Final Thoughts

Please take a few moments to share your thoughts about our course. What have you learned? Is there a particular issue that has truly resonated with you? Have you been compelled to discuss any of these issues with your friends, family or colleagues?



Filed under Uncategorized

Issue 20 Is the Treasury’s $700 Billion Bailout the Solution to the Credit Crisis?

Pre Script: 

Hope you don’t feel rushed by this. my earlier than expected post.  I’m intentionally posting tomorrow’s issue today to give ourselves enough time to discuss and have meaningful online conversations on the topic/issue. And also to give Prof. Zinn sufficient  time to evaluate our very last  (pause) assignment, since our grades should be turned-in first thing next week, I’m sure. 



Issue for July 17, 2009 Friday. 


Issue 20: Is the Treasury’s $700 Billion Bailout the Solution to the Credit Crisis?



The sub-prime mortgage crisis of 2007-2008 contributed to an economic downturn/malaise and  created a financially destructive cascade of events throughout the U.S. and the rest of the world. The signs of a credit market crisis first appeared in August 2007 which prompted the Fed  to respond with “conventional and nontraditional policy measures to increase liquidity in the banking system” (Bonello 368).


As the financial crisis spread rapidly, people, including the investors lost confidence, banks stopped lending money, credit card companies abruptly changed terms without sufficient prior notice, the public tightened their belts, companies filed for bankruptcy one after another, and soon a deep recession became inevitable. The Fed Chairman Bernanke was quoted as saying, “at the root of the problem is a loss of confidence by investors and the public in the strength of key financial institutions and markets, which has had cascading and unwelcome effects on the availability of credit and the value of savings” (368). 


Then Treasury Secretary Henry “Hank” Paulson  Jr. (former CEO of Goldman Sachs, 2008 TIME person of the year runner-up, but more importantly, a prominent philanthropist and environmentalist)  proposed “a comprehensive approach to address market instability. His $700 billion plan would give the Treasury the authority to buy mortgage-related assets from financial institutions” (369). The fed backed the Treasury plan. Then President George W. Bush supported the “rescue” plan. In his address to the nation, Bush  explained the plan and what caused the economy to fail.  Bush touched on key problems/elements including but not limited to,  the faulty lending practices, the shifted supply and demand for houses when the value of houses plummeted, and the repercussions or consequences of the mortgage-backed securities which was believed to  have  “clogged the financial system” (372).  The stocks also fell by certain percentage points and our retirement funds took a hit in 2008 even before the recession was formally announced in Dec. 2008 (the U.S. had been in recession since Dec. 2007). 

When the housing market nosedived and “set off a domino effect across our economy,” many investors pulled back and many  investment banks like Bear Sterns and Lehman Brothers  suffered massively and we all know what finally happened to those investment firms. Other banks were in financial trouble, as well, and their money supply dried up which then caused the general American population to suffer severely, especially those who needed to borrow money.  Many home-owners throughout the U.S. defaulted on their home mortgage loans. It was no surprise that a lot of Americans did not want Paulson asking for bail-out money during these intense economic times…


Gingrich addresses four main questions all of which can be found on pages 375-376… and answered appropriately which I will intentionally omit. (Don’t want my last post to be the longest). The title stands out the most, by the way. “Before D. C. Gets our Money, it owes us some answers.” Very well-put! (It’s good as is).


Here are some supplemental resources you may consult:


A)   The Economist   I want your money!


The subheading says,

No government bail-out of the banking system was ever going to be pretty. This one deserves support.”




B) This is a  (Meet the Press) clip/segment in which Paulson speaks to Tom Brokaw about the plan.




C) Yale Economist/Professor Robert Shiller on Sub-prime mortgage w/a BusinessWeek editor


click here:

Robert Shiller

Brief Synopsis:

The solutions Shiller suggests/recommends in this short clip above isn’t as detailed as what Stiglitz outlines, from 1-6, at:  (suggested in our text  on page 378).

