The results of my survey of economists will be published in mid September. It's going to take longer than I thought to swim through the data and pull out the good stuff. And I have been advised by smart people that this week is a bad one to compete for attention in the news.  I can tell you that I've seen the raw results and there will be surprises.

Let's do a little experiment here. I asked economists to rank issues by how important they are to the economy. I'm asking you the same thing now. In the comments, tell us what you think is the number one issue for the United States from an ECONOMIC perspective.

I'm guessing your answers will be all over the place, and that says a lot about the challenge of democracy. If you don't know which issue is most important to the economy, it's hard to know which candidate would do the best job.

In your view, what is the most important issue for the economy?
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Aug 27, 2008
1. The National Debt (Long Term).
2. Trade Deficit (Short Term)
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Aug 27, 2008
- Short-term: massive contraction of available credit

This leads to overall deflation (property values & investments being huge slices of the pie). Combine that with climbing prices in critical sectors like energy and food, plus stagnant wages, and it's no wonder that we're in a mess.

- Long-term: peak oil

Look it up! If you graph energy output with GDP,you'll see they correlate very closely. So it seems likely that if energy use declines (due to cost and/or availability), that GDP will mirror it. Alternative energy is pretty much guaranteed to be more expensive and less abundant than the cheap but finite sources we've built our economy around.

Whoever wins the election is probably walking into a disaster, and will likely get blamed for all sorts of bad things.
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Aug 27, 2008
This might sound rather simplistic, but the biggest obstacle in the US economy is finding someone who understands economics. Obviously the two clowns running for President have no earthly idea about economics and neither have the last couple.

Until this fundamental hurdle has been leaped, there's really no point in taking this discussion further. How else can you explain a country that rewards hard work with higher tax rates, shows total ignorance of currency devaluation, artificially prostitutes interest rates, encourages a social security fund that earns one-half of a CD or treasury bill the government themselves backs and guarantees, and presumes to know how to spend and save my money better than I do.

As long as the power brokers fail to understand the concept of money, it's really a lost cause no matter what they do and how they prioritize.

Its like asking me what part of the boat needs the most repair work in order to sail from the Motherland to Plymouth Rock. My answer: the captain.
Aug 27, 2008
The debt ration of the average American household. Most Americans get this sense of needing a big house, expensive car, and lots of stuff. This may come from a sense of entitlement or a need to "keep up with the Jones". Enventually it come time to pay the piper and that is where we are now. As the structure of the debt based economy collapses more people are realizing how overextended they are. They did not want the goverment interferring with their ability to borrow, and convinced the government that keeping them from doing so was repressive or discriminatory. Now they are looking for the government to bail them out.

Credit companies saw the huge profits to be made through subprime credit, whether mortgage, auto loans, credit cards, etc. They did not want the government to question or regulate their lending laws and practices, but now they look to the government to bail them out.

Most of the middle class and poor do not have money to spend to keep the economy going because they are all trying to manage a tremendous dept. The wealthy who have low or no debt load do not see why there is a problem. Thus the gap and agnst between the classes furthers.
Aug 27, 2008
Trade Deficit. Money is draining out of the US at a record pace. It can't go on forever.
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Aug 27, 2008
I don't know, and I'm very curious to hear what the economists you surveyed said.
Aug 27, 2008
Nailing down one issue that is the most important economic issue is nearly impossible as there are many factors that affect the economy. But since you asked for one I would say The Federal Reserve.

The Federal Reserve is to blame for the current housing problem because they had set interest rates at historic lows and encouraged banks to lend money to people who had no business borrowing money. Then when the banks started to run into problem the Fed infused money into the system to essentially bail out the banks for making bad investments. This caused the value of the dollar to drop like a rock which is partly responsible for our current energy crisis and the impending inflation problems that we are just starting to feel now. The Fed has been given too much free reign to ruin our economy and they need to either be regulated better or abolished all together.
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Aug 27, 2008
Health care costs
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Aug 27, 2008
Just one point huh? Lower the insanely high corporate tax rates! Combined federal and State rates are among the highest in the OECD. All the socialist countries in the EU figured his out years ago and have been lowering the rates to attract investment. Ireland 12.5%, Norway and Sweden 28%, France 34% and USA 39.25%? come on. Japan is the only place where its higher! (39.54%)

Unforunately the Republicans won't do much because they'll be painted as simply serving the interests of their corporate elite buddies and Dems won't do it because it doesn't appeal to their base.

A reasonable corporate tax rate is not a left or right issue. It encourages investment at home rather than abroad and that means jobs.

Aug 27, 2008
Number one issue: Recession.
- High energy costs
- Higher costs of most everything else, because it takes energy to make or transport it)
- Falling dollar relative to euro (currency tied, not to gold any more, but to oil.)
- Depressed stock market (foreign investors pulling out, because of negative value of dollar)
- Loss of jobs, due to above, creating lower spending, exasperating above effects.
- Falling housing prices, as poeple can't afford what they bought, and as empty nest boomers downsize,

Number two issue: Threat of inflation.
Causes: All the things that drag on the economy causing recession create a need to have higher wages to maintain the status quo. IF (and that's the big question) the job market responds, then the problem spirals, with prices being allowed to rise, making them more out of reach of those who didn't get the pay increase, making them clamor for it even more.

That's the issues. But what's the solution?
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Aug 27, 2008
1. You spend more than what is the market value of what you produce.

