For economy, immediate overhaul necessary

January 12, 2009 by Yamini Piplani 

Working class important for sustained growth

 

In times of desperation, it seems like nothing anyone says or does makes any difference. This is the state of consumer confidence today. Consumers have gained little to no confidence in the system, ignoring all efforts by the government to stimulate the economy. 

For the past year, many fancy promises for change have been made to American voters. From saving the collapsing stock market, completely revamping the health care industry and fixing our bureaucratic immigration system to directing money toward the education system and increasing the Pell grant, the incoming Obama administration has set higher goals for itself than any previous administration has in my lifetime. 

While President-elect Barack Obama is desperately explaining the importance of his economic stimulus package to members of Congress, to the understanding of an average person, this stimulus plan is far away and will not have an impact in the short term. 

Pumping money into infrastructure projects or giving small tax breaks to businesses that hire more employees might be the right solution to bring the economy out of a recession eventually, but in the short term it will do nothing for those who have lost their homes to foreclosure or are unemployed and have no special skills.      

Nevada has one of the highest rates of foreclosure in the country, and the unemployment rate in this state is well above the national average of 7.2 percent, which in itself is at a 16-year high. The last figure, calculated in November, was at eight percent. This means that at the last count, eight out of every 100 eligible Nevadans were actively pursuing a job but were unable to find one. 

What is more depressing is that this figure does not include those whose hours have been cut, pays have been reduced or who have given up on looking for a job because the market is just so bad. If those people are included in the estimate, some figures calculate the unemployment rate at around 12 to 14 percent. The number of people filing for welfare has been steadily increasing. Even with extended unemployment insurance, there are significantly more struggling people in Nevada than there were a couple of years ago. 

Everywhere you go there is some talk about the bad economy. Businesses are firing employees left and right, hours and/or pay are being reduced, and even the state government is so short on money that colleges and Clark County School District schools are firing teachers and cutting funding to programs that have been proven to help students (fine arts, academic and athletic). 

Unfortunately, this budget shortfall is likely to perpetuate Nevada’s abysmal graduation rates. People from Nevada know better than most that being in a place that is highly dependent on tourism in times of a recession is not good news. When the economy is in a recession, the tourism industry sees a huge decline (which it has) because travel, just like other luxury goods, is expendable. 

So, there are less people spending on the Las Vegas Strip which leads to less gaming taxes being paid to the state government and eventually, less money being spent on Nevadans. It has gotten so bad in Nevada that even the porn industry isn’t doing too well and some strip clubs and brothels are seeing a major decline in revenue. Who would have thought that perhaps sex doesn’t always sell? Maybe this is a good time to focus on all those ignored warnings of economic diversification.         

We all know that even after throwing hundreds of billions of dollars to banks, saving our auto industry and sending checks to people across the country, consumers are still hoarding their money and sales across the board have declined. Even the supermarket mogul Wal-Mart showed some losses in previous months.  

Simple economics tells us that when people hoard money, businesses and owners are not only left with lower revenues, but they also have to compensate by firing more employees or reducing wages. When both the public and the private sector are suffering and the federal government is busy bailing out big banks, an average person can’t do much but speculate about the future and save as much as he can for the worst-case scenario. 

The fact that consumers aren’t buying or investing in the stock market should not come as a shock at this point. The same old conservative economic theories of trickledown economics have to be rethought. And let’s admit it, even some of the most economically conservative ones among us supported the bailout of Wall Street as well as the auto industry by the federal government. 

If members of Congress only took a few days to pass a $700 billion bailout plan for failing banks, they can surely fork up some money for the sake of the people who helped elect them. And I’m sure that if Congress does decide to help those who have gone through foreclosures or are unemployed, unlike some “important” banks that needed to be “saved,” they won’t go for an extravagant vacation with taxpayer money. 

All eyes are on the president-elect now; new leadership might change the pace of things. His promises have given some hope to many struggling Americans, but we can only wait and watch if he can really save our deteriorating economy like many of us hope he can.