A short-term economic boost
Well, IS it recession or isn't it? Will the $150 billion stimulus package, announced Friday, help or not? And, bottom line, are we going to be in trouble? Are you scared the economy will get really bad?
A survey of money people and people on Ashland's Main Street drew some cynical answers and head-shaking, with a few, like developer Jim Batzer saying he thought the economy was "pretty healthy" and the stimulus (one estimate puts it as a rebate of about $800 a person) would help.
Most in the liberal town, however, scoffed at it. Bookstore clerk Martine VanBuuren said she's scared for her job if the economy gets much worse — adding that the stimulus would only deepen the national debt and "I'm getting a garden and some chickens in case the whole s—-house goes up in flames."
It's important at this point to note that although it may seem like the sky is falling, contraction in the economy is as natural and expected as expansion. Some recessions are worse than others — some people and industries are more affected than others — but the economy always lumbers out of the economic doldrums. The most recent recessions were in 1990 and 2001, after which the economy dusted itself off and trudged on.
Investment adviser Richard Schultz of Ashland said the tax rebates and business incentives in the stimulus package proposed by President Bush would "spur things along" but are "only throwing pennies at the problem," which is potential job losses, personal debt and the credit pinch.
"If joblessness happens, that will be the real problem and will cause a downward spiral," said Schultz. The red flags about the economy — the subprime loan implosion, weakening stocks, slackening productivity — have been apparent since May, he added, but officials are only reacting now, likely because it's a presidential election year.
Kate Nehrba, co-owner of Blue Dragon Books — which just closed its doors for a retirement and to avoid steeper rents — said the proposed stimulus "doesn't deal with the problem. He (Bush) hopes I'll go buy something and that'll make everything better, but what we really need is good Social Security, health care and a sound economy. The government is broken."
The stimulus, said optometrist Ken Loftus, is "ridiculous and will be forgotten in a few weeks. He's spent a lot of money on wars abroad and we have a much greater need for health care."
"The economy? It sucks," said retail store manager Janice Ortega. "The energy crisis affects everyone. The middle class is disappearing. The only people who make a profit these days are large corporations." The rebate, she said, "would only be a drop in the bucket — and what does it do to the deficit? It will leave our children trillions of dollars in debt."
Former Ashland Police Chief Mike Bianca, now a loan officer at People's Bank of Commerce in Ashland, said a "short-term, feel-good stimulus" that just encourages consumer spending is not going to help in the long run.
"A stimulus that encourages savings and income growth is good," Bianca said. "We've got to get away, nationally, from asset depreciation — and we need income appreciation and productivity that boosts working-class wages."
The rapid appreciation of stocks and real estate in recent years has been good only for those who have them "but have been a disaster for those who don't," said Bianca. "Wages have not kept up with the cost of living. I have serious concerns. The last bubbles, real estate and stocks, have burst. Where is the real value?"
Batzer said the stimulus, if passed by Congress and signed by the president, would help but more helpful will be "a new president who doesn't cater to the corporations so much. You need to work with the small guy. Corporations have been exporting jobs and getting tax breaks to do it. That's not fair to the wage earner."
Batzer added that, rather than a stimulus, he'd prefer incentives for innovation such as the electric car because "that's where we've always been strong, coming up with a better idea — and that's where this president has not been helpful."
As to whether recession is knocking on the door, Schultz said we have not even had one fiscal quarter of decline in the Gross Domestic Product and a recession is defined as two quarters of decline. However, manufacturing is down, housing starts were off 14 percent last month and stocks have lost a lot of value since the start of the year.
"We're just entering a potential downturn and it's interesting they're reacting so soon. It could be because it's an election year," Schultz noted.
The third quarter of 2007 was up 4.9 percent and the fourth quarter numbers aren't out till the end of January so, said Schultz, "we're only in the second or third inning of a major economic problem." However, the definition of recession didn't matter to Ortega. "It's a recession and they should just come out and say it." Retail clerk Gabriella Viga also said it's a recession, noting, "The economy is getting outrageous. It's difficult for middle-class people to make ends meet. Prices, taxes, gasoline all keep going up. The size of the rebate stuns me, in a good way and maybe it will help stimulate the economy right here in Ashland, where we suffer so much in the winter" when Shakespeare takes his long winter nap from Ashland's stages and tourists scurry home.
John Darling is a freelance writer living in Ashland. E-mail him at email@example.com.