So, given that you fulishly spent your natural resources, outsourced industrial production (which is the only thing that creates new value) , depleted your education system - you are pretty much doomed...
Aug 27, 2008
Energy. It has a snow-ball effect on the price of everything.
Aug 27, 2008
The primary negative impact to the US economy is the government's overspending.

The current administration has spent 5 TRILLION dollars more than they took in in taxes since 2000. A big chunk of this was because of the war in Iraq, but other big chunks are just because they decided to significantly reduce the taxing of the rich and corporations, while still spending up a storm.

This has driven down the value of the dollar just as it would if we were a banana republic. In fact, the current administration's spending policy seems to be built around a banana republic model. Give the rich even more money and spend, spend, spend.

The weakened dollar means higher oil prices, higher food prices, higher inflation, everything we are seeing now.

Add to that the stupidity of letting Wall Street regulate themselves so that they can "innovate" some new ways to commit fraud, and you have a perfect storm.

We need a government that will tax enough to cover what they spend or reduce spending enough to match taxes and we need to regulate the heck out of Wall Street, because they have shown they cannot be trusted to not sell each other bags of doodoo with gold dust sprinkled on top and call it gold.
Aug 27, 2008
Oops, one addition to my previous post. A lot of people are pointing to the cost of oil as hurting the economy. But it's a global phenomenon. OPEC no longer can reliably control the price of oil, as they are already producing at near maximum (previously, if they wanted the price to fall, they could simply open up their pipes and if they wanted it to rise, they curbed the supply). The price of oil is now set by market forces and political situations. As such the price of everything everywhere is climbing. The US economic problem is one of global competitiveness. If this problem is a variable affecting all parties then it is cancelled out on both sides of the equation. As long as everyone else is spending more on everything, then the US' trade position will remain unchanged by oil prices.
Aug 27, 2008
Aug 27, 2008
1. National Debt (from the war) leading to not spending money on important things like education
2. Energy crisis - we really need to make alternative energy the next "space race"
3. Incentives for innovation and small business development - these are the engines of new jobs & economic growth
4. Health care
Aug 27, 2008
1. Consumerism and the push to have everyone in America live beyond their means by maxing out their plastic.
2. Shipping all America's industrial jobs overseas and replacing them with low-paying low-status service jobs.
3. The coddling of financial criminals in the financial sector: stock brokers, currency and commodity speculators, bankers, real estate speculators, and all their ilk.
4. The worshiping of the rich regardless of who they stole their money from.
5. Idiot free-marketers who can't see that what a "free-market economy" means to American business is no tariffs on American goods while the US government subsidizes American business (especially agribusiness) and maintains tariffs on imported goods (e.g., textiles).
6. Misuse of the taxes Americans pay through the nose.
7. Keeping health care totally capitalistic for everyone but the dirt-poor and old so that a few pharmaceutical companies can enrich their executives and stockbrokers.

There's more, but who cares?
Aug 27, 2008
The most important issue for the economy is high <i>federal government spending</i>. Currently, the federal government accounts for 20% of the United States GDP. In order to pay for that spending, the government has to collect 20% of GDP in taxes, from American pockets. We currently collect 16-18% in taxes, which is why we have a budget deficit.

Higher taxes - without exception - decrease <i>long run</i> growth. Entitlement spending - namely Medicare, Medicaid, and Social Security - is projected to grow from ~9% GDP today to ~18% GDP in 2030 (Source: CBO). Increased spending invariably leads to increased taxes, whether now or in the future. Leaving all other spending alone, the increase in spending on entitlements will require a 50% increase (9-10% points) in total taxation to pay for them.

The federal government must change the structure of its entitlements so that their growth tracks the growth of the economy, or that other spending is reduced when they begin to get out of hand. I cannot underestimate the impact that too much spending has. Remember, spending equals taxes. Higher taxes reduce productivity and innovation. These are the bedrock of the American economy.
Aug 27, 2008
From what I can see here, most people think the biggest problems are the national deficit and the value of the US dollar. My understanding is that one will alleviate the other though, by this model:

1) A lower value dollar means that American goods are now relatively cheaper to overseas markets than they previously were due to an improved exchange rate (for them).
2) This means more sales overseas. Likewise your imports become less attractive, as the purchasing power of your dollar makes foreign goods relatively more expensive.
3) This means your trade deficit will fall.

I own a business in the caribbean that imports furniture from other countries. Since the dollar started falling I have only just begun to consider the US as a source for goods, as previously the exchange rate made them uncompetitive. I see the rise of China and the fall of the US as a matter of competitiveness; China is cheaper, and sells more. The US had been holding its own by supplying quality over quantity but has been losing ground as the far east improves their product and service quality. This means China gets a surplus and the US gets a deficit.

Some people mentioned issues like Medicare, the invasion and social security as issues. I am no expert, but as long as Americans are spending this money in the US on US goods and services, doesn't that mean the economy is boosted by these programs, regardless of how flawed said programs may be? I mean, the money never leaves the US economy, it just changes hands, doesn't it?
Aug 27, 2008
A stable and predictable energy supply system. This may have several different inputs (gas, LNG, Nuke, passive solar, etc...) and the cost per gallon at the pump might be higher then historical US prices, but the important part is that it is stable.

With a predictable and stable supply, the economy and consumers can make rational decisions. It is the unpredictable part that churns the economy. As a side benefit, most scenarios for a predictable energy suppy systems would also stop de facto funding of enemy nation states and NGO's.
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