3.9 Inflation

"Why Economists are Rooting for Inflation" was written by Stephan Gandel and was published on 10 January 2012. The article is about how a growing number of economists are arguing that rising prices are exactly what we need to cure our the current economic maladies.There are two reasons these ecomomists feel this way. One, inflation would shrink the value of the debts both the government and borrowers have to pay, improving our collective balance sheets. Higher salaries would also make it easier for borrowers to pay back their loans helping banks. Two, and this might be the more important reason now, inflation pushes people and companies to spend money.
 

They also argue that higher inflation could make it harder for China, and others, to continue to peg its currency to the dollar. If the dollar falls in value, that would make U.S. goods cheaper abroad and hopefully stimulate demand.Some members of the Federal Reserve do seem to be on board with the idea that we need more inflation.There might be a better way but that would have to get passed in Washington, which isn’t doing much of anything these days and is unlikely to do anything big in an election year. That is why inflation is becoming a popular solution.
  

1. Why is it bad for the economy for consumers to save or pay down debts?

Consumers would use extra money to pay off debts.

2. How would inflation help people pay off debts?

Inflation would shrink the value of the debts both the government and borrowers have to pay

3. How can inflation stimulate spending?

Inflation pushes people and companies to spend money.
4. The author argues the Fed should allow inflation to increase, how can they do this?
It could raise interest rates.

5. Why does the former Fed Chairman warn against using inflation as a tool to help the economy?

The stimulative effects of inflation are short-lived, but the damage of higher prices can last for a long-time

6. What alternative does he suggest? What would that end up causing?

He suggests that government spending should boost the economy and institute a delayed consumption tax. that would  end up causing a boost in demand.

7. What would be a positive impact of a national sales tax?

It could raise money for the government.

8. What would be a negative impact of a national sales tax?

It could make things more expensive.

9. What does the author mean when he says "It's something the Fed could do on its own, and get done now"?

The Fed could raise or lower inflation and they would not have to go through Washington to raise or lower inflation.

3.8 Spending and Infrastructure

    "Why your Prius will bankrupt our highways" was written by Jordan Weissmann and was published on 2 February 2012.The article is about how gas taxes have funded our roads for decades, but our fuel-efficient cars and tax-allergic Congress are leading to an infrastructure break-down. House Republicans unveiled a highway spending bill that would cut funding for Amtrak and nix high-speed rail projects. And it would pay for its $260 billion price tag partly with royalties from expanded offshore oil drilling. This bill dead-on-arrival in the Democrat-controlled Senate.
    The federal government has maintained a Highway Trust Fund, paid for mostly by taxes on fuel, that helps cover the repair and construction of our country's roads, bridges, and mass transit. Congress hasn't raised the gas tax since 1993, and since then, inflation has eaten away at least a third of its value. Americans are now using less fuel than they did just a few years ago. As a result, they're paying fewer gas taxes, and less money is flowing into the Highway Trust Fund

1. Why won't the Republican sponsored bill at the beginning of the article ever actually become law?
The Senate is controlled by the Democrats. 
2. What is the Highway Trust Fund?
A bank account paid for mostly by taxes on fuel, that helps cover the repair and construction of our country's roads, bridges, and mass transit
3. What does the article mean when it says "inflation has eaten away a third of its value"?
That the gas tax isn't worth as much as it should because inflation is depleting the value of a dollar. 
4. How is it actually both a good and bad thing for Congress that Americans have consumed less gasoline?
It is a good thing because Americans are caring about fuel efficiency which helps the environment, but on the down side it 
5. Explain what Exhibit 2.19 shows us.
HTF Baseline Forecast vs. Conservative Forecast
6. Explain what Exhibit 2.21 shows us.
The Annual Federal Revenue Needed to Maintain Current Highway  and Transit Program Purchasing Power
7. How have the Obama Administration's new gasoline consumption standards created new challenges for Congress?
Congress would have to make sure that current system's funding would be obsolete.
8. What are potential solutions to the problem?
Moving to a system that charges motorists based on the number of miles they drive, rather than the gas they burn.

3.7 Obama's critics are right

The author of this article completely disagrees with Andrew Sullivan from the previous blog. Whereas Sullivan thinks Obama has dome so much for the country, David Frum thinks that Obama is the worst thing that has happened to the nation in a while. Frum agrees with all of the critisims that Obama has. 

Frum believes that Obama is spending way too much federal money. Frum also believes that Obama is a Kenyan socialist who is reorienting the country toward more dependence on the federal government. He feel that Obama is saying "this job is too hard for me, " because of the Senate not approving his nominations to the Federal Reserve Board. David Frum does not feel that Obama is a very good president.

