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Our economic crisis. How to fix it

Henry Blodget at Business Insider says our we are in an economic crisis and our financial system is a mess. Both parties are to blame along with the rest of us, and if we don’t work together to fix it he says (sounding like a socialist rather than the editor of a major business blog), “we’re going to become a nation of a few million landed aristocrats and 300 million serfs.”

He presents several dozen charts to explain what’s gone wrong. I highly urge everyone to read them. They’re easy to understand and his points are clear.

Here’s a few highlights:

“Real personal income per capita”–the amount we each take home after adjusting for inflation–is about where it was a decade ago.

Sounds like a lost decade to me, like what Japan had.

The problem isn’t taxes because corporate profits are at an all-time high. But the profits don’t flow through to most people, they stay at the very top. Unemployment is high, wages as a percent of the economy are at a low.

The red line is debt, the blue line is GDP

Our biggest problem is skyrocketing debt, which is now 350% of GDP, and widly higher than GDP growth. This clearly is insane and unsustainable. Consumers, businesses, and all levels of government have borrowed way too much. This is the core of the economic crisis.

All of us need to borrow less and companies need to pay more in wages

Yes, this means corporate profit margins will drop. But they can drop a long, long way and still be “above average.” And this is our country we’re talking about. If corporations really are people, it’s time for them to start acting like people–and sharing their wealth.

Now Blodget is sounding like a populist. More, please!

The federal government is currently spending far more than it makes. This must be reversed.

We have to raise taxes as a percent of GDP  and/or cut spending as a percent of GDP . And given that there are 320 million of us who have to agree, we should probably compromise: A little of both.

Social program spending by the federal government is much higher than military spending, specifically for Social Security, Medicare, and Medicaid. This spending must be cut but it needs to happen slowly so the economy doesn’t get clobbered while it’s happening.

I agree. We also need to stop our lunatic adventurism across the planet, bring the troops home and leave them here. We also must stop bailing out insolvent big banks. Let them fail, preferably after arresting their CEOs.

Blodget’s crucial point is we all need to work together now. The pointless partisan squabbling must end. Serfdom looms if we stay divided.

  • http://twitter.com/jklundell Jonathan Lundell

    He had me until he brought up the SocialSecurityMedicareMedicaid program. Don’t think I know that one. Lumping three programs together ought to set off alarm bells. SS has been running a surplus, with a relatively modest projected shortfall. And what accounts for the Medi-stuff deficit explosion is exactly a huge increase in health care costs, public and private. Reduce health care costs to those of Canada or Japan or France and we’re running a surplus. So let’s have another slide or three, please.

    • http://polizeros.com/ Bob Morris

      Good points. Our health care costs are much higher than in other industrialized countries.

      • Steve G

        Yes, consumer costs, but not actual costs. I’m all for corporations making a profit, but this greed the healthcare industry has, has gone on long enough. But even if there was an affordable option for all it wouldn’t solve the crisis we are in.

        My ideas that we need to do are the following:

        1) Get rid of farm and oil subsidies. Eating so much corn is not healthy. Besides there are cheaper easier grains to grow than corn that are more healthy. I’m not going to argue that sugar is sugar is sugar, but eating so much sugar isn’t healthy. That you can’t argue with. Also we need mandatory labeling for genetically modified food, of which I saw a report that claims that 70% of the food we eat in the USA is genetically modified. Anybody know if that figure is actually true?

        2) Legalize marijuana (not all illicit drugs, just this one). The tax revenue and job creation and savings from not having to worry about marijuana and go after more serious drugs and crimes would be worth it alone.

        3) Force the healthcare industry to work on static margins. Just because they can charge you $100 for a couple of aspirin doesn’t mean they have to.

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