Shiller probably says more in detail in his book, however. In the clip, he briefly talks about the sub-prime mortgage crisis and shares his view on the crisis. According to Shiller, we should have what he suggests/calls , a “continuous workout mortgage,” and change the way institutions and people give advice to potential future  homeowners. He brings up the past housing crisis from the Roosevelt years (or from the decade of the Great Depression)  and further emphasizes that we need innovative (creative) solutions to solve our current mortgage-related financial problems. I liked his explanations so I’m including this clip as well.  Hope you don’t feel too overwhelmed. Take a look if you have time.



Now the Million-dollar   que$tion. 

What is your opinion of the Bail-out plan?  

Give your free-style answer.



THE END!!  (Stick a fork in me, I am DONE! 😀 ~Chandler Bing from Friends)



Post Script:


From the bottom of my heart, I want to say that it was a pure pleasure meeting a group of fine colleagues/individuals with whom I had the utmost pleasure of discussing twenty of the most important economic issues, both intellectually and passionately (at times, right Justine? 🙂 Are you still thinking about running for President in the future? You have my vote. I wish you a lot of  luck and good health, esp. Many people in my family have been very sick and it made me realize that you really have nothing without your health… )


Anyway, we didn’t have that many people/students  in this class but we did a pretty decent job overall, looking back, right? 

It was a collaborative team effort/teamwork! 


I wish you all, your family and pets MUCH much happiness. I sincerely hope I contributed, as much as I gained from this course, as well as from you guys, of course. 

Thank you, really, for reading many of my lengthy posts!!  Your priceless thoughts and comments (both + and -) are much appreciated, well-taken, and above all, valued. 

Many, many thanks!   (Sorry,  at times,  I shared TMI and too much of my personal op/comments on a variety of sub-topics, not directly  related to the issues we were addressing. 

Hope this short  message of gratitude makes my faux pas up to you…  For the last time, thanks for reading in full. I appreciate your time. (Time is money!)


All the best!

Take care.

Have a great weekend and memorable rest of the summer.


In appreciation, 



I’m done at UR SCS after summer ’09  but IF I’m registering for the online ECON 398U course then I hope to see all of you and work together again. 

Perhaps, we can continue our  lively discussions and reunite then. Perhaps…  one never knows.


Lastly, this free-style blogging thing(y) or Word press was a great idea! It’s a great learning tool. Just great! Too bad we got to only use it for just 4 wks!

Bye Sara, Kristen, Sarah, Justin, Ramon, Kenny and, of course, our prof. and moderator, Prof. Z.

It’s been fun!!  Fun, fun, fun!!

Night everyone!

“Good-night, good-night, parting is such sweet sorrow that I shall say good-night…” ~ Shakespeare in love.



Take a look at this.  Knowledge at Wharton op/interpretation on Subprime Crisis.



Filed under Uncategorized

Issue 19: Is the Inequality in U.S. Income Distribution Surging?

Income and wealth distribution is a known inequality in the United States. Both James Cypher and Diana Furchtgott-Roth agree that income inequality is rising but they differ to the extent of this difference and its impact. First off, there are several measurements of income that you should become familiar with when reading about this topic. One is the quintile distribution of income, which is computed by the Census Bureau. In 2007, the highest quintile received about one half of total household income. Here is the link to their website for lots of fun statistics, wohoo! Another measurement is the Gini coefficient/ index ,which ranges from 0 with perfect equality to 1 which represents perfect inequality. For reference, in 2007 the Gini index was at .47.

Economist James Cypher, points out how many heterodox economists look at income and wealth as one of the most important indicators of the overall state of an economy. Cypher believes we are experiencing the largest shift in distribution since the 19th century. He discusses several reasons why income inequality is on the rise. One main reason is the power that wealthy individuals and US corporations have due to the opportunities created by the rapid increase in globalization. He also discusses the government’s role in creating “pro-economic policies” such as NAFTA and tax cuts for corporations and the “frontal assault” on unions. (Please view the youtube video below to further investigae the impact of union busting) Overall Cypher fears that there is nothing to stop the growing inequality among Americans.