1. How does Frum argue that Obama is creating a welfare state?
 Frum argues that Obama is creating a welfare state by refering to Social Security judges.  The Social Security Administration has been awarding more and more disability pensions: with unemployment higher, more people are seeking help—and with jobs scarce, more judges are saying yes.
2. How does this create a snowball effect within the federal government?
Of course, as the federal government manages more and more disability pensions, it must hire more judges and administrators to hear and process those requests. Federal hiring has been more than offset by layoffs at the state and local level.
3. How does Frum argue that Obama is tampering with the market rather than using economic incentives to change behaviors of consumers?
Frum says Obama is raising taxes on important products and the letting consumer choose how to conserve that product.
4. How does Frum characterize "Obamacare" differently than Sullivan did?
He says that Obamacare is causing the government to spend more money on healthcare than what it`s been spending.
5. How was the situation in Britain in the 1990s similar to what Obama is doing to America now?
Over the decade, the public sector provided more than half of all the net new jobs in three of the four main economic regions of England—and 80 percent of the net new jobs for women.
6. How should Obama have handled the economic stimulus in response to the recession of 2008?
Obama should have hired more Federal Reserve Board members to deal qith the monetary problems or recession.
7. Obama does not control what the Federal Reserve does, but how has he influenced it?
He nominates the members of the Federal Reserve Board
8. What will Obama's biggest foreign policy issue be in the coming election year?
Germany’s unwillingness to work with or trust Obama's administration’s ideas for saving Europe from itself.

3.6 Obama's Critics are Wrong

Obama, being in his last year of his first term, is being critiqued unmercifully by Republicans and Democrats. This happens to all presidents but author Andrew Sullivan believes that the critisims are wrong. The far right believe that Obama is a socialist and is trying to change the way America handles things. The far left believe that Obama is "a hapless fool of Wall Street a continuation of Bush in civil liberties, and a cloistered elitist unable to grasp the populist moment that is his historic opportunity."Sullivan believes that even though he has not agreed with everything Obama has done during his time in office, Obama has delivered in a way that the "unhinged right" and the "purist left" have not absorbed or been able to understand.

1. What does Sullivan say about presidents in the last year of their first terms?

He will always get attacked mercilessly by his partisan opponents, and also, often, by the feistier members of his base.

2. What are the main criticisms of Obama from the right?

The right’s core case is that Obama has governed as a radical leftist attempting a “fundamental transformation” of the American way of life.

3. What was America's economic situation when Obama assumed office?

A recession

4. How have Obama's responses to the problem been interpreted by the right?

The right claims the stimulus failed because it didn’t bring unemployment down to 8 percent in its first year, as predicted by Obama’s transition economic team

5. What typical Republican stances has Obama taken while in office?

TAX-CUTS!

6. In what ways is "Obamacare" a pretty conservative reform of the health care system?

It is based on the individual mandate, an idea pioneered by the archconservative Heritage Foundation, Newt Gingrich, and, of course, Mitt Romney.  It does not have a public option; it gives a huge new client base to the drug and insurance companies; its health-insurance exchanges were also pioneered by the right.

7. Why is the left wrong to be disappointed in Obama's performance so far?

The simple scale of what has been accomplished on issues liberals say they care about. 

8. How is Obama communicating his accomplishments to the public?

Obama is that he practices a show-don’t-tell, long-game form of domestic politics.

9. How does Sullivan characterize Obama's pattern of responses to problems?

10. When does Sullivan concede that Obama has made mistakes in office?

Obama has waged a war based on a reading of executive power that many civil libertarians, including myself, oppose.

3.5 Obama - State of the Union - 01.24.12

    On January 24, 2012 President Barack Obama gave his State of the Union Address. This responsibility is given to the President in Article II Section III. The President gives the State of the Union Address to Congress annually. The address not only reports on the condition of the nation but also allows the president to outline his legislative agenda (for which he needs the cooperation of Congress) and his national priorities. Originally intended as a communication device between the President and Congress it has also become a communication device between the president and the people of the United States.
    President Obama addressed his agenda for the coming year. He wants a country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs. A future where we’re in control of our own energy and an economy built to last. Obama would like an America that is built to last.
    Obama says "Nothing will get done in Washington this year, or next year, or maybe even the year after that, because Washington is broken." He believes that neither party can take the blame for this, but both are needed to put an end to it. He addresses his opponents by stating that we need to bridge our biggest philosophical differences this year,  and make real progress. "As long as we are joined in common purpose, as long as we maintain our common resolve, our journey moves forward, and our future is hopeful, and the state of our Union will always be strong," stated Obama in his closing remarks.

I liked how Ruth  Ginsburg fell asleep during the speech, I was right there with her dozing off when I thought no one was looking.