Should the Government Step In?

Yesterday the National Retail Federation’s board of directors asked Congress and President Bush to launch legislation to put forth an economic stimulus package in an effort to fight a slowdown in consumer spending.

Holiday sales increased 3%, according to the US Department of Commerce, lower than the 4% that the NRF had forecast. Said Tracy Mullin, the NRF’s president and CEO: “Consumer spending and retail sales are the backbone of the nation’s economy. Stimulus that helps consumer spending will benefit all industries in the private sector.”

Macroeconomic conditions, like the housing slump, high energy prices and a weakening employment are to blame for the downturn, the NRF says. The organization did not give any suggestions as to what type of package Washington should put together, except to say that it should act quickly and in a bipartisan manner.

Should the government get involved in providing economic stimulus, or is it the responsibility of retailers to adapt and weather these conditions on their own?

3 Responses to “Should the Government Step In?”

  1. 1 Terrence OBrien January 18, 2008 at 3:09 pm

    I am afraid it’s too late to help at this point. As usual, the government is ready to help after the problem is already on the table. The so-called great Alan Greenspan created this crisis by keeping rates much too low in 2002, 2003, 2004 after the econony was already in recovery mode.

    Thank you Mr. Greenspan, and the Republicans can thank him for their upcoming loss in the general election. If we are in the recession I think we will be in this year, there is no way a Republican will be in the White House in 2009!

  2. 2 Josh S. January 19, 2008 at 10:24 pm

    Unfortunately, we now need a recession to bring the economy back into balance. The criminally loose lending practices of the last decade have artificially inflated the value of homes to unsustainable levels. Current home values aren’t based on true supply and demand. Personal income growth didn’t empower people across the country to pay more for homes. It was lenders acting like used car salesmen who make a sale at an inflated price by manipulating the sales terms. In prior generations, home prices were kept in check because the price a borrower could pay was limited based on the ratio norms for debt to income. Lenders found a loophole in this simple system that had protected generations of buyers from taking on too much debt. They took a page from the used car salesman’s selling guide and began to manipulate the debt to income ratio by enabling borrowers to qualify for excessive loans with ridiculous lending terms like interest only mortgage payments.

    So now what? Personal income still hasn’t grown and lenders shouldn’t be making any more crazy loans. So who can or should qualify to pay $400,000 for a home that really is only worth $300,000? We now need a recession to restore order and equity to the housing market. It’s a little bit like what is now being accepted in forestry. The occasional forest fire is actually viewed as a necessity. Better to have a few small forest fires than to have one big one. I’m all for some of the measures that are being taken to ease the impact of a recession, but these measures shouldn’t stop one from happening. The idea is to have a soft landing, not a crash landing.

  3. 3 Clifford Sondock, President of the Land Use Institute January 22, 2008 at 10:42 am

    Government interference in the economy both through monetary and fiscal policies has put the US in this predicament.

    Federal Reserve policies of excessively low interest rates and high increases on the money supply over the past decade encouraged high-risk mortgage lending and, subsequently, caused the housing bubble (not to mention various other bubbles including the Dot-com bubble).

    Federal spending has increased at unsustainable rates over the past decade, most recently the War in Iraq has resulted in enormous deficit spending.

    All these factors combined with the prognosis of future inflation caused by unsustainable entitlements from social security and health care have triggered a constant decline in the value of US currency.

    The ill affects from debasing the US currency, also enabling mal-investment and enormous US deficit spending and national debt is bankrupting the United States.

    The coming recession is definitely upon us…the question is whether this “hurricane” is a Category 1 to a Category 5…one thing is certain, if the US continues its insane monetary and fiscal policies, a Category 5 is imminent.

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