Editors' Note: Every month, Townhall Magazine highlights some of the outstanding blogs written by users in our community. The following is an entry from Steve at ReviesRamblings and appears in the March issue of Townhall Magazine.
One major cause of our recession is the $4 trillion early decline in the value of U.S. homes, which could
escalate to steeper declines in other business activities. However, the root cause of the recession has
been the Federal Reserve’s low-interest-rate policy on short-term loans. This policy led to uncontrolled
growth in the housing market in the early 1990s, the willingness of mortgage lenders to underwrite
fraudulent loans and the consequent decline in the housing market in 2008.
In the short-term, the Federal Reserve needs to closely control the in flow of capital into the financial
market and guarantee money market securities that big companies need for day-to-day cash flow. In
the long-term, the U.S. needs to stay true to its role as a global economic powerhouse. Changing the
capitalist role of the U.S. will weaken market expectations and may lead to a global recession.
Recessions can be brought to a halt by counteracting government policies. What have U.S. policy
makers done so far to halt the recession? While the economy is in transition, the current administration
has accepted to incur a proactive $1 trillion expense to revive the banking industry and short-term
lending market.
The Obama administration’s policies of change focus on long-term economic recovery. They focus
on areas where government can intervene to redistribute the wealth, establish social reform in the
health industry, implement middle-class tax cuts and higher corporate taxes, introduce massive efforts
to rebuild infrastructure, invest in research and development of alternative sources of energy, and help
middle-size U.S.-based companies survive in an increasingly global competition, which is hampered by
increasing U.S. foreign-oil dependency.
These changes could lead to bigger government spending and higher taxes levied on capital gains,
big corporations and medium-size businesses. These changes could bring undesirable slow growth and
could slow job creation.