Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Now that the bailout passed…what next?

Posted by sanityinjection on October 6, 2008

Free falling stock markets around the world today are a reminder that despite the federal bailout legislation, the economy is not going to rebound overnight. Having taken emergency measures to stave off a severe depression, what long-term steps should we be taking to improve the US economy?

Zachary Karabell has a piece up in the Wall Street Journal today arguing that America’s fundamental economic problem is its failure to adapt to a changing global economy in which we are no longer an economic superpower, but merely the greatest of a handful of powers. He cites enormous transfers of wealth out of the US and Europe to Asia and the Middle East over the last 5 years. The US imports goods and commodities at a furious rate but is not seeing that capital outflow reinvested in the US as it once would have been.

Karabell suggests two major changes that need to occur to put us on a sound long-term footing. The first is to achieve greater energy independence, so that we can stop sending trillions of dollars to OPEC and Russia. This of course has to involve a broad spectrum of energy investment, including offshore oil drilling and alternative energy sources. There is no reason why, in ten years, the majority of homes in the US cannot be heated by domestic natural gas, powered by a more diverse cocktail of sources including nuclear and wind energy, and have an electric car charging in the garage.

The second major change is to decrease the corporate tax rate, which is much higher than in Europe or Asia and creates a disincentive to operate businesses here (which means fewer jobs) and keep profits here. Karabell argues that arguments about the fairness of having corporations bear more of a share of the tax burden than middle-class working families are not wrong so much as obsolete, because the ability of companies to locate overseas makes it too easy to evade corporate taxation. Why have a high tax rate if it cannot be practically collected? Better to take a smaller piece of what will be a resultingly larger economic pie.

Article is here: http://online.wsj.com/article/SB122325757745406687.html

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3 Responses to “Now that the bailout passed…what next?”

  1. lizzygram said

    Here is a link for you to check out it is somewhat of an answer for you. If it blows you away like it did me please cut, copy, and paste it on everyone’s blog site you know..We need to get this out as much and to everyone we can….Thanks

    http://www.brillig.com/debt_clock/

  2. sanityinjection said

    The relevant measure of the national debt is as a percentage of our gross domestic product, not simply as a dollar figure. By that standard, the national debt is of concern, but hardly at a crisis level, although the financial bailout will only add to it. We cannot realistically be focused on reducing the debt until we can get our economy back on a sound footing. At that point, the best way to reduce the debt is to cut government spending, and the best way to do that is to tackle entitlement programs – Social Security and Medicare chief among them. Not an easy task!

  3. lizzygram said

    Well check out this DOLLAR figure…while we the taxpayers are footing this bailout bill…It only adds to my thought of it all…Pay Off and not a Bailout Bill. This link below is to CNN, check it out for yourself and think about it hard for there is more to come….

    http://www.cnn.com/2008/POLITICS/10/08/politicians.meltdown.aig.ap/index.html

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