Friday, February 26, 2010

Housing Data Improves, Long Road Ahead

http://www.forbes.com/2010/02/17/housing-starts-increase-markets-equities-indicator-update.html

Economic Terms:

1. Housing Start – the nationwide number of such instances per period used esp. in the U.S. as an indication of economic growth or decline
2. Department of Commerce – the department of the U.S. federal government that promotes and administers domestic and foreign commerce. It works to promote American business interests at home and abroad.
3. Housing Market – The U.S. housing market includes the construction, sale, and resale, of all residential properties across the country. Even though it's only focused on housing, conditions in the housing market are indicative of the state of the economy as a whole.
www.dictionary.com

People Mentioned:
David Joy - the chief market strategist and chairman of the Capital Markets Committee for RiverSource Investments, a subsidiary of Ameriprise Financial, Inc. Joy serves as chairman of the RiverSource Investments Capital Markets Committee, which comprises the company's senior investment and economic leadership.

The economic activity describes in this article emphasizes the slow and steady breakthrough of the economic recession. This article explains how the housing industry is beginning to thrive again, as statistically analyzed by the number of housing starts in January. This is said to be one indication that the economy is slowly starting to strengthen again. There seems to be a direct correlation between the number of housing starts and the economy. More people are buying houses right now and are being encouraged to buy houses with the assumption that they will be able to keep their jobs to pay for them. David Joy expresses that although there has not yet been a phenomenal breakthrough, economic improvement is perceived as being modest right now and that people are becoming more comfortable and confident spending their money. Housing starts hit their highest number reached since six months ago. However, there has been a decline in the demand for new home builds due to the excess amount of inventory spread throughout the United States. Also, the Department of Commerce explained that these housing starts were up 2.8% in January to a seasonally adjusted 591,000 units.

This is happening because plummeting prices and cheaper mortgage rates lured some buyers. Another reason this activity is occurring is due to all the governmental actions of injecting capital into the credit system and the tremendous incentives given by the government. These incentives are helping and are predicted to continue helping all homeowners, stabilizing the banking system, and stabilizing the huge amounts of capital being injected into the credit system are all other reasons as to why the housing market and housing starts statistics are improving. In addition, there are historically low interest rates of houses right now for people wishing to buy a home for their first time or those wishing to buy a new home.
In essence, this economic activity is occurring because of the low interest rates on houses right resulting from the economic crisis of recession the United States is currently suffering from. Real estate is one of those things that are commonly impacted by fluctuating interest rates. Interest rates are the cost of borrowing money. When interest rates are high, this typically creates debt and/or unpaid bills for the homeowner. However, when these rates are low, like they are now, there are fewer bills to pay with lower balances due. So, this prompts people to buy houses when interest rates are relatively low. Another reason stems from governmental activity and the incentives or rewards given by the government. These rewards are beneficial to consumers, the public and banking systems and credit systems, or systems for allowing people to purchase things on credit. They include, lower mortgage and interest rates, cheaper prices for nicer homes, bonuses for first time home buyers and many more.

As an economic commentator, I think next, the economy will progress and strengthen, and the housing starts statistics will continue to increase. Also, I agree with the analysis that the rise in the number of housing starts is an indication of a slowly recovering economy. I hold this belief because I do see other areas that are slowly improving and can be a direct correlation to the economic growth we are starting to see. Also, I believe the housing starts number will continue to increase because things seem to have already gotten worse before they could get better, and I believe that now is the time that things will start to get better.

Monday, February 22, 2010

Child care a key to welfare reform

Economic terms:

Labor market -  the available supply of labor considered with reference to the demand for it.
 
Welfare - financial or other assistance to an individual or family from a city, state, or national government: Thousands of jobless people in this city would starve if it weren't for welfare.

Personal Responsibility and Work Opportunity Reconciliation Act of 1996 -  a United States federal law considered to be a fundamental shift in both the method and goal of federal cash assistance to the poor. 
www.dictionary.com 

This article emphasizes the financial and physical necessity of child care for working mothers' as parents receiving welfare are being coerced back into the labor market by July of this year. Under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, 25 percent of all single parents in welfare families must be working or in job training by July of this year, and 50 percent by 2002. As a result, many subsidized child care slots are full with lengthy waiting lists. Also, those providers in low income neighborhoods have proven to provide higher quality care versus those in middle to high class neighborhoods and there is a dearth of child care arrangements disabling them to return to work. This is causing the deadline for single and dual parent households to return to work hard to meet. Therefore, not only will these parents be ineligible to continue receiving wellfare, they will be out of work still and unable to provide for their children at home with no or very limited sources of income. Additionally, these program are false advertising the availability of child care for all working mothers. The only good part about this welfare reform is the fact that it is gaining more and more awareness for child care and it's great necessity and importance, although it still lacks adequate resources.

