Imagine coming home from work and finding a large crack in one of the walls. Since it doesn't appear to threaten the structural integrity of the house, you sinply patch the sheetrock and don't worry about it. A few days weeks later another crack appears in another location. Again, it doesn't appear serious, so you just patch it.
When a third crack appears a short time later, you become a little concerned and call in a builder for advice. He tells you the problems are the result of settling and are nothing serious, but that the stucco is starting to crack and should be repaired as well. Repairs are completed and everything looks fine for a while longer.
Soon other cracks appear and seem to be increasing in frequency and severity. You contact the builder and he advises that perhaps the settling problem could be reduced by redoing the roof and installing gutters and downspouts with french drains to carry water away from the foundation. Again the benefits prove short lived.
One day you are contacted by the water company with a question about your ongoing and excessive water usage. You call a plumber, who tests and finds that you have an underground leak, and serious cracks in the foundation. Digging down to find the leak, he discovers that the water has been eroding the dirt under the foundation which has led to the cracking. He can fix the water line, but recommends having someone inspect the damage to the foundation before doing the work.
The man who comes to inspect the damage warns that unless the foundation is repaired, the cracking will continue, eventually destroying the house. The new roof, and other modifications did nothing to solve the problem, just masking it.
Unfortunately, the efforts by both parties to fix the economic problems have been very similar to the efforts to fix the home. Initially, the problems were not viewed as serious, and were patched with no effort to discover what was causing the problems.
New regulations were put into place initially, and when that didn't solve the problems, financial bailouts of financial institutions were started. While it appeared that this would work, it did not resolve the problem either.
Modifying the laws governing the credit card companies will be very much like fixing a leak that was causing damage to the foundations, slowing further erosion, but the foundation must still be repaired to prevent eventual collapse.
No amount of restructuring will allow GM and Chrysler to survive if the customers, who are the foundation of the economy, can't afford to purchase a car. The banks can't continue to show a profit if the customer can't earn enough to buy extra things. Ultimately, the people at the bottom carry everything above them. Everyone of them who is unable to carry his share weakens the entire economy.
Democrats frequently attempt to raise money by taxing the wealthy. Those at the bottom buy from those above them, and when taxes are raised on the upper levels, they are forced to pass the increases on to the lower ones. This results in decresed buying power, and weakens the entire economy. This effect is unavoidable if taxes are raised, regardless at what level they are raised.
Republicans have assumed that if money is given back to the rich, they will share it with the poor. Unfortunately, the rich have no incentive to pass it on and tend to keep the majority of it for themselves. The economy is not strengthened very much.
The only way to genuinely fix our economic woes is to help the individuals in the poor majority to help themselves. The economy is dependent on the individual being succeding. Raising taxes, or printing money will only obscure the problem, not fix it. Making it profitable to save, by cutting fees on savings accounts and increasing returns will help them to reach a point where they can buy again. This will require banks and lending institutions to settle for reduced short term profits, and Government entities to be more careful in their expenditures so the gains are not offset by increased public costs.
Healthcare organizations will also have to settle for lower profits from the customers and insurers will need to settle for lower profits. This will require investors to modify their expectations as well. Tort laws will need modification so frivolous suits are unprofitable.
I am sure it will be difficult to get cooperation to do all these things, but the alternative is a future of increasing frequency and severity of economic swings. Eventually it will be impossible to prevent collapse. Repairing the foundation now is a far better choice.
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