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THE AMERICAN ECONOMY.

Discusses the "new" economics brought about by 9/11. Economics and forecasting. The high-tech age. Human capital. Traditional policies and dependence on the GDP. Considers the new long-range outlook for achieving balanced budget and GDP growth. Production goals, consumer attitudes, downsizing of companies. Ten recommendations for federal government and business community to adopt.

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MACRO-, MICRO- AND PROJECTED ECONOMICS
More than anything else, the progress of the world in the 21st Century depends on economics. It affects everything and everyone, whether natives in darkest Africa, striving to avoid encroaching urbanization, to the middle aged managers, now out of work in America because of downsizing. While we tend to consider macroeconomics as a worldly overview of resources, Microeconomics is a far more personal aspect of the world economy in general. What we earn, what we spend, what we save, how diligently we work and retain our jobs is all part of the economic system that controls our daily lives.
Because of the wide range of subjects, the following pages are more a generalized overview, with some specific recommendations, based on the “new” economics that the September 11 events hav

23, I 4Veblein, Thorstein: The Theory of Business Enterprise (19 4) www.socsci.mcmaster.ca/~econ/uqcm/3ll3/veblen/buse...No author listed: "National Budget Simulation" University of California,Berkeley garnet.Berkeley.edu:3333/budget/budget.html Today's economics models make some consumer assumptions. 5) So, if naïve forecasting turns out to be wrong, it can be said thattomorrow is NOT like today, and this year is NOT just like last year. It affects everything and everyone, whether nativesin darkest Africa, striving to avoid encroaching urbanization, to themiddle aged managers, now out of work in America because of downsizing.While we tend to consider macroeconomics as a worldly overview ofresources, Microeconomics is a far more personal aspect of the worldeconomy in general. as The Computer Age, whichis not a new Industrial Revolution, but merely an expansion of it. There are stilleconomists who believe that "consumption spending creates the internalfunds for firms to pay down bank debt." (Van Lear 7 6) But, the Fed'scontinuing to lower the prime and consumer spending iffy, perhaps borrowingis still viable and even necessary. David: The New Inflation: The Collapse Of Free Markets Princeton University Press, 1981Van Lear, William and Stokes, Robert: "A critical reflection on endogenous money and asset price inflation" Journal of post-Keynesian Economics, Armonk NY, Summer 2 1, v. So, given these circumstances, isa balanced budget possible for the next several years (remember, PresidentBush warned that the war against terrorism could last for some years)? 1 ) Encourage increased bio-technology usage in agriculture WORKS CITEDBowers, David A. 3) Given these four basics, sometimes theborderline between "macro-" and "micro-" is blurred. But, if there islittle or no, or waning demand, why waste manufacturing time and money? In an economic millieu where "macro-" and "micro-" are meant to definethe scopes of economic examination and forecasting, it might be an idea toset down some foundations on which the parameters of microeconomics arebased. In essence, the "new"human capital represents an avid consumer population which is moredemanding and weary of time-consuming ordering and purchasing at retailstores. However, if prices drop (there are "sales" from airlines to all sortsof retailers) and consumer purchase goods which now have little if anyeffect on the bottom line, what is the end result? Perhaps because the Fed has once again reduced interestrates, in the wake of the September 11 attacks, it seems obvious that thislatest economic move was made to spur consumer purchasing, to bolsterretailers and manufacturers (from automobiles and homes to department andspecialty stores). However, increasing volume by reducing per-item profitis not, in the long run, a viable way of doing business. This is a political, not merely an economic problem, of course,even though the Republicans have an "out" in the unusual circumstancesfollowing the terrorist attacks and the increased billions spent formilitary and victims' restitution funds. One reason, of course, is to reduceinventories now bloated by lack of consumer confidence. Less profit, less taxespaid, the potential of a rising deficit, after several years of budgetsurplus. "In years when growth is sluggish, revenues rise more slowly while costs for unemployment insurance increase. "Theability of free markets to keep prices down has collapsed. Amtrak, bus lines) top encourage travel for those who now fear to fly 9) Eliminate federal tax, and encourage states to reduce or eliminate sales tax on food and pharmaceutical products. As we see more and more "Downsizing" of companies, and re-training ofemployees who have been "downsized" we need to worry about potentialinflation. MACRO-, MICRO- AND PROJECTED ECONOMICS More than anything else, the progress of the world in the 21st Centurydepends on economics. To begin with, any economic system "must set goals of production...howscarce resources are to be allocated....how the results of production areto be allocated among the population...and what provision is to be made foreconomic progress..." (Dewey, p. Some aretruly self-explanatory. Such as the fact that a consumer prefers MORE of acommodity than less of it. The averageconsumer is willing to spend a few cents more to get what he is used togetting. Because of the wide range of subjects, the following pages are more ageneralized overview, with some specific recommendations, based on the"new" economics that the September 11 events have brought about. One interesting "game" is presented by theUniversity of California at Berkeley online, the CCER National BudgetSimulation. Now, atleast temporarily, the American economy must be looked at in two differentways: First, can and should it revert to its traditional policies? Until September 11, it made sense to look at the U.S. As Thorstein Veblen wrote: "The material framework of moderncivilization is the industrial system, and the directing force whichanimates this framework is business enterprise." (Veblen 1) Businessenterprise, as we enter the 21st century is nothing more than creating anacceptable combination of product or service availability matched toconsumer needs. This is thecause of the new inflation. As a result, the deficit widens." (Greenstein 1) 2) Enforce a usury limit on interest for credit card purchases. No wonder the Federal Reserve