How The Recovery Went Wrong Summary
Nick Jensen
Webber International University
MBA632 – How the Recovery Went Wrong
7/6/2012
How the Recovery Went Wrong
In “How the recovery went wrong”, Mr. Golub argues that even though the economy is moving in the right direction, it is the slowest and worst recovery from a recession in the last 60 years. Mr. Golub points out that all recoveries will “go in the right direction” by definition but in spite of President Obama’s continuous reassurances of the economy’s positive development, going in the right direction is not enough. The two most significant indicators of a recovery, job growth and GDP growth, show below-average figures and backs up Mr. Golub’s claims. Both indicators rank at the bottom of the 11 recoveries through the last 60 years and signify the economic problems. The government has used all the tools available to get the economy going as an attempt to make people spend …show more content…
more money and thereby increase the flow of currency. However, the stimulus of money supply was poorly executed and focused on the wrong aspects of the economy. As a result of the “antibusiness rhetoric” and various regulatory initiatives made by the government, the economy is currently in a recovery that “is one of the weakest since World War II”.
Government interaction in the form of “fiscal and monetary stimulus” along with lower interest rates has not created typical effects on the economy but has instead discouraged people from saving.
In fact, the low interest rates have been more beneficial for the government, banks, and homeowners rather than businesses and individuals. The stimulus that has been in effect since 2008 now amounts to a total of $5 trillion which is a third of the annual GDP and it is likely that he large stimulus package will have a momentary positive effect. However, Mr. Golub believes that the money has been invested in projects, institutions and industries that haven’t showed any positive results. For example, huge amounts of money was spent on government employees, training programs that turned out to be failures, and unemployment benefits which discourages individuals from searching for jobs. Instead, the money should have been spent on initiatives that can sustain the economy in the long run like “building infrastructure or other assets that will help the nation create wealth over
time”.
Basically, a recovery needs borrowing and spending from individuals and businesses, and the government failed to achieve this scenario because of poor choices of focus. Instead of encouraging entrepreneurship and investments, the government put their attention to “electric cars or wind and solar power”. Furthermore, the government initiated a wide range of “regulatory actions” that limited the coal industry while implementing ObamaCare with incorrect projections of “costs and effects”. All these actions by the government were put in place without paying any attention to budgeting “government expenditures” which have increased the national debt significantly and have to be paid back at some point in time.
Mr. Golub also states that President Obama and the government have created a “negative environment” where businesses are discouraged from “investing in the future” and individuals are “less willing” to spend all of their disposable income. This scenario has formed due to Obama’s plans of raising taxes for businesses and high-income individuals. The plan has been expressed numerous times by the president even though “the top 1% of earners actually pay as much as the bottom 90%” while the bottom half don’t pay any income taxes.
In conclusion, the recovery went wrong because the government failed to address the areas of the economy that were most crucial. Instead, they chose to focus on projects that didn’t have any effect while establishing a negative environment for businesses and individuals. Additionally, the low interest rates resulted in a situation where the government has “subsidized increased spending by penalizing savings”. The $5 trillion dollar stimulus was managed poorly and didn’t help the economy recover at the pace that was needed.
Webber International University
MBA632 – How the Recovery Went Wrong
7/6/2012
How the Recovery Went Wrong
In “How the recovery went wrong”, Mr. Golub argues that even though the economy is moving in the right direction, it is the slowest and worst recovery from a recession in the last 60 years. Mr. Golub points out that all recoveries will “go in the right direction” by definition but in spite of President Obama’s continuous reassurances of the economy’s positive development, going in the right direction is not enough. The two most significant indicators of a recovery, job growth and GDP growth, show below-average figures and backs up Mr. Golub’s claims. Both indicators rank at the bottom of the 11 recoveries through the last 60 years and signify the economic problems. The government has used all the tools available to get the economy going as an attempt to make people spend …show more content…
more money and thereby increase the flow of currency. However, the stimulus of money supply was poorly executed and focused on the wrong aspects of the economy. As a result of the “antibusiness rhetoric” and various regulatory initiatives made by the government, the economy is currently in a recovery that “is one of the weakest since World War II”.
Government interaction in the form of “fiscal and monetary stimulus” along with lower interest rates has not created typical effects on the economy but has instead discouraged people from saving.
In fact, the low interest rates have been more beneficial for the government, banks, and homeowners rather than businesses and individuals. The stimulus that has been in effect since 2008 now amounts to a total of $5 trillion which is a third of the annual GDP and it is likely that he large stimulus package will have a momentary positive effect. However, Mr. Golub believes that the money has been invested in projects, institutions and industries that haven’t showed any positive results. For example, huge amounts of money was spent on government employees, training programs that turned out to be failures, and unemployment benefits which discourages individuals from searching for jobs. Instead, the money should have been spent on initiatives that can sustain the economy in the long run like “building infrastructure or other assets that will help the nation create wealth over
time”.
Basically, a recovery needs borrowing and spending from individuals and businesses, and the government failed to achieve this scenario because of poor choices of focus. Instead of encouraging entrepreneurship and investments, the government put their attention to “electric cars or wind and solar power”. Furthermore, the government initiated a wide range of “regulatory actions” that limited the coal industry while implementing ObamaCare with incorrect projections of “costs and effects”. All these actions by the government were put in place without paying any attention to budgeting “government expenditures” which have increased the national debt significantly and have to be paid back at some point in time.
Mr. Golub also states that President Obama and the government have created a “negative environment” where businesses are discouraged from “investing in the future” and individuals are “less willing” to spend all of their disposable income. This scenario has formed due to Obama’s plans of raising taxes for businesses and high-income individuals. The plan has been expressed numerous times by the president even though “the top 1% of earners actually pay as much as the bottom 90%” while the bottom half don’t pay any income taxes.
In conclusion, the recovery went wrong because the government failed to address the areas of the economy that were most crucial. Instead, they chose to focus on projects that didn’t have any effect while establishing a negative environment for businesses and individuals. Additionally, the low interest rates resulted in a situation where the government has “subsidized increased spending by penalizing savings”. The $5 trillion dollar stimulus was managed poorly and didn’t help the economy recover at the pace that was needed.