Furchtgott-Roth argues that one needs to carefully look at the measures of inequality as the numbers can be distorting. She discusses various reasons for why the stats may not always represent what they say they are. Here are a few examples that she mentions; 1) you need to consider that the tendency of high-income men marrying high-income women, which will increase the inequality among households without actually changing the wealth of the individuals. 2) Measurements under tax policy also create a problem since the tax returns are measured by units (eg: married couple/ family) rather than individuals. Like Cypher, she analyzes the consumption patterns of the rich but comes to a different conclusion- some households in the bottom quintile are not truly poor. She does not believe there is a “surge” in inequality and looks to other factors such as difference in education as a source of inequality. Here is a link to a similar argument about the distortions of census data.

Map of US Income Distribution: The lighter means more equal if you cannot read the legend.

Finally, here is the video I referenced before that talks about the politics of de-unionization has caused income disparity. If you want to save time, start around 2 minutes in.

As always, some questions to consider:

Do you think the government should play a role in moderating the income inequality? If so, what type of market intervention would be beneficial? If not, why do you support a free market?

What did you think about the distortions of census data?

How do previous discussions such as CEO pay, NAFTA, current recession, etc. play into income distribution?


Filed under Issue 19: Is the inequality in U.S. income distribution surging?, Uncategorized

Issue 18: Do the Testing and Accountability Elements of the “No Child Left Behind” Act Prevent a Proper Cost-Benefit Evaluation?

Since at least 1983, Americans have expressed discontent with the effectiveness of the public education system. They point to sub-par student performance as grounds for reform, and in 2002, the No Child Left Behind Act (NCLB) was implemented across the nation (Bonello and Lobo 334). The U.S. Department of Education website describes its goals as four-fold: “stronger accountability for results, more freedom for states and communities, proven education methods, and more choices for parents.” These goals take form in a variety of ways, including state choice of how to spend federal money and educational methods based on scientific research.

George Miller

On one side of the issue, George Miller acknowledges that NCLB has “brought some positive changes,” including gains in reading, math, and narrowing achievement gaps among groups of students (336-337). However, he contests that it has not been enough. That “we didn’t get it all right when we enacted the law,” leaving the American public with the sense that it is not fair, flexible, or funded (336). He does not advocate abandoning the goals of the act, only seriously changing it to address major concerns. Successful new legislation would include acknowledging school performance, developing better tests that go beyond math and reading, implementing performance pay for teachers and administrators, holding schools accountable, lowering the high school dropout rate, and funding the education system in a bid to build our democratic society (340).
Raymond Simon

Raymond Simon comes at the issue from a personal viewpoint as a teacher, as well as a government position. He notes the effectiveness of the federal government serving as a “minority funding partner in a voluntary endeavor” (342). He points to the Constitution as the basis for state and local officials to determine standards and assessment practices without government intervention, unless they choose to accept the federal funds (342). Simon believes that the best practices shared as a result of federally-funded “scientifically based research and the gathering and use of reliable data” are one of the best results of the NCLB act (344). Using them, we can raise the bar for poor-performing schools and hold them to it. Simon also believes that modifications based on what we have learned are enough to shore up the strong performance of the act to date (344-345). Secretary Margaret Spellings agrees with Simon. Her “national report card” of proven methods can be found here, and she says that she “look[s] forward to working with Congress to craft a bill that strengthens the law without undermining the foundation of accountability that has turned the tide in American education.”

Here’s an overview of NCLB and some of its shortcomings, complete with track and field analogies!

There are inconsistencies and failings in our current system. Do these factors warrant government subsidization of the private sector? Complete government control? Or should it be left to each state to work out?

President Obama has not finalized a recommendation for NCLB, however, it appears that he will support higher standards and more stringent testing. The Washington Post just reported some opposition to this goal: Republicans have selected a chair of the House Education and Labor Committee who supports “maximum latitude” for states, instead of funding federal testing. “He feels the same sense of urgency I do, that we need to get dramatically better,” Education Secretary Arne Duncan reported. Kline wants to push for higher academic standards but give schools more flexibility to achieve them in order to “be much looser at the local level, let folks innovate.” Kline originally supported NCLB, but “said he soured on it after fielding persistent complaints from educators and parents. ‘Let’s back the federal government out of dictating to schools how they’re going to do their business’ he said.”

