Economics? Did Someone Forget?

So I came across an article today that analyzed the economic plans of the candidates both Dem and Republican. I initially started this letter because Ron Paul was neglected and I address that briefly, but actually address the general economics that people seem to forget or just utterly disregard. Enjoy my letter and feel free to correct me if I made some mistakes so I can learn, because in the end, that is all that matters.

Here is the article that got me inspired: Whose Stimulus Makes the Grade

Here is my Letter to her:

Dear Ruth Marcus,

Thank you for your article explaining the candidates new economic plans. I see a lot of the Democratic candidates are all about spending money to stimulate the economy and this I do not agree with. Yes, our economy is going through a rough time and a lot of people are hurting, including myself.

I don't understand how George Bush's plan to send money back to Americans is going to help stimulate the economy in the long run. Once the American people get their money, Bush is hoping the spend this money so it will go right back into the economy. This does nothing to help the actual income levels of these people and does nothing to create new jobs. Coming from the business side, this will not create any new jobs because this will be a predictable, one time increase in revenue for businesses because Americans will spend it, and then go back to the same hurt they were feeling before.

The other candidates on the Democrat side, Obama wants to send more tax credit out, which will cause the same issue, as I have mentioned, about George Bush's plan. If the economy continues to go badly, and it will for reasons discussed later, He will issue another $250 tax credit. Then Obama wants to issue another set of credits to a specific class of citizens, in hopes they will spend this money.

Edwards, I am not entirely clear on everything he wants to do, aside from stimulate jobs, is to be seen as another deficiency. Why invest in a certain job type and try to stimulate that way? Sure, it is a better plan for economic relief in the long run, but which jobs specifically do you stimulate? How do you stimulate them? Tax credits? Reduced tax rates? This part is very unclear for me and I hope you can clarify this part.

Hilary wants to just dump money is needless things, like heating saving. This really makes little sense, because this does nothing for energy independence and will not be recognized by Americans. If your heating gets cheaper, most people will see that as a good thing and will do little to watch their cost for this area and it will end up staying around the same.

I watched the debate last night from Florida and most everyone on the stage seemed reluctant to say they support the Bush program but wants to expand it. This can generically be applied the 4 of the 5 candidates about cutting taxes to businesses but not individuals and nothing to help the savings of the people and helping them have something to look forward to at the end of this economic downturn.

Now in your article, you did not mention Ron Paul's plan. This is most upsetting since there were 5 candidates on stage in Florida last night and you only care to talk about 4. In your article I noticed a few basic, and incorrect assumptions and strangely enough Ron Paul's plan addresses these assumptions and the consequences of these, while at the same time will provide a permanent relief.

The first assumption is that of economic cycles and business cycles, apparently we think we are exempt and our economy grows somewhere between a linear and exponential rate. A free market economy will always have recessions and growths, booms and busts. That is just the natural tendency of any economy. I don't know why so many people do not seem to understand this very basic nature that I was taught back in Macro-Economics in College. Austrian economics This recession has been predictable and expected. The reasons behind, why this one is expected to be pretty bad will be discussed in the second false assumption made by the general public about the economy. We have been living in a great time of economic growth, that has jumped by double digits for some 19+ quarters and that is great. The problem is that according to the business cycle, this will eventually come to an end for a period of time and then return to a greater or equal growth prior to the downturn. So, since this is expected, why is everyone trying to stop it, it is the same as trying to prevent a hurricane or tornado. It happens, its natural, just ride it out and wait for the sun to come out.

The second assumption is a major failure that results from the first assumption and comes down to government involvement in delaying or correcting a recession and is precisely what the Austrian School of economics addresses. Although the Austrian School blames government regulation for the business cycle in general, it does attribute worse recessions with regulation and trying to correct the inherent problems with the Federal Reserve. The answer given by Bush to pour more money into the economy, which Democrats want to expand up is precisely the problem. Pouring money into a broken system will accelerate and/or worsen the downturn. Since 1971 the US has printed over 13 Trillion dollars. That is 13,000,000,000,000 of new wealth that came out of thin air. Why has the dollar's inflation gone up and is only worth .04 compared to the dollar of 1913? Why is the price of gold floating around $900? These questions are simply answered to our intervention in markets and the money supply. As long as the government is will to create new money and play with the natural realm of interest rates there will be booms and busts as the market tries to compensate for the fluctuations.

Now, that was a very brief thought so I can move on and not write another book. Ron Paul understands these concepts and wants to remove the tax burden, but that is only a small step. Unlike the other Republicans, he understands that it is impossible to lower taxes and at the same time increase spending. Our foreign policy is costing us over 600 billion per year and that doesn't include Iraq and Afghanistan. We give out hundreds of billions of dollars in aid to countries around the world because we can print money and borrow. This has to stop if we want to take care of ourselves. Taking care of countries around the world with aid and troops is something an empire does. We are not an empire!

I am getting tired of talking about this becuase I am sure you will read this and discard it, however I could not just be silent. I am sick of people disregarding general economic theory and thinking that just because they want to do something, everything will turn out ok. Ron Paul does not want to do anything. He wants to do less, because we can't afford what we are doing anymore. We have no more money, inflation is around 10-12 percent, we are out of money so we borrow from China and other countries and print more. ANY business would have long be under with these circumstances. Why should a government be any different if it is playing a role in the economy? The only bodies that play roles in economies are businesses, therefore the Government is not exempt from this.