Sunday, December 15, 2013

-Christmas Shopping?-

Article: As wealthy cinch the purse, holiday spending slides

Author:  Steve Liesman
Date of article: Friday, 13 Dec 2013
News Source: CNBC
            This article discusses the importance of Christmas spending to the well being of the economy. As we all know, most of us tend to spend much more money during the holidays than any other time of year and this occasional, annual burst in spending is great for the current and upcoming fiscal year. But the article takes a quick spin, saying “The CNBC All-America Economic Survey paints a contradictory portrait of consumers and of their finances, and willingness to spend ahead of the critical Christmas shopping season.”
            Even though spending is down, the survey also showed that people are quite optimistic about stocks, inflation and wages. This is nice to see after the slum that our economy had been for some time. Yet “On the other hand, the survey of 800 people nationwide predicts a sharp, 9.4 percent drop in holiday spending this year compared with actual outlays a year ago as measured by the National Retail Federation. Americans plan to spend just $681 this holiday season, about on par with 2009, when the nation was clawing its way out of a deep financial crisis.
            Further reading concludes that this drop in Christmas spending is due to a sharp decline in spending by the wealthy.” Those with incomes above $100,000 plan to lay out $300 less than they did last year, undoing two years of strong gains. But more broadly, overall sentiment about the economy remains muted and incomes severely challenged. There's even evidence that the imbroglios in Washington had a depressing effect on holiday spending.” Essentially, because the rich are spending less, the poor are spending much less in fear of another recession.
            Just 15 percent of the public rate the economy as excellent or good, a substantial gain from 4 percent during the recession that began in 2008 but still well below the 26 percent who thought the economy was in good shape in 2007.Meanwhile, 83 percent rate the economy fair or poor. A quarter of those who will spend less this year say it's because their income is lower; 22 percent report that it's because the economy is in bad shape.

But overall optimism on the economy remains subdued. Just 26 percent say the economy will get better next year. A year ago, attitudes were more buoyant, with 37 percent thinking the economy would improve.” Although, people are more optimistic about the economy’s bounce back than they were before, the recession really lost some its followers and it’s unclear if people will ever have the confidence they once had with their money.

Sunday, December 8, 2013

-The Economics of Marijuana-

Article: States Push to Get Most Out of Marijuana Taxes
Author: Dan Frosch
Date of article: April 24, 2013

Website: New York Times

Marijuana has been used for thousands of years, and hemp itself was for centuries of great importance to the United States economy. But in the early to mid-20th century, many states began to ban the drug, and soon marijuana consumption became illegal under federal law.

One important facet of California's proposition was an excise tax that proponents claimed would bring billions of tax dollars to a state in economic turmoil. From an economic perspective, it seems pretty rational -- imposing a tax on a multi-billion dollar market and cuttting spending on law enforcement will yield more money.Let's think in terms of real dollars: a 2003 study by the Office of National Drug Control Policy estimated domestic spending on cannabis prosecution to be a whopping $29 billion each year. Furthermore, a study commissioned by the United Nations in 2006 estimated the North American cannabis market to be worth upwards of $60 billion per year, more than the combined value of corn and wheat. It seems obvious that the economic benefits would be outstanding, but there are other contributing factors.

First and foremost, it is a basic rule of economics that the easier it is to obtain a product, the less the product will cost. Taking marijuana off the black market and into a legitimate marketplace will make it easier to buy and consequently cause a considerable drop in price. In fact, a study by the international think tank Research and Development Corporation concluded that Proposition 19 could potentially lead to a decrease in the price of marijuana by as much as 80%. If prices were to fall so drastically, it is unknown whether the economic tax benefits would outweigh the social costs.Secondly, the law of supply and demand tells us that as the price of a product decreases, consumption will increase. This is something that legalization opponents are quick to point out, and it is difficult to predict exactly how marijuana usage in the United States would change. 