What are your findings?


Filed under Case Studies

Issue 17: Has the North American Free Trade Agreement Benefited the Economies of Canada, Mexico, and the United States?

For most people, NAFTA is a contentious issue and one that stirs very lively discussion. Whichever side you happen to agree with, there is always room for healthy debate. This topic is particularly interesting to me as I was working in economic development for the Commonwealth throughout much of the 1990s. Specifically, I served as an Associate International Marketing Manager for the Virginia Economic Development Partnership (VEDP). It was during this time that a great deal of attention was being focused on NAFTA and then Governor George Allen traveled to Mexico in support of trade with Virginia. In fact, the agency hired an individual to manage trade relations with Canada and Mexico.

I fondly remember the presidential debates and Ross Perot’s description of the “great sucking sound” that he suggested would represent jobs fleeing to Mexico. The famous Larry King debate between Ross Perot and Al Gore can be viewed on Youtube. Unfortunately, the embedding feature is disabled for this particular video.

Before we begin our passionate discussion regarding job gains/losses, increases or decreases in productivity and the standard of living, and the aggregate impact on wages, let’s take a look at the impact of trade and foreign direct investment on the Commonwealth. VEDP provides information on the impact foreign direct investment has on employment. Here you can see the impact Canadian and Mexican firms have on Virginia employment. The US Department of Commerce, International Trade Administration provides us with specific information regarding the impact of international trade and foreign direct investment on the Commonwealth’s economy. Also, it is interesting to consider Richmond’s top export destinations. Another good resource is “NAFTA: A State Export Perspective 1993 – 2003”.

Finally, take a look at the dollar volume of US trade as it relates to Canada and Mexico. You may wish to explore the official NAFTA web site.

A few fundamental questions to ask are:

1. Has NAFTA improved or diminished the standard of living in the member countries?
2. Has there been a substantial loss of jobs from the US to Mexico?
3. Has the removal of trade barriers facilitated the flow of trade between the three nations?
4. Has the battle over NAFTA been more of an economic discussion or a political discussion?


Filed under Issue 17: Has the North American Free Trade Agreement (NAFTA) benefited the economies of Canada, Mexico, and the United States?

Issue 17: Is NAFTA Good or Bad for Canada, the U.S., and Mexico?

John M. Melle makes very good arguments in favor of NAFTA. NAFTA was enacted in 1994. Since then, our total trade with Canada and Mexico has doubled, Mexico’s exports have shifted to manufactured value-added goods, and American exported services has increased by nearly 75% since 1993 (pg. 321-322). Ultimately, the facts and figures show that there has been a positive economic improvement. Mexico has seen increases in their manufacturing jobs, Americans get cheaper products and are allowed to sell products for less in those countries, and both Canada and Mexico have received cheaper American services and goods that would have been more difficult to provide before the enactment of NAFTA.

So why is there any oppostion to the trade agreement at all? Sandra Polaski does a good job of summarizing the reasoning many opponents to NAFTA have. The major results opponents point out is the loss of agricultural jobs for Mexicans in Mexico and the loss of manufacturing jobs in the United States. Here is an interesting debate pre-NAFTA between candidate Ross Perot and Vice President Al Gore:

Here is another argument against NAFTA:

These arguments depict what John Melle’s statistics do not: that NAFTA has in fact caused a great deal of economic harm to our country in indirect ways. For instance, many believe NAFTA has put Mexican farmers out of business because American farms are able to produce food at a much lower cost through the use of subsidies and technology. Thousands of workers in Mexico that once worked on those farms have entered America illegally and legally in the search for work. If NAFTA was never signed and made into law, it’s logical to conclude that there may not be anywhere near as many illegal immigrants or the costs that are inherently associated with them. Further, although American service industries are expanding into Mexico and Canada, our manufacturing businesses are losing tremendous amounts of jobs and are forced to move into these countries, in particular Mexico.

