Yielding Wealth | Personal Finance

What Would I Do to Fix The Economy?

by miranda on March 14th, 2008

As many regular readers know, I’m not a big fan of recent “economic stimulus” efforts. They tend to be band-aids rather than solutions. And Jennifer Hofmann at My Organized Biz asked me what I would do.

So here it is:

There is no way for the government to fix the economy. And it can’t happen in a short period of time. These things are cyclical. Downcycles are inevitable. Trying to prevent them at all actually makes the economy more unstable, as we’ve seen since the last economic stimulus a few years ago (during G.W. Bush’s first four years). But if the government must meddle now (and government always does), it could focus on things that might help us “regular” folks. And do things that change the way the economy works right now.

Control of the economy should be returned to traditional middle class values of saving, working hard, and using credit sparingly, and not left as a debt-based economy designed to promote excessive consumerism and usurious earnings by creditors of all stripes.

And it’s all about prioritizing what’s in important in terms of spending.

I don’t think that bailing companies out constantly is overly helpful. At least, “saving” their stock values only teaches them that when they are stupid, the government will be there for them. That said, some help is needed in the financial sector. Mass bank failures would be devastating to everyone. But it should come with a price: Regulation.

Basic rules (not over-regulation) should be established to ensure that someone can pay for any home loan that they get. This means that borrowers should be approved at the re-set rate, and not at the teaser rate. Income verification should be more rigorous. I went through an income audit for my self-employment earnings so that I could get a decent home mortgage loan rate. Even though it was harder for me to get a home loan (I refused to pay the interest rate premium for a “stated income” mortgage), in the end I benefit for taking the trouble. This sort of thing should be explained to borrowers.

Better education should be taught about finances. Start teaching children in schools the value of money, and the expenses of credit and the problems associated with living beyond their means. This is something that could easily be added to the math curriculum.

Finally, the government should prioritize its spending. Part of our problem comes from the fact that too many hard working middle class families have problems  making ends meet due to sky-rocketing health care costs and, now, transportation costs. Stop subsidizing oil companies and giving them tax breaks. Funnel money to research for alternative energy that would wean us off our fossil fuels (which also contribute to health problems and safety hazards). It would be less expensive as well. And universal health care would actually decrease the cost per person. This could easily be paid for if we stopped giving funding to the militaries of other countries. We wouldn’t even have to get out of Iraq (although that alone could pay for universal health care). Imagine if we weren’t responsible for portions of the military budgets of dozens of countries…

We live in America. We should be innovating ways to make things better, but cost less. Instead we’re maintaining the status quo. And paying for it with borrowed money.

Do you agree? Disagree? What would YOU do?

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