This economic activity is occurig because as our government is falling further and further into recession, the funding of more and more programs are being cut, such as those for child care for working mothers. In San Francisco's Tenderloin district especially, this has became a huge epidemic and problem that many do not envision change for. In order for the budget deficit to dwindle, the governor, as well as other governmental figures concluded that the best possiible solution to achieve their goal in a relatively short amount of time is to take away family necessity to gain an economic edge for economic benefit rather than individual benefit.

The reason this event is occuring is because welfare program recipients are becoming increasing dole and lazy, finding comfort in getting a check and/ or unemployment every month without having to work for it. So, this welfare reform is attempting to coerce these parents into the labor market and diminish the ease welfare and unemployment checks provide. However, as a result, the government is implementing a policy that will cut funding for programs, such as child care for working mothers, to aid in getting more tax revenue and money from higher consumer spending due to employment and hopefully lower the economic budget deficit. What they are failing to realize is the complications this goal is proposing by limiting adequate resources to enable mothers to return to work and fulfill the governments goals.

As an economic commentator, I thunk next, the government will foreshadow the detrimental affect the welfare reform will have on working and unemployed mothers alike and be forced to find a remedy to this problem. Therefore, all of the resources for child care availinility may not be restored, but I believe there will be more implemented to see this governmental goal to success and welfare reform to completion. It may be hard and take some time to get organized, I do not believe it to be impossible.

Friday, February 12, 2010

Making Health Care Affordable

Article Citation: http://online.wsj.com/article/SB10001424052748703575004575043123039400004.html?mod=WSJ_economy_LeftTopHighlights

Economic Terms:

1. Status Quo – The existing condition or state of affairs.

2. Premium – the excess value of one form of money over another of the same nominal value.

3. Recession - a period of an economic contraction, sometimes limited in scope or duration.

Source Citation: http://www.dictionary.com

People Mentioned:

1. Stephen Zuckerman - a health economist at Washington's Urban Institute think tank.

2. Helen Darling - Helen Darling is President of the National Business Group on Health (formerly Washington Business Group on Health), a non-profit, membership organization devoted to providing practical solutions to its employer-members' most important health-care problems and representing large employers' perspective on national health policy issues. Darling heads the Business Group's Institute on Health Care Costs and Solutions, devoted to finding practical solutions from a business perspective to the nation's growing crisis of rapidly rising costs and affordability of care.

Description:

The economic activity present here is regarding the rise in the cost of health care and the dearth of financial and social capitalism prevalent in this problem that continues to grow. Because of the state of America’s present economy, not much has been done to contain the skyrocketing prices of health care and to maintain insurance coverage for low-income families and individuals. The cost of health care is depleting the savings and already limited incomes of families and individuals alike. President Obama formerly proposed a health care solution to Congress, inclusive of the “public option” which the House-Senate refuted. With his health care recovery plan, health insurance and coverage would have been provided to nearly all Americans and would have dramatically decreased the cost of health care, making it affordable for all. However, people either suggested that this would do to little or too much of one or the other. Now, there seems to be nothing being done in regards to the health reform after this plan died. Nothing being done about this problem will result in fewer people receiving health care because of the exorbitant costs, and fewer employers will provide health benefits for the same reason. The U.S. health-care tab in 2009 was $2.5 trillion, equal to 17.3% of the nation's gross domestic product. In a new forecast, the federal Centers for Medicare and Medicaid Services predict that without some big change, health care will amount to 19.3% of GDP by 2019. Rather than addressing problems now so they will not progress, by not acting rapidly, problems such as this, will continue to swell the already large budget deficit.

Analysis:

This economic activity can be happening for a number of reasons. In theory, there are many probable causes; however, there are particular theories that pertain to our current U.S. recession and health insurance price inflation than others. The primary reason for the high cost of American health care is that most medical services, technologies, and materials and drugs are more expensive than in other industrialized countries. Additionally, government borrowing is out of control and needs to be stabilized and secured before further damaging the economy of America in this current recession. But probably the most common thought on what causes a recession is due to events that have an economy-wide impact. Some examples of these events would be: increase in interest rates or in consumer confidence. In fact the general consensus is that a recession is primarily caused by the actions taken to control the money supply in the economy. These actions have five primary results which dictate our recession and health care instability: oil rise, inflation, housing bubble, dollar collapse, and global economy.