I believe NAFTA works effectively but should also come with many other stipulations. I believe it is possible for us to benefit from free trade while also cutting off those negative characteristics of NAFTA. We need stronger borders, we need to do a better job of protecting American jobs, and we also need to be sure that our trucking industry is not dismantled in favor of Mexican truck drivers. In 2004, NAFTA created a U.S. trade surplus of 14.2 billion dollars. This is tremendous, but I believe our trade surplus could be and should be even higher.


Filed under Issue 17: Has the North American Free Trade Agreement (NAFTA) benefited the economies of Canada, Mexico, and the United States?, Uncategorized

Issue 16: Are Spending Cuts the Right Way to Balance the Fed Gov’t’s Budget?

Issue/Topic for July 13, 2009 Monday 


 Issue 16:  Are Spending Cuts the Right Way to Balance the Federal Government’s Budget? 

The 1978 Full Employment and Balanced Growth Act lists economic goals for the federal government and the FEBG Act mentions the goal of a balanced federal budget.  In short, the federal government has failed to balance its budget. Moreover,  recent deficits have been large. [“Between 1940 and 1975, there were only two instances when the deficit was in excess of $50 billion. Between 1980 – 1990, the fed gov’t deficit averaged about $140 billion. Budget deficits continued until fiscal year 1998: Budget surpluses were recorded in that fiscal year and in each of the next fiscal years. But the budget returned to deficit and the estimates are for deficits of $423 billion and $354 billion for fiscal years 2006-2007” (Bonello 302).]


(As of July 2009,  our national debt is 11.5 trillion, according to or

It is important to remind us, BTW, that there is a difference between national debt and deficit. See:  


According to the text, the public/national debt is the total of outstanding gov’t securities.  When the fed gov’t runs a deficit, the public debt increases by the amount of the deficit. When the fed gov’t runs a deficit, it sells treasury bills, notes, and bonds. The public/national debt is a summary of all prior deficits. The gross fed  debt was $8.6 trillion by Dec.  2006. 

More info can be found at:


Our text authors ask “why do deficits arise ?” on page 302.  Bonello and Lobo (B&L, hereafter) list a few possibilities, one of which is the ratio of gov’t spending and revenues it receives/collects. We learned when we took Macroecon (or you will in the future) that the Budget deficit is equal to the difference between what the gov’t spends and what it collects in taxes, or also known simply as, G-T. When G exceeds T, the gov’t must borrow from the public to finance its deficit. (G= Gov’t purchases, T= Net taxes (the collection of taxes, the pymt of transfer pymts.) 

 B &L say deficit is likely to increase if the economy enters a recession. (We know this to be quite true as we’ve read about this in recent months. See the U.S. National Debt graph in the UTube video embedded below. )

B&L list reasons in the middle of the aforementioned page, as to why this phenomenon is true (i.e.  Less economic activity decreases tax revenues or lower incomes mean less tax revenue, Increase gov’t spending  or more expenditures for subsidy programs such as unemployment benefit or compensation programs and the like). The authors  remind the readers and us of other possibilities or reasons that cause/create a deficit.


Edwards and Stenholm’s views on this topic/issue are both compelling backed up with sufficient data and explanations. They both agree that budget deficits must be cut but they disagree on how to accomplish it. They talk about how to go about preventing the public debt from rising or getting worse, also.  Edwards’ reasons revolve around overspending by the gov’t and defends  supply-side tax cuts, whereas Stenholm’s reasons revolve around condemning and  criticizing borrowing money from our children and their children which is our current method/approach, which he appropriately calls  “borrow and spend” which he thinks is worse than the “tax and spend” method of the past (312). There are other statements made by E & S which I will intentionally omit and leave it up to you, my fellow yearning-to-learn colleagues/bloggers, to delve into and touch on. Let the discussion (verbal blood bath 🙂  begin!


Check this video out.  Enjoy! I like the way he describes things in a rather non-chalant & laid-back manner.


Laura Tyson’s Comments on the 2nd Stimulus Plan. Enjoy!  This is a bonus clip, I’m including. She talks about deficits towards the end of the segment.


Filed under Issue 16: Are spending cuts the right way to balance the federal government's budget?, Uncategorized