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Friday, May 9, 2008

The Coming Recession

An economic recession is coming, and soon. It is not because George W. Bush is doing a bad job. It's not because of Iraq. It's not because of the housing bubble or gas prices. The reason is far more mundane; it's simply time for a recession.

Anyone who has studied economics will tell you that recessions are a natural part of a market economy. They happen with regularity, and in fact they are predictable (if you pay attention to economics over the decades). Every decade has its recession. The recession is preceded by a slowdown in growth (just as we are experiencing right now) and a downturn in the stock market. Unemployment rises, and government revenues decrease. Companies streamline themselves to remain competitive. The weaker corporations and businesses die out, leaving the remaining economy stronger and more vital. The resulting economy is healthier, and thus begins to climb its way back out of the recession.

This is a process the economy goes through on a regular basis, a natural and necessary cleansing of the capitalist system. It is not pleasant, by any means. People suffer. Yet we are fortunate to live in a country compassionate enough to have developed a safety net. In the rest of the world, which always suffers worse than we do during these times, many are not so fortunate. A friend of Dinesh D'Souza once stated that he wanted to live in America because he always wanted to live in a nation where the poor were fat. In India, and much of the rest of our planet, the poor starve.

The government can either help the process go by quickly (by staying out of the way), or it can hinder the recovery by interfering and over-regulating the economy. Certain enterprises must fail. Those which are under-performing and badly planned need to make way for a bright new crop of entrepreneurs. This is how an economy remains vibrant, fresh, and job-producing. Those industrialized nations that interfere in this process always go through far worse times than we do during a recession, and they seem to last twice as long. Socialism keeps businesses on life support that should be euthanized. This is not good for the health of an economy.

We will go through a recession, though we are still a good distance away from it right now. A recession, after all, is not a decline in growth, but an actual shrinkage of the economy. That hasn't happened yet. It will still take a while for the slow-down to turn into a real recession; this is a process, not an event.

To lessen the impact, there are some very simple steps we can take. First, we need to open up drilling in the Dakotas, Anwar, and the Atlantic and Gulf coasts. Geologists report that when you combine the petroleum these regions contain, we have more than the Middle East. It infuriates me to hear our politicians whining that gas prices are high, then refusing to let us do anything to solve the problem. This leads to the second step-- refineries. We haven't built a new refinery in the United States in twenty years, yet the population here has exploded. Demand is higher, yet the supply, even with cheap oil, is limited. If we can't process the oil, the end-product will remain expensive despite the price of the ingredients.

Of course we should explore alternative fuels, but to do so exclusively at the expense of the economy is just plain stupid. If you want cheap electricity, give people a tax credit for ten thousand dollars toward the purchase of solar panels. The sun is a free resource, and people will gladly take advantage of it with such an incentive. No government money need be spent.

Another easy fix for the economy would be to tax imports from the countries we do business with the exact same amount as they tax our goods. Japan, for example, makes more money in tariffs from the sale of a GM vehicle there than GM does. With a fair-trade policy (as described above), we could not only decrease taxes on our own people, but also level the playing field for American corporations, both here and overseas. Many nations depend on us as a market for their goods. They would gladly get rid of their tariffs in order to remain competitive in our consumer market. The end result of such a policy would be either a booming export business for American products, a renewed home market for our own goods, or a mixture of both. Why we haven't already taken this step is mystifying to me.

Still, whatever we do, recessions will occur, not just here, but in the world economy as a whole. We'll continue to blame our politicians for this, but the mere fact that it is occurring everywhere at once ought to be sufficient evidence to any sane and rational person to the contrary. Alas, there are very few of those around anymore, or at least reporters studiously avoid putting them in front of a camera or microphone. Nevertheless, from the economic signs already in evidence, it's time to hunker down; it looks like we're in for some stormy weather.

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