The Good, the Bad and the Ugly Some of the Economic Challenges Our Next President will Face .


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Diagram. To be talked about in converse request:
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"The Good, the Bad and the Ugly" Some of the Economic Challenges Our Next President will Face

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Outline To be talked about in turn around request: "The Ugly" - the current monetary emergency "The Bad" – imbalance, medicinal services, standardized savings "The Good" – efficiency development

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"The Ugly" or What Just Happened?

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Events Leading up to the Financial Crisis

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Events Leading up to the Financial Crisis

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Timeline of the Last 14 Months

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From the NY Times September 11, 2003: The Bush organization today prescribed the most noteworthy administrative upgrade in the lodging fund industry since the investment funds and advance emergency 10 years back. Under the arrangement, another organization would be made inside the Treasury Department to accept supervision of Fannie Mae and Freddie Mac… Fannie Mae and Freddie Mac have been condemned by adversaries for applying a lot of impact over their controllers. Among the gatherings upbraiding the proposition today were the National Association of Home Builders and Congressional Democrats who expect that more tightly direction of the organizations could strongly lessen their dedication to financing low-wage and moderate lodging. \'\'These two substances - Fannie Mae and Freddie Mac - are not confronting any sort of monetary emergency,\'\' said Representative Barney Frank of Massachusetts, the positioning Democrat on the Financial Services Committee. \'\'The more individuals overstate these issues, the more weight there is on these organizations, the less we will find regarding reasonable lodging.\'\' Didn\'t Any Officials Foresee the Crisis?

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The Lesson for the Next President: Good aims are insufficient The best of goals (stretching out home possession to low salary people) has prompted to the most noticeably bad of emergencies. Everybody, particularly low salary people, will be much more regrettable off therefore.

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The Fallout

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The Bubble Bursts

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The Effects Spread 1 in 6 property holders owes more on home loan than the house is worth Foreclosures have climbed significantly, hopping 71 % in the 3 rd quarter of 2008 in respect to year prior Worldwide credit markets have seized up – nobody believes any other person\'s asset report the share trading system has dove

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Credit Markets Seize Up

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The Stock Market Crashes Source: Shiller, overhauled to Oct. 24, 2008

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S&P 500 Stock Price Index Adjusted for swelling, in rate terms 400 300 200 100 0 1880 1900 1920 1940 1960 1980 2000 year - 39% - 27%, 4 yrs to recuperate top - 81%, 29 yrs to recoup crest - 53%, 16 yrs to recuperate crest - 67%, 20 yrs to recuperate top - 46%, has not recuperated top - 34%, 2 yrs to recuperate crest Source: My counts in light of Shiller\'s information.

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Employment has been declining since Jan. 2008 Employment is relied upon to fall in the October report.

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What can the legislature do? The endeavors by the Treasury and the Fed to give liquidity to monetary markets and recapitalize banks are the best trust . The potential impacts of more monetary jolt are unverifiable. Consider the impacts of the current assessment discount:

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11000 10000 9000 2006 2007 2008 month 5 4 3 savrt 2 1 0 2006 2007 2008 month The Effects of the Recent Tax Rebates Tax refund After-duty pay Consumer uses Saving rate

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Bottom Line on Current Crisis We will presumably have a direct to extreme retreat due to the aftermath from the subprime contract catastrophe. On the off chance that administration feels constrained to attempt a jolt bundle, foundation speculation would be ideal. In any event spending on foundation would have some side advantages, regardless of the possibility that it didn\'t fortify the economy.

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Some Long-term Economic Challenges Income Inequality Health Care Social Security and Medicare Global Warming (I won\'t have room schedule-wise to talk about)

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Income Inequality There has been an emotional increment in pay imbalance in the U.S. since the late 1970s. Financial experts ascribe the expansion to elements, for example, innovative change and globalization.

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Real Wage Growth by Education Level - Males From Autor, Katz, & Kearney (2005). Sythesis balanced full-time week after week income.

