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Congress Needs to Take Drastic Action

By: Steve Johnson

4/16/2008 - 26 Comments

Economic conditions continue to weaken across the country, as the financial sector continues to shed jobs and the housing market continues to deflate.

Even Fed Chairman Ben Bernanke recently acknowledged for the first time that a recession was possible and that congress needs to take action. This statement puts distance between the Federal Reserve Chairman and the looming economic collapse by putting congress in their rightful position to – make some hard decisions or take the blame. Congress needs to cut back on spending drastically. They need to stop talking about how many more bailouts they are going to pass, and start talking about how they are going to cut 20-30% from the budget.

Reference Article: Bankruptcy filings rise 38% in 2007

Heads Will Role

As the elections approach and the economy sinks further into recession, heads are going to role and they are going to start at the top.

Congress wants Ben Bernanke to fix the economy problems so they can continue spending like there is no tomorrow. But, there is little more Ben can do. Congress needs to stop spending and start cutting back. Instead of cutting, congress is busy working on their next stimulus package. How many stimulus packages will be created before they realize they are just adding to the runaway inflation problem?  In the end, congress will have to let a lot of businesses and banks go out of business.

You can only push money into the economy so many times, until the usual dosage doesn’t work anymore.  The usual ‘shot in the arm’ is not working, as the economy is already num. The consumer can’t get high anymore and the coming withdrawal is going to be painful.

Reference Article: Plan B: Rebates

Hyperinflation Is Worse Than a Recession

I don’t like the idea of a recession either, but hyperinflation is worse than a recession. The inflation that is already on deck is likely to consume 8-12% of purchasing power for the next few years.

As the presidential election nears, issue number one, two and three are likely to be the economy, jobs and inflation – no matter what anyone does.

McCain is Starting to Show Leadership

Up until yesterday, Ron Paul is the only presidential candidate that understands the severity of the economic conditions that we are in. Yesterday, John McCain started talking about cutting gas tax and freezing congressional spending.  So far, this is the best ideas that I have heard from any other candidate. Clinton and Obama have both committed to lots of new social programs that will need to be funded by increasing taxes – which will not work with an economy in recession.

Reference Article: McCain: Fix tax law, freeze spending

McCain has an uphill battle as he will be fighting congress every step of the way, but I believe if he continues with his plan, his ideas have the best chance to turn the economy around.  McCain is betting that the economy is going to tank, while the other candidates are still hoping for a stock market rally in the second half of 2008. 

John McCain is showing forethought and leadership in standing up to congress to fight for the purse of the people that congress has stolen.  This is the financial leadership we need.

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