Anonymous asked in Politics & GovernmentPolitics · 9 years ago

Does the current economic situation and debt crises expose the greatest weakness of democracy?

That basically people can't balance a budget?

People want more spending, but also want lower taxes. They vote for leaders who promise tax cuts and spending increases. People see the government's spending as someone else's money, they are happy to leave someone else to foot the bill. And politicians, seeing the short term political gains of it, are happy to leave it to the next government.

People only start complaining about deficits and debts when they reach crisis levels; and even then, no one wants to pay for it. Look how unpopular the austerity measures in Europe are, despite the desperate need.

We should be able to run surpluses during economic prosperity, and only deficits during recessions and slowdowns, so that over the medium/long term the budget is balanced.

3 Answers

  • 9 years ago
    Favorite Answer

    The debt crises expose a weakness of Capitalism, not Democracy. In feudal societies, the Crown always amassed capital and only went into debt during times of war. In lean times, serfs who couldn't get enough food simply died. Fredrick Hayek, a Nobel Prize winning economist from the first half of the 20th Century, proposed that a wealthy nation should cover basic human needs such as food, shelter and health care while Capitalism should thrive over and above. We do this to some extent in the US and to a greater extent in other parts of the civilized world.

    Major economic transitions never occur without bumps along the way. Our recent severe crash was no less dangerous than the crash of 1929 but the pain and suffering was dramatically less severe this time, indicating that Keynes was correct in the need for market intervention. I've heard people compare the recent recession to the Great Depression but let me ask you... Was there ever a day that you went to the store for a quart of milk and there wasn't any?

    It's human nature to panic when the markets hit a serious snag, like the housing bubble. Banks withdraw from the credit markets and a credit freeze ensues. Businesses can't get the cash they need to operate and the economy grinds to a halt. The only available money is government money. If the government doesn't feed the need for capital, the economy sinks into depression. This is what happened in 1929-1930. The Hoover Administration did nothing to help the frozen credit markets and the Federal Reserve made it worse by tightening the money supply.

    We have officially been out of recession for two years but growth is sluggish and the labor market hasn't recovered. First quarter this year we had an annualized growth rate of 2.2 percent. Our labor trouble has been slowly correcting itself as well. At our current rate of growth, we will never be able to get a handle on our debt or deficit spending and it will be years before the labor market recovers.

    What we need, really need, is to get the blue collar workers back on the job, earning an income instead of getting a support check. Not only will the government be able to stop sending them a check every month, they'll be receiving income tax revenue. A large segment of the unemployed are construction workers and that stands to reason since our crash was centered around residential real estate. We don't need any new homes right now because there are plenty of empty ones already. When asked what to do about our economic woes, Alan Greenspan, former Fed Chairman, said "Have the government buy up all the empty houses and burn them to the ground." He was joking of course but he was poking at the actual problem. If there were no empty houses, our construction industry would recover overnight and dramatically stimulate our overall economy.

    I'm thinking the government should buy up all the empty houses, at a fixed rate based on recent foreclosure prices in the respective neighborhoods. Banks the government purchases these houses from should be granted a multi-year moratorium on capitalization requirements as they will be forced to write down the value of the loans currently on their books for these houses. The houses could then be sold using 30 year fixed mortgages to anyone that can meet minimum income and stability requirements with no money down. These "healthy" loans could then be sold to any interested banks, investors or retained temporarily by the government. Everyone knows that foreclosure houses are a great deal but you have to have the full price in cash to get them. Being able to offer a 30 year fixed mortgage at these reduced prices makes the bargain available to a much larger segment of the population. I bet a lot of parents would cosign for their young adult children to get into their first home even.

    Yes, we could get the construction industry back to work almost overnight but at what cost? Our debt-to-GDP ratio would obviously go up because the stimulus would be expensive but would we be better off? While our debt-to-GDP ratio is high, we're nowhere near a debt crisis. Japan had ratios almost double ours in the '90s and they were able to absorb it and come out ahead. We are nowhere near the troubled States in Europe. If the austerity hawks in the United States would stop thinking of macroeconomic issues as if they function like their own personal checkbooks, we might be able to grow out of this anemic economy.

  • 9 years ago

    Agree on all your points.

    The biggest problem we have in my humble opinion is the FED. We need to abolish the Federal Reserve bank. They are about as Federal as FEDEX is. In other words they are a private institution that is owned by the wealthiest bankers in the world. They represent the major banks. Facts about the Fed:

    1. The money they print is borrowed to the U.S. Government in exchange for U.S. bonds. The FED charges interest for each dollar printed. The U.S. taxpayer pays the interest.

    2. The FED uses Fractional Reserve banking (which is also the model in most European countries) which creates money out of thin air. Here's a good link explaining how they do that:

  • 9 years ago

    Yes, there are flaws in democracy, but I believe there is no such thing as the perfect government. Let's go back to Plato. The perfect world. The world over the world, If you would. To achieve perfection in government, we have to ask, how would it work? It might be like democracy, except everyone would be honest, thoughtful, and would plan ahead. But then, that wouldn't work, because humanity doesn't work like that. So, before try to perfect politics, music, anything, we must first achieve human perfection. Then we must ask ourselves-what is the perfect human being? Honest, kind, caring. IQ does not factor in, we need the less smart people. So until we achieve perfection in humanity, we cannot, and never will, be able to create the perfect government. And then, even if we do create the perfect human being, would it still be human? What if you need both ends of the spectrum, that humanity can be so good, so kind, so loving, because we can be so destructive, cruel, and brutal? So, I guess my point is, shut up.

    Source(s): I am fourteen.
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