Nevertheless, the Prohibition Era was notorious for multi-million dollar crime rings involved in the underground trade of alcohol, and the same exists today for the marijuana industry.
The American marijuana trade is a large part of the ongoing drug war with and within Mexico, Canada and other countries. Pro-legalization activists argue that by legalizing marijuana, criminal activity would literally decrease and take the "shady" aspects out of the drug trade.

We may never know exactly what America would be like should marijuana be legalized, but the debate over doing so will surely never die until it happens.

Friday, November 8, 2013

-Job Growth Comeback!-

Article: What Shutdown? Job Growth Strong in October
Author: Annalyn Kurtz
Date of article: November 8, 2013
Website: CNN Money

                Everyone predicted the economy to fall drastically after the 16 days of little government interaction due to the shutdown but surprisingly the economy was not hit that hard with the freeze, in fact, it increased activity. According to the Bureau of Labor Statistics, 204000 new jobs were added to the U.S. economy in the month of October. This number was surprising to economists’ expectation for the month. This number is a huge leap from the late August and September hiring stat of 60,000.
jobs 110813The article puts it bluntly: “Economists were expecting weak job growth due to uncertainties created by the budget battles in Washington. The federal government shut down on Oct. 1, after Congress failed to agree on a budget for fiscal 2014. The standoff lasted 16 days and left as many as 800,000 federal employees temporarily out of work.The numbers were also strong enough to get Wall Street talking once again about when the Federal Reserve should start slowing its stimulus program. The Fed has been buying $85 billion in bonds each month since September 2012, in an effort to strengthen the job market.
Given the government shutdown, many Fed watchers were starting to think the central bank would continue its stimulus at full blast until at least spring 2014. The Fed next meets at the end of December, and the strong jobs report could mean officials will consider reducing their monthly bond purchases sooner rather than later. "Once again the U.S. economy appears to be overcoming a summer swoon," said Paul Ashworth, chief U.S. economist for Capital Economics in a research note. "In our opinion, the data would justify the Fed reducing the pace of its asset purchases in December."
The outlook isn't all rosy though. Overall, the economy has still not recovered all of the jobs lost in the Great Recession. The jobs report also showed the unemployment rate rose slightly to 7.3%, up from 7.2% in September, but economists expect this to be a passing blip. About 448,000 furloughed federal workers were counted as being on temporary layoff, and the next jobs report, due on December 6, will probably show these people were back at work in November.
Meanwhile, only 62.8% of Americans over age 16 either had a job or looked for one. That's the lowest level since March 1978. Economists also believe this number was impacted by furloughed federal employees but nevertheless, it has been hovering around the lowest levels since the 1970s for months. Where are the jobs? Job gains came across a variety of sectors. Retailers added 44,000 jobs, professional and business services also added 44,000 jobs, restaurants and bars hired 29,000 workers and manufacturers added 12,000 jobs. Meanwhile, the federal government cut 12,000 jobs -- a third of which were at the U.S. Postal Service.

Sunday, November 3, 2013

-What is our government REALLY spending money on?-

Article: On Government Spending
Author:  Demosthenes
Date of article: October 10, 2013
Website: Teen Ink
                The bias of this article is criticizing government spending which is understandable in a country with less than 5% congress approval rate. It’s quite clear that this country’s people are very unhappy with their government and spending is, and has always been, a huge subject of disagreement. This problem is probably the biggest issue in our government with people on both sides arguing where it is best to spend this borrowed money. With the national debt growing larger every minute, this issue is like a tick bomb to the government’s downfall.
                This article explores the wide range of issues that the government spends the taxpayer’s money. Although this article is quite opinionated, it brings light to some vital points that, as taxpayers, we need to know. It begins by stating “Government spending includes spending taxpayer money on social security, defense programs, education, public safety, and many more realistic social needs. However, the government, even wealthier as it entered the 21st century, has began to spend its money on random and irrelevant things, some that completely have nothing to do with healing our broken economy, protecting our citizens, and improving life and education in the cities.” With that aside, the author dives into the criticism stating that “much of the taxpayer dollars go to the government to waste on various idiotic things.”
Now, I understand that people disagree on government spending but I was surprised when the author went as far as to say the government spends money on “idiotic things”, but I read further and we can all agree our government pays for “some things that are vital for the human populace in America. Things, like education, safety, military and defense, Social Security, welfare, unemployment insurance, disability payments, etc. These are important for the people that live in America, important for the safety of America, and important to uphold the legacy of America. Our defense is especially crucial because of the protection of another 9/11. Our education is critical to raise new wonders that will solve the problems of the modern world. Public safety deals with things in the neighborhood. These things are all very important.” Yes so what are these “idiotic things?” I did some research.
                I found that about $3 million was given to the University of California at Irvine to allow students to play World of Warcraft. Apparently, the goal of this “video-game research” is to allow students to study how “emerging forms of communication, including multiplayer computer games and online virtual worlds such as World of Warcraft and Second Life can help organizations collaborate and compete more effectively in the global marketplace.” I was dumbfounded by these findings. I fail to see the connection between World of Warcraft and the global marketplace, I’m sorry that might just be me.
                In 2006, $1 million dollars was given to zoos in New Orleans, Little Rock, Chicago, and Milwaukee zoos to create “poetry”, which supposedly is supposed to make the public aware of environmental issues. Almost $500,000 was spent to study the behavior of male prostitutes in faraway Vietnam. The government spent $2.5 million dollars on a commercial during the Super Bowl that was apparently “horrendous.” A little more than $800,000 was given to various sources around America to create and promote video games. And the list goes on!
This type of under-the-rug spending needs to be brought to light. The tax payers need to know where their government is spending their hard earned money. Maybe if the government was more truthful and smart about its spending, maybe we wouldn’t be in the sticky situation we are in now.

Sunday, October 27, 2013

-Wait, why are young people saying no to work?-

Article: Why young people are saying “no” to the workforce
Author: Steve Hargreaves
Date of article: October 22, 2013
Website: CNN Money
                The title of this article was the first thing that caught my eye. I thought to myself; “why young people are saying no…to work? What? If my parents found out I rejected a well paying job after college, I would be dead meat.” So out of curiosity, I read further into the article and I found some interesting aspects of this issue.
Let’s start off with some concrete facts: “78% of people aged 20 to 34 either have jobs or are looking for work, according to the Bureau of Labor Statistics. That's down from the peak of 83% in 2000, and the lowest since the 1970s.” Once the numbers are on the table, we begin to look at some possible reasons for this drop in number of young people in the work force. The article puts it bluntly; “the biggest thing keeping young people out of work is the weak economy,” which is understandable, after the huge recession and bank failures in 2008, our economy suffered some significant damage and is still recovering from the fall. With that, there are also some other reasons for this shift in workplace demographics which economists call “structural changes.”
One being school and education in general. With college tuition leaping higher and higher in cost each year, students are forced to take longer to graduate as they take fewer classes per semester while scraping enough money for another year. Along with that comes the desire for a higher degree, meaning that since students are paying ridiculous amounts for a college education, they take the opportunity to get more advanced degrees, therefore stay in school longer.
Secondly, young people are just simply staying home more often. “Since 2000, married women between the ages of 25 and 34 have been leaving the labor force at a slightly higher rate than young people at large.” This is also makes sound sense, when a recession hits and money is short, it makes people rethink their priorities and question what they really want in life and for young people the decision is usually to spend time with their children.
Thirdly, one which I didn’t consider, is that people are living longer which means a delay on huge life milestones. This isn’t as bad as the first two; this could help our economy in the long run. Unlike the other two reasons that can’t be changed easily, this doesn’t have to change because it’s not particularly damaging, it just shows that we are inching towards a drastic demographic shift for this upcoming generation.

And lastly, some young people fresh out of college are simply giving up on the workforce, with the baby boom generation’s delaying retirement and the nasty economic situation, the new generation of young workers have lost all hope in the system and just quit. It’s a sad dilemma but it is reality. 

