Tags: Treating | symptoms | Cure | Disease

Stop Treating the Symptoms: Cure the Disease

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Monday, 05 Dec 2011 09:59 AM Current | Bio | Archive

The U.S. economy is sick. If it isn't properly cared for, it will eventually get much sicker and maybe die.

It's no secret that we are on an unsustainable path. Experts estimate that Medicare, Social Security and interest on the debt combined will take up 80 percent of tax receipts by the middle of next decade, on its way to over 100 percent shortly thereafter. Monthly deficits are now the size of yearly deficits last decade.

Meanwhile, the recovery is one of the most anemic ever, especially considering its coming off such a severe recession. GDP growth has averaged about 2.5 percent during the recovery while past recoveries suggest we should be growing at about a 4 or 5 percent rate at this point.

The housing market is still not recovering. Unemployment has averaged about 9 percent in the past two and a half years, the longest period of sustained high unemployment since the Great Depression.
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URGENT: ‘Wealth Gap’ Widens to 1929 Crash Level. See the Shocking Footage. See the Evidence.

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That's what's ailing us. The country needs to get the economy growing at a strong clip and find workable long term solutions to the debt problem.

Our inability to do these things has us wallowing in economic oblivion.

While corporations have record amounts of cash on the books, they aren't putting it to work and investing. Why would they?

The current course of the U.S. economy is slow growth for the near and intermediate term with catastrophe a little further down the road. That's not particularly promising. Frankly, there are much better opportunities in the emerging markets, and that's where the money is going.

Until the country changes the current narrative of slow growth followed by catastrophe, the economy is unlikely to get meaningfully better and stay that way.

Unfortunately, many politicians in Washington don't attack the main disease. Many take the approach that the way to fix the economy is by implementing policies that will strengthen the housing market, figuring a stronger housing market will lift the overall economy. Others think unemployment is the key. If we could just incentive companies to do more hiring, increased employment levels will lift the economy. But, this is folly.


It's like a patient with Pneumonia. It would be a poor doctor indeed that believes the proper way to treat the disease is by just getting rid of the headaches, or southing the cough, or addressing the nausea. Cough medicine or aspirin will only temporarily relieve the symptoms. If the disease isn't treated, these symptoms will just return and the patient will continue to get sicker.

Treating the disease with antibiotics and bed rest will attack the main cause. As the patient gets better; the cough, headaches and nausea will take care of themselves.

The economy is a similar situation. What's needed is an overall solution to incentivize investment and change the negative perceptions about the economy. A rising overall economy will put people back to work and enable the housing market to recover.

However, failing to address the overall economy and focusing instead on the symptoms of a bad economy like unemployment or housing prices won't fix anything. We've already had "cash for clunkers" and several plans to reduce the foreclosure rate, among other misguided fixes. But, nothing gets better and stays that way.

Politicians who support the next plan to reduce unemployment or prop up housing prices without sufficiently addressing the overall economic problems are either panderers or fools.

Don't buy into these cheap fix proposals.

About the Author: Tom Hutchinson
Tom Hutchinson is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of The High Income Factor. Discover more by Clicking Here Now.



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TomHutchinson
The U.S. economy is sick. If it isn't properly cared for, it will eventually get much sicker and maybe die. It's no secret that we are on an unsustainable path. Experts estimate that Medicare, Social Security and interest on the debt combined will take up 80 percent of tax...
Treating,symptoms,Cure,Disease
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2011-59-05
Monday, 05 Dec 2011 09:59 AM
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