Explanation:

In essence, this economic activity of recession and exorbitant price inflation of American health care insurance coverage is due to the inherent instability in the capitalist system, lack of responsibility on the Federal Reserve, as well as on the government. Because the United States is a highly industrialized country, our services, goods, supplies, drugs, and technology are far more advances. This fact alone tends to increase prices to maintain their supply in compensation for the high demand of these things. The money used for maintenance on these things is being taken away from higher priorities and necessities, such as insuring American individuals and families should something happen to them. The other specified reason is based how much money the government borrows from outside sources. This has affected the long-term viability of the American Economy. The purpose of this is to actually redistribute income, not acquire more wealth. And because the government pays off its bonds or borrowed funds with tax revenues commanded from citizens, it is able to borrow at a much lower interest rate than private sectors, making borrowing excessive and favored. Furthermore, in the United States, financial equations are to be governed and dictated by the Federal Reserve’s. Hence, their lack of ability to maintain all of these different elements is the overarching cause for this economic activity.

Prediction:

As an economic commentator, I think future steps will either be limited to none immediate in the progression of the American health care system and sustaining the budget deficit resulting in recession. I personally believe prices will continue to rise, recession will continue to be the cause of the percentage of job loses, and the rising costs of health care will continue to deplete the savings and incomes of families and individuals. However, I do see a long-term hope for the future of the U.S. economy to come out of recession if a firm and legitimate plan of action is formulated and implemented. I hold these views because of the dearth of recovery I see in the American economy right now. Everything is halted. To me, it appears as though things will have to get worse than they already are to call the attention to the blind eyes of government to render change.

Monday, February 1, 2010

$100 Billion Deficit Increase is Forecast

Article Citation:

http://www.nytimes.com/2010/02/01/us/politics/01budget.html?ref=economy


Economic Terms:

1. Deficit – When more money goes out than comes in. A budget deficit occurs when public spending exceeds government revenue.

2. Gross Domestic Product – a measure of economic activity in a country. GDP = private consumption + investment + public spending + the exchange in inventories + (exports – imports).

3. Tax Revenues - The other early source of tax revenue was trade, with tolls and customs duties being collected from travelling merchants. The big advantage of these taxes was that they fell mostly on visitors rather than residents.

Citation: http://www.economist.com/research/economics/


Description:

The economic activity here is the debate over President Obama’s proposed plan to lower the unemployment rate while raising the rate of employment by employers and number of job availability. President Obama, previously opposing McCain’s tactic to implement a plan to disregard about 120 programs for the benefit of more salutary priorities such as education, research and energy programs, now proposed this same tactic. However, there is a $100 billion deficit forecasted as a result of President Obama’s recovery plan which will be bigger and more detrimental to the economy than last year’s deficit. His primary concerns underline increasing taxes on big banks, tax credits for small businesses that make new hires and money for infrastructure projects, increasing tax revenues and decreasing spending. President Obama and his budget advisor believe this plan will lower the deficit, rather than increase it due to a combination of renewed economic growth. The President will ask for a bipartisan commission to propose a plan to also balance the budget. If Mr. Obama’s plan is to survive, we will have survived the second worse recession experienced.

Analysis:

Prior to President Obama, President Bush’s decision for U.S. involvement in military enforcement resulting in war, and sending troops to fight a war in Iraq for oil has made governmental spending skyrocket, never compensating or fully recovering from these budget loses. The huge trade deficit is also a cause of today’s economic recession. Another aspect that also crucially matters is the current credit expansion; it keeps accelerating. But the problem is that more and more credit creates less and less economic activity, as measured by GDP.

Explanation:

This economic activity occurred due to a prolonged history and progressive problems of economic instability that was never rectified. President Bush left our economy extremely corrupt, furthering the corruption of the economy in our current recession and making it more challenging to rectify them in the midst of crisis. Our current economic crisis and recession is primarily a post-war effect that has never been atoned for. Additionally, the excess and unnecessary spending of money, consumer spending, and the excess borrowing of money and credit have resulted in the second worse economic recession which we are now experiencing.

Prediction:

As an economic commentator, I personally believe that this economic recession will continue to progress so long as our government is limiting the necessary supplies and resources for consumer, employer, and employee advantage. Although I do believe we as a nation are taking slow but progressive steps towards surviving this current recession, I do not believe enough progress is being made at the pace it should to bring about the economic growth, security, and equity we Americans have been seeking. As we are staying relatively consistent in limited progress through this recession, other nations and countries are suffering as a result. Our inefficiency is hampering the economic growth, security, and equity other countries seek as well. I hold this view because I of the news I have heard regarding “progress” the government is making and because I continue to witness the detrimental affect on our society the economic recession is fostering. I do believe our country as well as others will come out of this recession, but what I do not know is when and the duration of this economic activity. However, I do believe things will get worse before they get better.