Thursday, July 15, 2010
Why the recession is lasting so long
The thing that people don't realize is that in order to buffer the effects of the economic crisis, the government spending has spread out the negative impact over a longer period. So instead of a major pain and a relatively quick recovery, we are getting a long drawn out pulling of a big nail embedded in our muscle. This has been shown the case in every past attempt of the government to spend its way out of a depression or recession regardless of which party is in power. By spreading out the pain, it also accumulates overhead and interest. It is like the difference in total cost of a house by either buying it outright or getting a mortgage and paying a huge amount of interest in the long run. Those who concentrate on the bottom line prefer to get it over quickly. Politicians, of course, prefer the long drawn out period because it gets them more voters in the short term especially when they are campaigning. Nothing seems to garner votes than the promise of giving away money. If this was all there was to it, even fiscal conservatives could tolerate taking the long drawn out pain plan. The trouble is that government doesn't stop spending. It mistakenly takes the periods of positive direction as excuses to increase spending even though the recovery from the previous downturn hasn't been truly addressed. Our current economic crisis has many factors, but one that really hasn't been discussed is that it was built on the downturns that resulted in the savings & loans bailout and other government attempts to alleviate past major economic downturns. Until we bite the nail and vote for people who will control government spending instead of promising to give us money, we are only heading for an even bigger economic crisis in the future.