In last issue’s “Bursting Bubbles: Why the economy will go from bad to worse,” economist Dean Baker examined how the boom economy of the ?90s was built on three unsustainable bubbles. One—the stock bubble—has already burst. The other two bubbles—the dollar bubble and the housing bubble—are still with us, but not for long. These bubbles created the basis for the… return to article
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Reader Comments (15)Page 1 of 1 pagesIt’s heartening to read a constructive look ahead at how the economic disaster created by the Republicans and the growing gulf between rich and poor can be ameliorated. Barry Bluestone and Bennett Harrison address this subject in detail in their book Growing Prosperity: The Battle for Growth with Equity in the 21st Century.
Posted by Charlene Woodcock on May 29, 2003 at 3:27 PM Wonderful piece. Now that we know where we “are” and “what” got us there, what are we going to do about it? I suggest class warfare: bush started with this war on children, women, the poor and the unrepresented. So I say let’s give it to him. Chief Joseph
Posted by JoeSmoke on May 29, 2003 at 3:53 PM Thanks a ton. I’ve been desperately searching for some sort of plan on which to hang my inherent sense of hope. Warfare is warfare, even if its only among the classes, and its always ugly. I’d like to see people take up this idea of an overhaul of the system. They have to realize that they won’t be abandoning the American ideal but rather rediscovering it.
Posted by Boneman on May 29, 2003 at 5:26 PM Bravo, Bravo, Boneman! All we need is the will to win, hard work and we could win this war and “take back our country” no pun intended? Chief Joseph
Posted by Chief Joseph on May 29, 2003 at 5:50 PM As one who works in the secondary mortgage market I contend that there is no such thing as a “housing bubble.” The dot com boom, and bust came because investors expected too much from something of which they knew too little.
The housing market, on the other hand, has shown continuous and steady growth across the decades, proving time and again that housing is one of America’s best investments. Though the current boom has been fueled by plummeting interest rates, there is no evidence that I’ve seen to indicate that rising interest rates would do anything more than bring calm to the market, as opposed to this fictional “bust” that some predict.
I just don’t see it. But, for those who are hoping and praying for economic decline so that Democrats might have a ghost of a chance in the next election, you may dream on.
Regards,
John
Posted by John on May 29, 2003 at 9:18 PM I’m pleased for once to see an article on this site that deals with solutions, even if I don’t happen to agree with many of them. Thank you for an interesting read, Mr. Baker.
Posted by Jon on May 29, 2003 at 10:16 PM This is ridiculous. Yes, everyone should have health-care and child-care, but will the Republicans or Democrats propose such a scheme that actually helps normal people? It’s not so complicated what the author is proposing, but it’s not possible politically. What we are seeing in this economic collapse is the need for the political independence of the working people.
What the author does not mention in the article is how the global economy is fitting into this- except in his advocating a cheaper dollar. What a cheaper dollar does as export the economic crisis within the US to Japan and Europe. That is the purpose of it. These countries are actually in a more depressed state than the US, and Japan especially is on the verge of a banking crisis.
So by advocating unlimited spending by the government, not only does the author ignore that this is politically impossible, he ignores the international implications.
I recommend for people to have a more realistic view:
Posted by Jon on May 30, 2003 at 11:35 AM Of course, its STILL the economy, stupid! The greater burden, as the economy dips lower and lower, still are the states themselves, and ulitmately the local municipalites. The insane tax cuts and the expenses of a needless and politically motivated war have left public services and basic needs in shambles. If you want a basic understanding of how the states are being assaulted by this administration, log on to http://www.tvnewslies.org, specifically http://www.tvnewslies.org/html/assault_on_the_states.html and weep!
Posted by Reggie on May 30, 2003 at 1:06 PM Great… BUT.. unless we address the politically incorrect and charged subject of mass immigration and its impact on our economy and needy Americans, nothing will change. Common sense dictates that if you allow a nations population to grown 20-25% in a decade (37-52 million) and consider that many of the new people are getting governmental aid or NOT contributing to our tax base ( illegals) then all our efforts will be for naught. I hane no problems with any of the new immigrants, but because of unbridled immigration, our schools, entitlement systems and programs such as medicare and medicaid ( designed to assist our neediest Americans of all races and creeds)
are under severe duress as they try to cope with huge increased demands on the systems. The bottom line is that governmental dollars are finite and more people equates to these dollars being whittled down and diverted from existing programs to new or expanded ones needed to serve the increased population. To state otherwise is a skewering of truth.
Posted by Chet Polwin on Jun 1, 2003 at 6:28 PM Mr. Baker brings many good points to light in describing the current economic situation. I believe the housing bubble should be more accurately described as a credit bubble. Healthcare cost are a difficult problem with no real solution in sight with the special interest groups who lobby Washington on behalf of large drug companies. With a growing elderly client base in need of more prescription drugs and new procedures, the issue comes down to one of quality-of-life. Affordable prescription drugs would certainly help but is just a part of an overall larger problem in containing spiraling healthcare costs. Bush’s tax cut was just that, a tax cut with limited ability to provide the necessary stimulus this economy needs.
Posted by eric sorensen on Jun 2, 2003 at 7:37 AM I agree that corporations are out of control and our country has become of, by and for the rich. However your solutions always seem to fall back on massive social programs that hurt the middle guy who is trying to get ahead. Instead of socialized medicine, we need people to take responsibility for their own health. Why should I have to pay for someone elses irresponsible behavior? You always also throw in the environmental issue. Here is another out of control ideal that keeps anyone in small business from doing almost anything. Don’t you realize the economic devastion caused by overegulation? Remember the 3 ways to generate wealth? These have never changed. We won’t get a standard of living by selling services and information. It’s only robbing one guy and giving it to another. Unfortunately it’s gone to the rich robbing the poor and middle class. Let’s bring manufacturing and resource development back to America.
Posted by McPat on Jun 2, 2003 at 11:19 AM Baker couldnt be further off base if he tried. Since 1987 (when Greenspan took over the Fed) the currency in circulation has grown by 273% - or it takes $1.61 to buy what $1.00 would in 1987. Government (under both parties) has grown similary - from about $750billion to $2.3trillion. If government growth, “investment” or whatever else you wish to call it could solve economic problems, they should already have been solved. But they aren’t - why? The sole cause of the economic problems we face today is TOO MUCH GOVERNMENT - yet Baker’s solutions are MORE GOVERNMENT.
Posted by ron on Jun 2, 2003 at 4:51 PM Congratulations for your continued wonderful work in progress. Just the repetitious concept of BUBBLE is enough to describe your social contribution to better economic policies.
Posted by Mario deSantis on Jun 3, 2003 at 10:27 AM Mr. Baker, I would like you to address another potential problem. Many among my regular middle class friends say they feel bloated by all the unnecessary stuff they have. They are making plans to live a simpler lifestyle. It looks like a trend to me. The U.S. economy is powering the world because we have long been on a buying binge. What would happen to us and the rest of the world if we suddenly came to our senses? What if we stopped buying every new electronic gimmick, tossed away our SUVs and moved out of our McMansions? Is anyone thinking about the steps we might take to make a transition to a sensible economy without hurting people who are barely getting by right now?
Posted by James Hellmuth on Jun 6, 2003 at 7:47 PM James, your friends are in the minority, people are spending less just because they have less (due to stock market and ridiculous taxing) but people (for the most part) still like getting stuff.
Posted by Brad on Jun 7, 2003 at 5:23 PM Page 1 of 1 pages -
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