting to succumb to negative attitudes during this current financial crisis, but recognizing positive elements of the economy becomes not only important but also self-fulfilling prophecy. The year is still new and hopeful signs are present, despite hand-wringing by the professional pessimists.
When reading the litany of those lining up for a “bailout” in Washington, it is instructive to remember the horrendous economy that greeted the Reagan administration when it arrived in the nation’s capital in the early ’80s. Raging inflation, 20 percent interest rates and incredibly high jobless rates – far in excess of today’s economic indicators – awaited incoming President Reagan.
A common sense approach by the nation’s leaders of that time turned the economy around and began the longest period of prosperity in the nation’s history. It was done with a combination of policy initiatives, especially a cut in federal tax rates. That worked then, just as the John F. Kennedy tax cuts had worked two decades earlier.
Some evidence of a silver lining in this economy is worth noting. Reports indicate that Americans are cutting back on spending for non-essential purchases in favor of saving more. Most certainly, lower gas prices are a bright spot. This is good for Americans and also deprives revenues to Russia, Saudi Arabia and Venezuela, countries not friendly to the U.S.
Lower holiday sales have contributed to discounts on consumer goods and services. And while Americans may be buying fewer new cars and other major purchases, reports show that certain sectors of the economy are doing brisk business – car repair businesses, shoe repair businesses, etc.
It is undeniably bad that the jobless rate has grown during this downturn, but the good aspect is that more than 93 percent of Americans are employed. While it is certainly bad for the country’s financial health that close to 10 percent of homeowners have missed a house payment or are in foreclosure (according to the Los Angeles Times), the flip side of this is good since it means that more than 90 percent of us are not in imminent danger of losing our homes.
Americans have faced such challenges before, some even worse than the current crisis. Their Yankee ingenuity combined with a free market enabled them to dig out of such crises, and they will do so again.
When families face financial shortfalls, they cut back on spending.
Government should do the same. Local governments in Kentucky would do well to emulate Louisville’s Mayor Jerry Abramson. He has been systematically trimming spending plans to match the city’s projected revenues. Shoveling money into government projects at this time is exactly the wrong thing to do.
Whether such spending is local, state or federal does not matter. It does matter a great deal that any major new spending at the federal level would have to be done with borrowed money, and countries like China, Japan and Saudi Arabia are increasingly reluctant to continue to lend to the United State.
Kentucky’s own budget shortfall in Frankfort has spurred much talk of increasing taxes but apparently little consideration of delaying or scrubbing the construction of numerous new courthouses around the state. Are state officials clueless about the deleterious effects any tax increases will have on Kentuckians who are already strapped with taxes, debt and the threat of job loss? Cutting spending during these financial times is a wise approach.
Shoveling money into major new courthouse construction is not.
The challenge right now is to tame the financial crisis facing the country.
Further, the challenge is being able to trust public officials at all levels to do the right thing by relying on what has worked in the past: to address spending. President Obama faces major challenges and concerns, but none as important as bringing spending under control. At the same time, he is presented with opportunities to get the country moving in the right directions. He is our president, and Americans will support him.