Tag Archives: ECONOMY

Five Year Anniversary

Nate Beeler's cartoon depicts the 5th anniversary since the Stimulus Package, known as the American Recovery and Reinvestment Act, was signed into legislation, and how the act was a waste of money.
Nate Beeler’s cartoon depicts the 5th anniversary since the Stimulus Package, known as the American Recovery and Reinvestment Act, was signed into legislation, and how the act was a waste of money.

In the political cartoon “Five Year Anniversary,” by Nate Beeler, five stacks of one hundred dollar bills are set on fire on top of a cake that reads “2009 Stimulus.” The five candles represent the Stimulus Package’s, also known as the American Recovery and Reinvestment Act, five years of age upon being signed into legislation by Barack Obama in 2009. Beeler’s cartoon depicts the idea that the ARRA wasted money rather than pushing the economy out of the Great Recession.

In December 2007, the United States experienced a time of rising unemployment and declining GDP (gross domestic product) that lasted until 2009. This period was dubbed the Great Recession due to the severity of the negative impacts. The U.S. National Bureau of Economic Research defines a recession as a “period of at least two consecutive quarters of declining levels of economic activity” (Krabbenhoft), and during the time span between 2007 and 2009 GDP decreased by 3.5 percent and the unemployment rate increased more than 5 percent. The gross domestic product indicates the total value of goods and services produced over a period of time, so production and consumer spending decreased drastically. The government attempted to alleviate the unemployment rate and increase economic growth by creating what’s known as a multiplier effect. The multiplier effect occurs when there is an increase in final income from the increase in spending from the initial stimulus. Consumer expenditures make up 70 percent of GDP, and increasing consumer expenditures would create this effect, for consumption leads to the selling of goods and so on. Business investments are also a main component of GDP, and providing business incentives to increase the level of investment was also critical to alleviating the economy. With these two conditions kept in mind, President Bush signed the Economic Stimulus Act of 2008 into legislation. The ESA consisted of 3 provisions: the first provision provided a tax rebate for taxpayers while the second and third provided tax incentives to businesses to stimulate business investment. Unfortunately, consumer spending did not increase as the government hoped it would. Many households preferred to keep their money in their savings rather than spend it or pay their debts; thus, the multiplier effect did not take off. The tax incentives for businesses were also ineffective because the success was minimal and did not improve the economy; therefore, the ESA was failed, but it inspired a new act that was created by the next president, Barack Obama.

After becoming president, Barack Obama signed the American Recovery and Reinvestment Act of 2009 into legislation. The ARRA allowed people to keep a larger segment of their paychecks, provided tax credits for homebuyers, college expenses, and home improvements. Essentially, people got more than a single rebate and had more of an incentive to increase consumer spending. The ARRA also provided money for the government to improve health care, education, and infrastructure in order to create more jobs for the public and decrease the unemployment rate. Despite these efforts, the economy continued declining; however, GDP increased slightly during the third quarter of 2009 and fourth quarter of 2013, but unemployment continued to increase. Although the ARRA played on the idea of the multiplier effect, it did not work because people either lost hope during the recession and stopped looking for jobs or used their money in ways the government didn’t intend. The ARRA had good intentions, but nothing occurred the way the government believed or wanted it to happen. This relates to John Knott’s cartoon, “What’s the Next Play Going to Be?” because of the naive thought that people would comply with what higher officials wanted them to do; in the end, people spent money the way they wanted to spend it or stopped trying to find a job whenever hope was lost. It is difficult to bring an economy out of a recession or decrease the unemployment rate immediately, and it takes time for such drastic changes to occur because people do not have unanimous opinions. Ultimately, the ARRA failed just as the NRA had due to the difficulty in governing people’s actions. The failure of the ARRA  and the NRA also expressed the theme that assuming what an entire nation of people would do is naive because people do not act or think similarly, and it is not safe to predict how millions of people would behave, especially during a crisis.

The irony behind the cartoon lies behind the fact that the anniversary of the Stimulus Package was being celebrated despite how negatively people viewed it. It is celebrated because the White House believed the ARRA was good for the economy, but many others thought otherwise as indicated by the burning money. Beeler’s cartoon depicts both standpoints, but the main focus is on how disfavored the ARRA was as shown by making the burning bills the focal point of the cartoon. 