has lowered the interest ratethree times this year, in order to keep inflation from spiraling upward.Some economists are pessimistic about inflation throughout the world. Economists use these demand figures to create demand curves, which canaccurately reflect purchasing patterns. Provide special tax incentives for military and/or defense contractors and manufacturers, as well as R & D facilities 4) Control movement overseas of facilities and jobs 5) Provide greater tax incentives for remodeling, rebuilding, and new home construction 6) Impose stricter rules for Social Security payments to the wealthy. But, ifthe assumption of maintaining a balanced budget remains, where wouldappropriate cuts be made? They may be the shortage of one natural asset or another.For example, in the gulf war, the price of petroleum went way up, becauseof the critical war area, and dangers of shipping. It isnot that we do different business, it is that we do business differently.Perhaps this is the key to economic survival, regardless of circumstances.Rather than think of this new high-tech infusion in the world's economicinstitutions, one should consider this the age of a new type ofentrepreneur. economy in termsof its alliance with, and dependence on the GDP, as well as the budgetsurplus amassed over the last several years which both was able to pay downthe national debt and develop tax cuts for the American tax payer. What we earn, what we spend, what we save, howdiligently we work and retain our jobs is all part of the economic systemthat controls our daily lives. 8) Provide equal financial assistance from federal government for ground transportation (i.e. Theymay be inflation. 3) Gross Domestic Product figures, therefore, are influenced by prices,by consumer demand, and also by interest rates, and the time it takes tobring a product to market to satisfy consumer demand. In terms of spending, this game lists the various subjects tobe increased or decreased: "Military sp[ending, veterans and militaryretirement, international affairs, general science, space and technology;non-defense energy spending, natural resources and environment,agriculture, transportation, community and regional development, education,training employment, and social services; non-Medicare health spending,Medicare, Non-SS Retirement and unemployment compensation, social welfarespending, social security, administration of justice, general governmentadministration, net interest, undisturbed offsetting receipts, (and)commerce and housing credit." (Berkeley 1) This "game" next lists taxexpenditures which include "Corporate tax breaks, personal business &investment benefits, pension & retirement deductions, employer-paid healthinsurance, itemized deductions, (and) other personal tax expenditures."(Berkeley 2) Given these subjects and the current economic situation and theobvious third- and fourth quarter economic downturn, which of the abovesubjects are ripe for reduction? 7) Investigate more thoroughly the drilling for oil on American soil (i.e., Alaskan wilderness, off-shore) to reduce dependence on Middle Eastern production. Forecasting (1997) Crisp Management LibraryDewey, Donald: Microeconomics: The Analysis of Prices and Markets New York: Oxford University Press, 1975Greenstein, Robert: "The Balanced Budget Constitutional Amendment: An Overview" Washington D.C.: Center on Budget and Policy Priorities, Jan 28, 1997 www.cbpp.org/Bbaovrvw.htmSimon, Richard: "Defense of the Homeland Comes With a Hefty Price Tag" Los Angeles TIMES, October 15, 2 1Slawson, W. So, given the current extraordinary economic conditions, what would besome recommendations to federal government and the business community: 1) Forget the balanced budget amendment or legislation for the present. This brings economists into the realm of forecasting. And, ifnot, what should be the new long-range outlook for achieving both abalanced budget and GDP growth? Whycontinue to have "fire sales"? What is interesting in this new system of business enterprises is thathuman capital- always thought of as one of the most precious and valuablesources of a company's success and dominance has been reduced to computerprogrammers and customer service representatives. 3) Lower capital gains tax and, at the same time, increase deductions for production facilities expansion. Then,one has to figure out why. It no longer becomes a game but anecessity to somehow try to keep the budget as balanced as possible, givenextraordinary defense and now bio-warfare spending. The less A is available, the more he wants B. Itis a form of compensation. Not too much money or too few goods." (Slawson,p. Human capital is part of today's microeconomics. Another assumption is that consumer preferences are generally in thesame consistent order. How often have we seen the price remain the sameon, say Oreo cookies, but the amount of cookies decreased. Itis now a fact that "defense of the homeland could cost $1.5 trillion overthe next five years, according to one estimate circulating on CapitolHill." (Simon A 1) That would tend to negate the possibility of continuinga balanced budget, and we would once again be in a deficit economy. First of all, we need to realize that economics and forecasting is nowclosely tired to the new high-tech age, a.k.a. So, anyrecommendation to today's businessmen and women in America is to useconsumer patterns more wisely, and forecast trends with better, moreaccurate numbers than before. We can even figure out that ifthere is inflation, how the consumer will continue to purchase what he isused to, perhaps more of one commodity than another. Some of the reasons may be unemployment. Another key assumption is that, if a consumer is used to buying twocommodities, he may be willing to accept a little less of Commodity A if hegets more of commodity B. The simplestform (and forecasting is not a science) is known as "naïve forecasting.These techniques have been given that name because they are based on therather naïve, but frequently useful assumption that tomorrow will be justlike today, and next year will be just like this year." (Bowers, p. 11) Current assumptions of GDP, however, seem more and more focused onconsumer attitudes, demand, purchasing power, and spendable income than thenation's resources. "By common practice,the activities of the household, the firm, the labor union, and theindustry are now consigned to the micro category, while the forces thataffect the important aggregates of the economic system- income,consumption, investment, and over-all growth are placed in the macrocategory." (Dewey, p. Milk before bread, bread before eggs, eggs beforebacon, bacon before roast beef.

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