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Real Wage Growth by Education Level - Females From Autor, Katz, & Kearney (2005). Creation balanced full-time week by week income.

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Caveats (1) Recent research proposes that the genuine wage development of low wage family units has been quicker than we might suspect. The cost of merchandise purchased by low-salary individuals have expanded significantly less than the general rate of expansion. Changing for this impact dispenses with 2/3 of the expansion in imbalance. (2) Time utilize considers demonstrate that those with advanced education levels now work longer hours and have less relaxation than those with less instruction. All things considered a secondary school dropout has 9 hours more recreation for each week than somebody with a graduate or expert degree.

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Historical Perspective: Income Share of the Top 10% of the Income Distribution, 1917 - 2006

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Comparison of France and US

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How Did France Prevent the Rise in Income Inequality? High least wages Highly managed work markets Generous unemployment benefits Powerful unions But at what cost?

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Unemployment Rate Trends in France versus the U.S.

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Bottom Line on Wage Inequality Wage disparity has risen essentially since the 1970s However, the prosperity of lower wage people might be downplayed. Attempting to reduction wage imbalance through work advertise confinements may prompt to higher unemployment. Obama\'s expense changes accomplish more to diminish disparity than McCain\'s changes.

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Health Care The U.S spends over 15% of GDP on medicinal services For the secretly protected: in 1960, 62% of costs were paid out-of-pocket; in 2006, just 22% were paid out-of-pocket 16% of the populace is without health care coverage 27% of the populace is secured by government medical coverage

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Health Expenditures as a Share of GDP, 2006 Belgium Canada Denmark France Germany Italy Japan Netherlands Norway OECD Portugal Spain Sweden Switzerland United Kingdom United States 0 5 10 15 Public Private Source: OECD

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Source: OECD

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Would we be in an ideal situation with a national medical coverage framework? A few Comparisons of U.S. furthermore, Canada Current spending per individual on social insurance: U.S. $5,700 Canada $3,000.

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Bottom line on Health Care All confirmation focuses to gross wasteful aspects in the U.S. social insurance framework. Different nations have imperfections in their frameworks, however they appear to have the capacity to create comparable wellbeing results at much lower cost. Changing medicinal services is a standout amongst the most troublesome difficulties confronting our next president. Neither one of the candidates has recommended the upgrade we truly require.

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Social Security and Medicare The essential issues: Too numerous retirees per laborer (because of longer futures and decreased richness) -In 1960, 9 specialists paid the bill for every retiree\'s Social Security Benefits -By 2030, there will be just 2 specialists accessible to pay the advantages for every Social Security beneficiary Medicare expenses are rising drastically

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Social Security and Medicare have significantly cut the neediness rates of the elderly.

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A SUMMARY OF THE 2008 ANNUAL REPORTS Social Security and Medicare Boards of Trustees A MESSAGE TO THE PUBLIC: "The money related state of the Social Security and Medicare programs stays tricky. Anticipated long run program expenses are not reasonable under current financing courses of action. "

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Projected Tax Income Shortfall, Percentage of GDP Source: Social Security and Medicare Board of Trustees

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Bottom Line on Social Security and Medicare Either imposes must be raised or benefits must be cut. The issue with raising assessments is that it could debilitate work. One approach to slice advantages is to raise the retirement age. McCain has demonstrated that qualifications must be cut, Obama hasn\'t shown that he will attempt to address this issue.

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The "Great" The U.S. is still a pioneer in profitability, which is a definitive wellspring of increments in ways of life.

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Recent US Productivity Growth has Outperformed Other G-7 Countries

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Relative Labor Productivity, G-7 in 2007

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Conclusion – the following president faces numerous financial difficulties The Good – The US keeps on driving in efficiency. The Bad – Income disparity, the human services framework, and the eventual fate of Social Security and Medicare are real difficulties The Ugly – the current money related emergency

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