In times like this, people get sussed up when the government starts spending money. But I believe that there needs to be a dichotomous approach: The government needs to spend money to stimulate, while encouraging the average person/family to save for themselves.
Looking at the Great Depression, FDR's policies of government spending and nurturing--policies that would be labeled as "socialist" by today's American conservatives---played a huge role in getting America back on its feet. FDR-created institutions like the Tennessee Valley Authority and the Works Progress Administration created thousands of jobs and helped build America's structural and social infrastructure. They cost wealth of dollars at the time---but they gave citizen-employees both money and dignity in a time when they needed both. They also left us with a greatly improved infrastructure in areas in which it was sorely needed.
I've said before & I'll say again, Obama's plans on creating an American "green" industry, as well as his service corps plans, are strikingly similar to the ideals and philosophies of FDR in the Great Depression.
Granted, WWII played a huge role in plucking us out of the Depression, as well...and we're currently seeing that we can't rely on war to do the same for us today.
So, I think that government spending is crucial in times of national and global financial crisis. It's not necessarily the government that's hurting---but it will be if the citizens continue to do so.
That said, I do strongly agree that there needs to be a strong persuasion by the government to encourage---and reward, if need be---its citizens to save for themselves. It's not just that it's the only way that people can truly dig themselves out and stay afloat, but it's really a culture that we need to re-adopt here in America.
Purpleoscar--how does your 5,000/yr tax-free plan work? Is it similar to a Roth or traditional IRA (Roth is taxed as income, but earnings and withdrawals are not taxed as long as the account's existed for 5+ years and you're 59 1/2; traditional IRA contributions are tax deductible, but earnings are taxed at withdrawal)? Or is it neither, and it's tax-free all around?
It may be similar to IRA but it's not a tax deductible savings plan. We have an RRSP (Registered Retirement Savings Plan) which is tax deductible and when you withdraw it at age 69 you pay tax on it, but the compounding of interest and dividends is not taxed while you were contributing over the years. Now we will also have a TFSA (Tax Free Savings Account) which means the money has been taxed on your pay cheque but income you save in this account is not taxed and you can withdraw without penalties and put back in the total amount of your room one year after the withdrawal. Any incentive helps. Increasing taxes means less money to save and slows down the process.
Again none of these programs work if the population doesn't save. The savings rates in the western world are far below China and Singapore. We are at close to 0%. This is the reason why the middle class is shrinking. If Obama wants to get some extra votes he needs to continue the Bush tax cuts. If he lets them expire the taxes will increase on everyone.
Most capitalist economists of the past had a religious moral background that looked askance on consumerist attitudes and believed in frugality. They also wrote books about morality along with their economic books and understood that both go hand in hand. Moral disciplines of religion and/or philosophy taught people self control so they could handle their shopping and consumerist addictions. Habits are very strong.
http://www.slice.ca/Shows/ShowsPage.aspx?title_id=93097
This is a show the government is pushing to try and show people how to get out of debt. We've had liberals for so long it's nice to see some tax payer money going to something worthwhile that conservatives understand.
Now your comments on FDR need to be tempered by what Hoover did. The increase of taxes and massive trade barriers are the reason a steep recession turned into a depression. What conservatives fear is that the Democrats want to push for a Keynesian demand side economics which push people to spend instead of save. We need people to save and pay down debt so we can start investing in the economy. The current government's bailout will do little for that since it's all paper. The reason for government trying to intervene is that recessions are not popular for governments even when they are necessary. They always exacerbate the problem and when the economy gets on it's feet again they take credit for what the general population did.
What liberals in our country said of Harper (conservative leader) was that he was a do nothing leader. They all pushed for deficit spending and increased taxes on the productive classes (this is "doing" in their minds). Thank god Harper is an economist and explained quite well to the public that raising taxes, and increasing deficits doesn't help the economy. We have to save at least 20% per person on the average to get back on track and individually we have to look at our retirement goals and try and meet them. I've seen retired people who live in basically a hole in the wall small one room apartment because they splurged their entire lives on a "standard of living" and their lives are so cramped they can hardly afford anything. We have people now retiring on mortgages which means no inheritance for children (an important part of keeping a large middle class) and dying bankrupt.
All the government can do is tax the economy and redistribute it. Once a recession comes in companies start losing money and they naturally pay less taxes and the government gets less revenue. This is usually when they go into deficit because they often have spending levels based on a growing economy and can't cut spending fast enough to balance the budget.
Obama is right in saying that the government can't turn off the television when your child needs to do their homework, but this also applies to the economy. If people won't save for retirement they will be shocked to see how little the benefits there will be when they do retire.
I'm glad you're talking about FDR and the depression because people are still debating on what was the cause and the solution was. Conservatives believe it is keeping taxes low, spending in check, and less trade barriers. The population has to save and invest and treat the markets as a long-term attitude. If people go back into gambling again the cycle will return again and again.
Liberals think that the government needs redistribution programs and protectionist policies to keep jobs at home. This is some of the reason why some conservatives want Obama to win so he can get unpopular with his policies and a "Reagan" will save the day. I think that's a lot of mess to clean up so conservatives better wake up or they will be extinct. Conservatives will conserving what was considered liberal in the past.
Some conservatives are ignorant and believe that government regulation is the problem. It is and isn't. It depends on which regulation. Certainly the Community Reinvestment Act (CRA) is BAD regulation, but we need to update it to cover the new scams that exist today, and eliminate the CRA. It's no different than have law and order when criminals abound, and they do. Good regulation that punishes the right people is instrumental in having a good economy. People have to save for down-payments and hold a job to get a mortgage just like it's supposed to be.
The population needs to be risk averse (less gambling) and that's what capitalism used to be about. You need to save money to be a capitalist, and be risk averse. That means earning lower returns on safe investments over your lifetime. The world right now is "consumerist" which has to do with keeping interest rates VERY low which punishes savers and rewards borrowers until they can't borrow anymore. When people slow down in spending because they can't borrow anymore and their salaries can't keep going up then the recession comes in.
So whatever your political point of view I hope people of all stripes change their spending habits because it's worth it in the long run. Anyways I know what to do so I'll be okay, and so will my family.
For those interested in reading more I would suggest a great American economist that could explain things very clearly:
Henry Hazlitt - Wikipedia, the free encyclopedia
I especially recommend Economics in one lesson and Foundations of Morality. Light bulbs were turning on in my head reading these books.
Most economists are Keynesian so reading this man will give you an idea of what most economists think today:
John Maynard Keynes - Wikipedia, the free encyclopedia
Marginal utility is an economic principle that looks at how subjective prices and values can be. This is the main reason why communism fell. How can you plan an economy when so much subjectivity is involved? The labor theory of value is unfortunately still popular amongst planners.
Marginal utility - Wikipedia, the free encyclopedia
There's lots more reading to do guys. It's faster to teach ourselves than just rely on politicians to figure it out for us. It's also fun for us keeners.