Nate Beeler’s political cartoon “Five Year Anniversary,” stresses how much of a fail the ARRA was due to the amount of money it dissipated. Many efforts were put in to save the economy, but the government did not consider the fact that some households or businesses wouldn’t comply with their intentions. The government was unable to dictate the people’s actions, ultimately leading to the collapse of the American Recovery and Reinvestment Act.

Citations:

Krabbenhoft, Alan G. “Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009.” Encyclopedia of Business and Finance, 3rd ed., vol. 1, Macmillan Reference USA, 2014, pp. 234-236. Gale Virtual Reference Library. Accessed 28 Nov. 2016.

Blind Politics

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Trump’s “Foreign” Policy is a cartoon that seeks to map out some of the ideas that Donald Trump has had about other nations. In the cartoon, Trump is explaining his foreign policy, which includes labels like “RAPISTS” on Mexico, “OUR PAL PUTIN” on Russia, and “DROP BOMB HERE?” in the middle east. All of these labels are references to things that Trump has said about these countries before, and all of them point toward the fact that Trump thinks about the rest of the world in an ethnocentric way, influencing all of his decisions on policy. One policy in particular that Trump is especially vocal about is his policy to keep low-skill manufacturing jobs in the U.S. by putting tariffs on imported goods (Rich). Although Donald Trump seeks to boost the success of American companies by cutting America off from the rest of the world, his policies may only harm American industries like what happened during the Great Depression.

Donald Trump’s motives in his economic policies are benign on a surface level. According to him, one of the biggest problems with our country is that industries are moving production plants out of America since labor is cheaper in other countries, and then these companies are distributing their goods in the U.S. without having to pay taxes for imports. In this way America is losing both low-skill manufacturing jobs and tax revenue from tariffs on foreign-made goods. His policy is to prevent or discourage companies from doing this by putting taxes on their imports into the U.S.

Trump has repeatedly vowed to impose high tariffs – or the threat of high tariffs – to bully American companies into keeping jobs in the United States. His favorite example is Ford Motor Co., which plans to build a massive plant in Mexico. Trump has said that before he takes office he will persuade Ford to change course by threatening to charge the company a 35 percent tax on cars imported back into the United States (Robert).

This policy is a bit more feasible than many of his other policies, but his no-compromise attitude and business background may cause him to force companies to decide between selling to America or to the rest of the world.

So what’s been interesting about Trump is he has really appealed to this older sense of nationalism as opposed to modern American conservatism. He criticizes outsourcing of jobs to other countries, things like that. So that’s his economic point of view. Then you throw in things on immigration – the Buckleyan conservatives are open to skills-based immigration. Let’s bring the best and brightest from around the world to America. The  view is that those individuals are a threat to the people who live here now, and we should only bring them in very, very limited numbers. (Robert)

The kind of America that Trump believes in is a kind of America that is self-sustaining, isolated, and free of foreign influence without benefit. Putting massive tariffs on imported goods discourages trade and encourages consumers to buy domestic goods, but trying to force this has never worked.

Trump is interested in running the country like a business. He seeks to be the CEO instead of the diplomatic leader. This comes into play when he talks about NATO and relations with Japan. “If we’re attacked, Japan doesn’t have to do anything. They can sit home and watch Sony television… They have to pay… It’s got to be a two-way street” (Henderson). Trump is talking about the Treaty of Mutual Cooperation and Security signed in 1960. This treaty requires both nations to defend each other in case of an attack, but article 9 of the treaty stops Japan from coming to the aid of the U.S. in the event of an attack. This treaty was made since “alliance with Japan is crucial for America’s Asia-Pacific strategy and security,” (Henderson) but Trump is instead looking at this alliance as a business opportunity. This goes back to the ethnocentric ideas that Trump has. It is a privilege to use the best military in the world, so other people have to pay for it, simple as that. The only problem is; it is not as simple as that. “Mr. Trump regards treaties with other countries as contracts that needed to be reviewed to see whether they benefited Americans” (Rich). Concerns that are rising about Trump’s relations with other countries are very similar to the concerns brought about by the Smoot-Hawley Tariff. This tariff, passed by Herbert Hoover during the Great Depression, started global trade wars that became detrimental to both American and world economies. If Trump seriously gives up an alliance with the Japanese for lack of profit, he will inevitably set off a chain reaction of instability in Asia, that could spread even further. An alliance with Japan is necessary not only for peace between nations, but also for trade. