Why Can’t This Economy Really Get Going?

A host of factors outside of the government's control will likely hold back the economy for at least another year.

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Brendan McDermid / Reuters

Traders work on the floor of the New York Stock Exchange after the opening bell Feb. 11, 2013.

It’s no secret that the U.S. economy isn’t doing especially well. But there’s a cliché – one that I’ve repeated myself – that conditions are improving, even if progress is disappointingly slow. That notion was exploded two weeks ago when the Department of Commerce estimated that GDP actually declined in the fourth quarter of 2012. It’s true that the drop wasn’t very big and was offset to some extent by better-than-expected results earlier in the year. But when you average results for the past four quarters, overall growth last year amounted to only half the normal rate, and there’s not really any upward trend.

Those results are even worse than they sound. After a recession ends, the economy typically enjoys a bit of a boom. And the deeper the slump, the more powerful the rebound usually is. For brief periods, GDP growth can get up as high as 9% (at an annual rate). And over several years, the economy can expand considerably faster than the historical average rate of 3.25%. In short, after a recession there’s typically a catch-up period, in which the economy makes up some of its lost ground.

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So the problem is not just that business conditions are taking a long time getting back to normal. What’s a lot more disappointing is that there hasn’t been any real rebound at all. In fact, GDP growth hasn’t outpaced the historical average rate for two consecutive quarters since the recession ended. This chronic weakness isn’t result of any single problem. Instead, there are a host of factors that have combined to produce the entrenched stagnation we see today. Among them:

The housing bust. Home prices have stopped falling and have turned up over the past year. But many American families still have not recovered from the 30% drop in prices between 2006 and 2009. By some estimates, a fifth of all the homes with mortgages are worth less than is owed on them. Not only does this prevent many homeowners from getting home-equity loans to help sustain their spending. They also may be unable to sell their homes and move elsewhere to take advantage of job opportunities.

Restrained bank lending. The losses banks suffered during the recession depleted their capital and made them more cautious. As a result, lending still has not recovered to 2009 levels.  To reduce the chances of future financial crises, regulators are requiring banks to raise more capital to back loans. While that will make the industry more secure in the long run, it may limit the amount banks are willing to lend while those higher capital requirements are being implemented.

Public sector layoffs. Although private-sector employment has been recovering since 2010, state and local government employment has been much weaker because of layoffs. These trends are likely to continue, especially if budget cuts lead to layoffs at the federal level as well. Estimates are that such cutbacks will reduce GDP growth this year by about a percentage point.

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Higher taxes. Raising taxes to reduce the deficit may be good for the economy in the long run, but in the short run every dollar removed from people’s pockets is a dollar that doesn’t get spent. The two percentage point rise in the payroll tax will have a direct negative effect on the spending of working Americans. Rough estimates of the overall fiscal cliff deal are that GDP growth will be reduced by about 1.5 percentage points this year.

The cost of Obamacare. Whatever the merits of the Affordable Care Act, it does raise taxes on high-income households by some $24 billion this year. Obamacare also increases costs for many businesses, and at some companies that will lead to layoffs or fewer new jobs.

Corporate cash hoarding. U.S. companies are holding as much as $1.8 trillion in cash. Corporate profits are high, and the economy isn’t growing fast enough to generate additional sales that would spur expansion. Companies therefore have little incentive to invest – if they do, it’s likely in order to cut costs, which may lead to fewer jobs. And badly drawn tax laws give multinationals an incentive to keep cash stashed overseas.

Euro zone troubles. European policymakers have become more optimistic about the outlook for the euro currency. And markets for the debt of troubled European countries are rising. Nonetheless, Europe is barely growing, and several countries – including Italy and Spain – are in recession. Even if the outlook improves, Europe will be a drag on the U.S. economy at least through 2013.

Other factors may play a part as well. Administration critics blame excessive regulation and uncertainty about future tax and budget policy for discouraging growth. But most of the things that are preventing a normal economic rebound are really beyond the government’s control, such as the state of the housing market. And as long as the federal government has to reduce the deficit – whether that is done by cutting spending or raising taxes – there will be a drag on the economy. It may indeed be true that the worst has passed. But slow growth seems likely to persist for at least another year – and perhaps longer.

181 comments
DominicBlais
DominicBlais

if you have a billion dollars in one persons hands, they can not spend it. as well as 2 people with half a billion, or better yet a 1,000,000 people with a million dollars. that's what a middle class is. We don't really have one anymore.  for every billion dollars the Koch brothers have is 1 million people are in poverty and the economic growth those people could provide to society. its not there. it's spending that makes it thrive

here lies the problem with no regulations the claim to be job creators is a myth  all they do is horde money. its great people can make a profit.Notice i said people not corporations. do you think the Facebook or Google or android would not have been made if they could only get 100 million or if the tax rate was 75% like it used to be. they would still exist and be thriving just more money would be changing hands between people workers would make more, and the economy would be better we would actually see faster innovation due to more competition and more people with money to buy things spending creates jobs not saving

we need to limit how much to some degree. corporations need to pay taxes raise wages by cutting profits( when a corporation makes a profit they are stealing from all the people that did the work who deserve a bonus.) corporations should all be co ops so profit is shared by the people who do the work not some guy sitting on a golf course his whole life. get rid of the stock market..that's what really happened when you deregulated, is a few people via the stock market which only drives companies to compete by profits not ethics or responsibility to society or for the commons they use, rather than innovations and how they treat employees. all of middle class American's wages went to a few people while the majority of America ended up with lower wages than their parents and they have college degrees.

we only need socialism in the boardroom the stock market, medicine and insurance. leaches need limits


gerald.sutliff
gerald.sutliff

Answer:  It's being impeded.  We know who's doing it.  However, when one starts to look into the whys it gets really ugly, fast.

Dlux
Dlux

I hope the comments below do not represent a cross section of American comprehension of this crisis because if they do then we will never get out of this mess.

The truth is that we are in vicious circle: lack of investment and hiring begets lack of consumption which begets lack of hiring and investment.

The only way out is to prime the pump à la Keynes.  This is tried and proven.  The experiment was the great depression.  Unfortunately history is repeating itself.

An economy is not a household.  The government's proper response to a major economic crisis is to increase spending.  It is counter-intuitive and difficult to comprehend for all as evidenced by the comments below.  However, the counter-intuitive response has proven to be the correct one.  Cutting spending during a depression exacerbates the crisis.  Increasing spending increases income and consumption which increases economic activity which leads to rehiring and reinvestment and economic growth, which is the fastest and surest way to eliminate deficits.

When you are in a car skidding off the road your natural reaction is to push harder on the brakes and try to steer away from the skid.  This is exactly the wrong action.  We are now in a vehicle skidding out of control, and the republicans insist that we should push on the brakes even harder.



JohnLydic_ReiFreeClassifieds
JohnLydic_ReiFreeClassifieds

It's really quite simple; we don't make enough stuff.Why don't we make enough stuff?Because it's cheaper to make stuff in other countries.How do we make it cheaper to make stuff here?Lower taxes and minimize bureaucratic regulation.How do we do that?Revolution.

JohnTMinustwentyminutesMercier
JohnTMinustwentyminutesMercier

"The problem with the American economy is not in America, its in other countries." No, it's implementation of Socialism/ Marxism.

MatthewW.Hall
MatthewW.Hall

parts of "this" economy are booming. They are called China, Indonesia, South Korea, ect. The problem with the American economy is not in America, its in other countries.

idgafkurt
idgafkurt

There is no recovery because there is no wealth creation.  Our great monetary experiment has failed to produce prosperity, instead creating an economy rooted in unlimited fiat, excessive leveraging and cheap money.  Our primary dealers take in the Feds trillions only to use those funds for government debt purchasing, repo market/shadow banking activity and prop trading.  These activities allow our financial/banking cartel to profit without involving itself in the most necessary of economic growth activities - intermediation.  Our greatest corporations spend little on productive growth capital, R&D or employee wages; instead they invest in economic non-activity like M&A's and stock buy-backs.  So we are left with a world where intermediation and capital investment, the wealth producers, have taken a back seat to risky financial derivatives and macro-economic algorithms, the destroyers of wealth and producers of our economic misery.   We have confused money for wealth and because of this we have no recovery.

 

MichaelPettengill
MichaelPettengill

High taxes????

Taxes were cut during Obama's first term, on top of the many Bush tax cuts, so the tax burden during Obama's first term was 25% lower than the tax burden during the last Clinton term when unemployment was under 4%, the economy going gangbusters.  in fact taxes were lower during Obama's first term than during either of Reagan's two terms, HW Bush's term, and GW Bush's two terms, not to mention the terms of Carter, Nixon, LBJ, JFK, Eisenhower.

TheMadKing
TheMadKing

What should anyone expect when businesses are being saddled with humongous tax increases, volumes of strangling regulations and now ObamaCare? Do they have more incentive and money or less to hire people full-time? Do the math, why don't you? Leave it to Time to be confused by the obvious. Or obfuscation on behalf of their Prez-God. Take your pick.

p.armstrongtrucking
p.armstrongtrucking

cant  obama  find obama  the  obama  reason  obama  why  obama   things  obama   are so crappy  OBAMA

todrobot
todrobot

This administration has been one of constant uncertainty in tax policy, health-care policy, you name it.  No business has any idea of future costs compounded by weakness in the economy and continued QE depreciating our capital.  

Taxes are going up and they are going up on all the pass-through entities that shifted to operating that way because being a C-corp was TOO DANG EXPENSIVE with the highest corporate tax rates in the world.  Now all these business are getting raped for being pass-through entities.  Will they flip-flop back to C-corps if corp taxes are lowered?  

Either the government takes that money and squanders it in inefficient, wasteful ways (Solyndra) or it will be paid out in salaries guided by the needs of the market.  Has central planning ever worked?  The answer is no, not really.

This administration is probably not as economically brain-dead as it seems, just incredibly cynical.  Ultimately though, this gets tiresome and it would be nice to have somebody who actually wanted to improve the economy in office.

SteveOrtman
SteveOrtman

Public sector layoff are a result on the recession, not a cause of it.  State and local governments are cutting costs because they don't have any money.  The logic here implies that if state and local governments just kept spending money they didn't have, everything would be fine.  Public sector employees produce very low productivity increases, and it's productivity increases that actually create wealth (not to be confused with riches) and create more jobs.

JackWhite
JackWhite

So higher taxes are good in the long run, but bad in the short term? I stopped reading right there.

retired.military
retired.military

"Why Can’t This Economy Really Get Going?"

In one word -  OBAMA. 

JaneL
JaneL

(1) Hire a veto-proof Senate in 2014.

(2) Repeal Obamacare in its entirety. Put welfare in the hands of the states, including welfare for medical needs.

(3) Medical insurance for catastrophic purposes only.

(4) Flat tax. No loopholes. Just a flat tax.

(5) Lower corporate tax rates.

(6) Abolish Department of Education.

(7) Full school choice in most states.

(8) Flat tax does not apply to any Congressperson who turns lobbyist - that income will be taxed at a very high rate.

(9) Term limits for Senators and Congressmen.

(10) Campaign spending for Congressmen and for Senators can only come from state residents.

rational_animal
rational_animal

Why can't this economy really get going? Socialism is why.

No matter how great a community organizer Obama is, no matter how much 'cooperation' he gets from business leaders, no matter how much we click our heels together and wish oh wish for economic growth, it won't happen. Krugman and company can hit the print button all they want. Printing money doesn't produce goods. The economy is stalled (and even shrinking... FORWARD! Yes we did!) because printing money doesn't produce goods. The people that make things are realizing that all of the risk and reward forces are out of balance. The printing press does little more than provide cash (not wealth) to the people that aren't actually earning anything. Those that produce are not going to expand production or assume any more risk because they are experiencing reduced standards of living or facing unreasonable risks in creating growth. You see 'from each according to his ability and to each according to his need' doesn't produce wealth.

If you want economic growth, restore capitalism and get the h*ll out of our way.

FR2011
FR2011

He's anti-business, that's the problem. Obamacare is also a huge problem for small business. He's no Reagan when it comes to the economy.

lordofthefly
lordofthefly

Media were more interested during the election is being Obama's PR corps than reporting facts about the economy and asking their favorite candidate the tough questions. Sixty percent of the jobs created during Obama's first term were low-wage (waiters, hotel housekeepers, retail clerks). Even Romney didn't jump on this well-documented reality. When we have a country in which thousands of people lost their jobs well before retirement and can't find comparable work, or can't find work at all, and when we have young women having babies out-of-wedlock at sixty-plus percent of the birthrate, and when we have approximately 50% of Americans who don't pay income tax ... what's the future looking like for the USA?

Stichmo
Stichmo

Mr Sivy - Two of the "factors that have combined to produce the entrenched stagnation we see today" should not have been included. Your  sentence is in the past tense.  While "Higher Taxes" and "The cost of Obamacare" will arguably affect FUTURE real GDP growth by reducing consumer demand, they have NOT impacted historical real GDP growth through December 2012.

The CBO estimates that higher taxes and government spending reductions in FY's 2013 and 2014 will reduce real GDP growth.  That is because we will not have fully recovered all of the 8.8 million private sector jobs lost as a result of the Great Recession of December 2007 to June 2009 until approximately the end of FY 2014.  Although we have recovered 6.1 million private sector jobs so far, more than enough to recover from any recession since the Great Depression except this one, we still need to recover another 2.7 million private sector jobs to get back to where we were.  The CBO estimates that austerity measures (tax increases and spending cuts) before FY 2015 will hurt economic growth are consistent with Keynesian economics.  

Keynesian economics is also consistent with what we did in the early 1980's, when we set post WW II records for spending as a % of GDP in FY's 1981, 1982 and 1983, not stopping until ALL of the 2.7 million private sector jobs lost in the downturn of 1981-82 had been recovered.  FY 1983 spending at 23.5% of GDP was higher than FY 2012 spending at 22.7% of GDP.  Discretionary spending in the early 1980's was higher than any recent year.  We also cut taxes during the downturn and then increased them once the recovery was complete.

In practice President Reagan was more of a Keynesian than President Obama.



aConservative
aConservative

During the Obama Reign Of Terror in America: 

 In November 2008:

305,787,716 people living in America. 

136,355,000 people employed - about 44.7% of the total population. 

In November 2012:

315,109,681 people living in America. 

135,636,000 people employed - about 43.0% of the total population. 

 Once businesses learned Obama won in November 2012 they immediately terminated 4,728,000 jobs by the time Obama assumed office 2 months later; the greatest mass firing of employees in America's history and totally covered up by the Lamestream press.

So in 4 years of the Obama Reign Of Terror: 

9.32 million more people

719,000 fewer jobs

You can't build a great nation with this kind of leadership.........


MarkBuehner
MarkBuehner

"But most of the things that are preventing a normal economic rebound are really beyond the government’s control, such as the state of the housing market"

Uhh whaaaat? Dodd-Frank? Fanny and Freddie? The Fed? The government essentially IS the housing market right now.

NikkiHernandez
NikkiHernandez

Why can't this economy get going? Simple, the federal government is doing everything exactly the opposite to spur growth. As Reagan demonstrated CLEARLY, the way out of a slump is to reduce taxes, increase the incentive to work, and attempt to rein in regulations (never really effective under leviathan). Reagan's stimulus was defense spending, which ultimately ended the cold war. But it also led to wonderful things like GPS,  satellite radio, ever faster electronics, powerful lasers, fantastically accurate autopilots, and many other spin off technologies that are now mainstays of our economy.

Obama has raised taxes, dramatically increased regulations, is cutting defense, and who is forever increasing the incentives not to work. For a deliberate attempt to enter a depression, the only things Obama has not done is to increase interest rates (which he does not have direct control over) and increase tariffs.

The things missing from the horrible stagflation of Jimmy Carter are inflation and sky high interest rates.

Gas prices are going up at 20% annualized rate. I just noticed car and homeowners insurance prices have jumped by a 15% annual rate. Medical costs are projected to be $20,000 per family of 3 in the next 7 years, for the MINIMUM defined Obamacare coverage, which has a 60% co-pay. We are on the edge of falling off into double digit inflation rates. The largest volume of short selling US Treasury bills just occurred in the past couple of weeks, signaling an interest rate rise. 


There are two aircraft carriers in port that the Navy cannot send out to sea because there is no money to pay for it. The super rich will always be super rich, but the tax increases are aimed squarely at the professional and business class. Obama is turning the US into the economy of a third world country.

carloseg
carloseg

Job creation problem we are facig is a micro-economic one.  It cannot be solved from the top down.  Particualrly now that the top of the economy (Wall Street, Washington, the Fed) are focused exclusively on the  "global economy" such that their actions have no effect on local economies and job creation.  Moreover, the top down answer to the American consumer is to acquire more debt in order or accept government transfer payments (SNAP, WIC, Unemployment) in order to sustain economic activity.  Obviously, neither of these are producing economic growth.

A better solution would be to encourage saving by removing the Fed Reserve as a preferential capital lender to banks.  This would leave consumer savings as a primary source of  equity for banks and financial institutions.  This  enables consumers to earn interest on the money they are saving so they can consume without additional debt.  By doing this the economic interests of Main Street and Wall Street are realigned and the nation as a whole is enabled to move forward to economic prosperity.

BCanuck
BCanuck

There are two misleading points in the article:

1) the banks have capital to lend, but they are parking it at the Federal Reserve because the Fed has chosen to pay interest on 'excess reserves'. There is no legal requirement for the Fed to do this.

2) Companies do have record amounts of cash on their books BUT they don't keep $100 bills in a big vault at company headquarters. Companies keep their 'cash' either at the bank (which the bank can lend out) or in short term debt or some sort of liquid asset meaning the money is already spent. A better question to ask is why aren't companies using the cash to invest in their own company rather than earn 1.5% at the bank or T-bills?

The reason why the US economy is doing so poorly is because instead of letting the economy adjust and sort itself out, the Federal Govt tried to 'fix' the economy - this never works and is only delaying the real recovery.

olderbutwiser
olderbutwiser

i am confused as to public sector layoffs.  While there have been a couple of non tenured teachers laid off(with decent sized declines in enrollment in Ct.) and state workers have to work 2 years long, there has not been any reduction in public sector in Conn(and NY and NJ) compared to the engineers, IT, pharma, manufacturing(esp defense) that have gotten hammered.  Why is this being mentioned..it may be in some states but not significant compared to private sector.  Also, with pensions intact a public worker is almost paid 1.4 times so large is the pension contributions

CarolShattuckBrady
CarolShattuckBrady

Nobody ever mentions that we have lost most of our manufacturing jobs to other countries.  Those people work for less money, they do not have the environmental mandates that our companies have to comply with, and they do not have the quality control we have in the USA.  Of course they can produce goods cheaper.  Our appliances, clothing, electronics etc come from China, Malaysia, Sri Lanka, Mexico, while Americans sit idle receiving unemployment.  Add to this the amount of money flowing out of this country for oil.  Our country is losing wealth at an alarming rate.  No wonder we are broke.  Until the government does something to bring the jobs back to America, it is only going to get worse.

LarryMcMasters
LarryMcMasters

@rational_animal They have to be in our way, we are too stupid to know what is best for us

bryanfred1
bryanfred1

The expectations of increased taxes and AHA costs has definitely made businesses more cautious over the last couple of years, which does have an impact on GDP growth.  At least part of that has now been quantified (tax rates, for now) but still nobody knows how much Obamacare is going to cost companies.  Health insurance rates have increased dramatically since its passing in anticipation of the AHA's provisions.  So while a woker might not see higher take-home pay, the cost to the company of employing that person is increasing.  It's all dollars out the door to the employer.

bryanfred1
bryanfred1

I say we roll the dice a little more on subsidized housing.

There, now make me chairman of the House Financial Services Committee.

The entire debacle is the result of well-intentioned policies that first required lenders to make financially unsound decisions, expanded those policies by making Fannie and Freddie the largest subprime investors in the world, and ultimately created a beast the government couldn't control.  Bubbles happen all the time, but in this case it was in an asset class that directly affected a majority of Americans.

tom.litton
tom.litton

@NikkiHernandez A side effect of reagonomics was huge deficits, which forced tax raises later in his presidency.  It seems Obama has more or less followed that approach and we are now at the tax raise part again.

bryanfred1
bryanfred1

Talk to any lender and the reason for depressed loan activity becomes readily apparent.  Banks are not happy making 1.5% on Treasury bonds (a negative real interest rate) - they would gladly lend to corporate borrowers or individuals at a nice margin.  But like households, businesses are de-levering their balance sheets and hoarding cash.  Remember that when the financial crisis hit banks seized up entirely; companies couldn't access their available debt capacity.  So today there is no loan demand absent an obvious and compelling economic recovery.  This was a good article in general, but like most others it has the causation backwards when it comes to lending activity.

bryanfred1
bryanfred1

The disconnect is that public employee counts are compared to their recent peaks, which follow ten years of exploding government payrolls at ever-higher compensation and benefit levels.  Governments at every level spent the 2000's tax windfalls like permanent income.  Local governments were hit the hardest because so much of their revenue comes from property taxes on homes that were suddenly declining in value.  Now you have a highly paid unionized workforce that you can't afford.

BCanuck
BCanuck

@CarolShattuckBrady

The living standards of the average American is better off because of cheap goods imported from foreign countries. Would the average American be better off if a flat screen TV cost $2500 instead of $250? Only the wealthy could afford 'made in USA' TVs.

Quality control is completely driven by the consumer. The iPhone is assembled in China but Apple demands it meets very high specs.

Someone making $15/hr in the US is far better living standard than someone making $1/hr in China because of trade.

rejis456
rejis456

It is not only manufacturing jobs.  The IT industry is owned by Indians.  Jobs are still being outsourced to India, and in addition, there are a lot of Indians in the US with visas, and eventually Green Cards.  These are high paying jobs.  Not to mention the impact of China, the Philippines, etc.  These jobs are never coming back.

Gregtheegg
Gregtheegg

@aConservative

 @aConservative this is actually true, mr. conservative. I was laid off during this time and it was clearly because of Obama's second term. He single handedly, as a president, destroyed the industry I was working in with regulations on the corporations/banks. Those regulations funnel down the chute to small businesses and affect them most of all. Would Romney have been better, I don't know. Even as I had just voted for Obama I was left to fend for myself, with little to no opportunities for employment since. I am a young person, a college grad, and there are no opportunities for us unless it's menial labor or retail. Obama has officially made the college degree the value of a high school degree twenty years ago.

And what does Obama do? He focuses on foreign policy, f@%#ing Syria and a couple of gas attacks. What about me, an American without a job? I may have to go to Grad school now, and though I am lucky to be able to do that coming from a wealthy family, it's the last thing I want to do. What point is grad school when you've only worked one full year since college? I do consider myself one of the lucky ones with family support, I would have hit reality hard coming out of school otherwise.

NikkiHernandez
NikkiHernandez

@tom.litton @NikkiHernandez Deficits? Obama wouldn't know anything about that, now would he. Reagan ended his term with a deficit of about 3% of GDP, not far from where it started, maxing out at 6% in 1983 (tax reduction come before economic growth), but the result was dramatically more economic grown and an end to stagflation. Obama is running 7% to 10% deficit per GDP every year.


By the way, Reagan had a degree in economics. It is not surprising that he was able to turn the economy around. In case you forgot, the late 1970's was awful. The mid-80's were fabulous.

Telling.truth
Telling.truth

@tom.litton @NikkiHernandez Except that the deficits of 'Reaganomics' led to significant economic growth, unlike the 'Obamanomics' deficits, which haven't led to any noticeable economic growth. When you add the growth-slowing effect of tax increases to no growth, the projection for the future gets even worse.

NikkiHernandez identifies technologies which have moved into consumer products out of the Reagan spending.  About the only technology area the Obama spending has focused on is batteries, where the research is on refinement not new approaches.  So, even ten or twenty years down the road, there will not be the economic stimulus the Reagan deficits continue to generate coming from the Obama approach.

BCanuck
BCanuck

@rejis456

The IT industry is owned by Indians? Really? What percentage of the global IT industry is owned by Indians? I would be shocked if it was more than 20%.

If they were high paying jobs why bother shipping them to India?

bdonovan1980
bdonovan1980

@rejis456 

The jobs went away based on edicts from Congress.  They can come back the same way.

Tax companies that offshore labor and the jobs will return when there is no economic incentive to screw the American worker.

BCanuck
BCanuck

@hareshp949 @BCanuck 

Just curious, are you agreeing with me or disagreeing?

Those are some interesting stats. Especially the part about how TVs in India cost MORE than in the US? I wonder why that would be? Tariffs maybe. 

You can get also get 'reasonable' used car in the US for $10,000. You can get a new Kia for $12,000. Again I wonder why it's so expensive in India (relative to other goods and services in India)?

I'd like to have a driver.

hareshp949
hareshp949

@BCanuck 

25-35%  of American wages are considered high paying in India. They are about 100 times the average Indian income. You can live comfortably though may be not with the bloated American life style. Most things except home and car are very inexpensive there. Car is something you can easily do without. They have three wheeler vehicles that  you can hire for about 50 cents a mile. A shoe polish will cost you about 10 cents at a street corner shack. Laundry is about 20 cents a piece. I got 2 knee X-rays and a half hour consulting with a reputed orthopedic  physician for about 10 US dollars. A hair cut may set you back by about a buck. Imported things like TVs and laptops are about 20% more than in US but the smaller size TVs are fine for most people. A driver is more affordable than a car but you can get a reasonable car for $6000 to $10000 or even less.  

BCanuck
BCanuck

@bdonovan1980 @BCanuck @rejis456 

Consumer spending is at an all-time high, apparently Americans are getting the money from somewhere. 

Trade is absolutely essential to maintaining and raising people's standard of living. 50 years ago people used to live in a 1200 sq.ft. home with one bathroom, one car, one small black-and-white TV. Now even poor people have mobile phones and 35" flat screen TVs. This is only possible if the manufacture of these goods is done in low wage countries overseas.

Lot's of manufacturing jobs that have been outsourced are dirty, repetitive, economically unrewarding and mentally unsatisfying. Americans are better educated, hardworking, have access to capital and live in a free, dynamic and creative society. Americans shouldn't even try to compete with workers assembling plastic trinkets for $1/hr overseas.

bdonovan1980
bdonovan1980

@BCanuck @rejis456 

If Americans are thrown out of work so the companies can hire a foreign worker for less - exactly where do they get money to buy those lower cost items?

BCanuck
BCanuck

You said these jobs were 'high paying'; 25-35% of American wages doesn't sound 'high paying' to me. Did you mean to say that these jobs in India were LOW paying? Or did you mean to say that people from India are working at high paying IT jobs in the US? If so, how come these Indians working in the US aren't having their high paying jobs in the US outsourced to their countrymen in India? Is it a conspiracy? Ownership means who own's the companies; what else could it mean?

'Obviously', you should be more careful about what you're saying.

You claim to 'know the IT industry' and also claim that I don't. Tell me how it works.

If American companies can offer their products and services to American consumers for less by outsourcing, isn't that a good thing? If Americans are paying less for their computers, then they'll spend the difference on other things, right?

BCanuck
BCanuck

@rejis456 

You said these jobs were 'high paying'; 25-35% of American wages doesn't sound 'high paying' to me. Did you mean to say that these jobs in India were LOW paying? Or did you mean to say that people from India are working at high paying IT jobs in the US? If so, how come these Indians working in the US aren't having their high paying jobs in the US outsourced to their countrymen in India? Is it a conspiracy? Ownership means who own's the companies; what else could it mean?

'Obviously', you should be more careful about what you're saying.

You claim to 'know the IT industry' and also claim that I don't. Tell me how it works.

If American companies can offer their products and services to American consumers for less by outsourcing, isn't that a good thing? If Americans are paying less for their computers, then they'll spend the difference on other things, right?

rejis456
rejis456

Because Indian wages are much lower, 25-35% of the American wage.  So even if they are not as productive, you can afford more of them and it is still less than an American. 

When I speak of ownership, I am not talking about who owns the companies.  I am talking about who does the work.  There are thousands of Indians working in American companies like IBM, Accenture, Microsoft.

I know the IT industry...obviously you do not. 

bryanfred1
bryanfred1

That's the part of the argument you seldom hear made.  The first TV I bought more than 15 years ago was a 20-inch tube-style that weighed about 60 pounds.  It cost $500.  Last year I bought a 42" 1080 flat panel for $350.  The old clunker TV would cost about $800 in today's dollars.  This holds across a massive number of lower-cost consumer products.

Also, globalization didn't suddenly kick off in the fall of 2008.  We managed to be at essentially full employment for much of the decade despite the trend having been well underway for 10 years.

BCanuck
BCanuck

@bdonovan1980 @rejis456

Congress never passed a law that started outsourcing!

The computer/Internet technology revolution made outsourcing possible. The shipping container and mega cargo ships made it possible to move goods efficiently.

You need to consider who BUYS all the cheap foreign goods - THE AMERICAN WORKER.

The living standard of the American worker is raised by cheap foreign goods. The American worker needs to work less hours to buy a TV or anything else made in China than if it was made in the US. The American worker has never had such a high level of material prosperity and this is due to trade.

Taxing US companies will make US companies poorer. That can't be good policy.