Sunday, October 20, 2013

-Oh the National Debt!-

Article: Putting U.S. debt in perspective
Author: Steve Hargreaves
Date of article: October 7, 2013
Website: CNN Money
                As an educated U.S. citizen, I am aware, and almost constantly reminded of, the country’s gigantic national debt.  I chose this article to better understand this debt, in perspective to other countries and the U.S itself. The struggle right now in Congress and the government shutdown basically centers on this elephant in the room, the national debt. The conflict arises as this number begins to climb higher and higher every year and the disagreement lies in whether to raise the debt limit or pay off our debt by adding taxes and such.
chart-us-owes                So let’s add some real numbers to this problem; the U.S. debt right now is $16.7 trillion. That’s about $52,681 per person. Now let’s backtrack; in 2003, the national debt rounded off at $4.04 trillion. The national debt quadrupled in ten years. If that doesn’t scary you enough, national debt is predicted to reach $50 trillion by 2030. I wondered how this number got so high so I researched the national debt history year by year and I found that the nation’s debt soars during battles and wars. During the Civil War and World War I national debt was 25% of GDP and it skyrocketed to 112.7% during World War II. Since the economy was in such awful shape, the great depression, the need for borrowed money is quite understandable. So let’s apply this to our economy today; our constant participation in overseas wars and conflicts is one of our biggest expenses. If this was reduced, or better yet, eradicated completely, our debt would drastically shrink.
                Knowing the important details of the situation, now we can take a look at the article which basically puts all these details in perspective. Although the U.S. national debt looks daunting, it’s not as awful as its other worldly powers. Take Japan for example, with a national debt of 238% of GDP, which looks terrible compared to the U.S’s 103%. Even developing countries, like India and Brazil, both in the high sixties percentile, have a hefty national debt.

chart-income-debt                These comparisons might prove comforting to some people but not for long. The article goes on to say “the average U.S. household is in worse shape than the government.” The debt-to-income ratio in U.S. households is 137%, more than 30% higher than the national, with household incomes ranging from 51k to 70k. This is very bad news. These numbers prove fetal to us and our economy. If the people of this country are in more debt than the country itself, which isn’t in great shape anyway, the country will fall fast. If the people can’t handle their own debt, the country is not any better off than its people.

Sunday, October 13, 2013

-The Conflict-

Article: The Economic Impact of the Conflict on Israelis and Palestinians
Author: Robert Shan
Date of article: October 6, 2011
Website: If Americans Knew
                I was very interested in the presentation that we had of the Creativity for Peace organization. The presentation really helped me understand the conflict that was always in play since the day I was born. I think this generation doesn’t fully understand the history and the conflict between the two Israeli and Palestine people. This presentation truly opened my eyes to the everyday struggles of these people. Usually, especially in economics, we tend to see the bigger picture, how this will affect the economy in ten, twenty years and we forget that we are talking about human being and their lives.
                So I rushed home and started to research both the organization and the conflict. I wanted to find out how I could help these girls and better understand the conflict. In my frantic researching, I found an article about the economic effects of this conflict, so I chose it for my weekly economics blog.
                This article discusses the effect of Israel’s control on the employment of the Palestine people. In the graph there is a distinct gap between the Israeli employment line and the Palestine. The Israeli unemployment rate is 5.6% as opposed to West Bank’s 23% and Gaza’s 30%. The article continues on to say that this “sharp rise in Palestinian unemployment is universally viewed as resulting from Israeli policies of closure and movement restrictions. The economic situation in Gaza has been devastated by an air, sea, and land blockade that Israeli officials say was designed to keep Gaza indefinitely on “the brink of collapse.”
                Now this makes sense, if a government puts strict rules and regulation on its economy, of course the economic output is going to decrease but the drastic decline in Palestine’s economy is harmful to its own and worldwide economies. Most economists believe that “this may be the worst year in the Palestinian economic history. The average Palestinian’s personal income will fall by 40%, and 67% of the population will fall into poverty.”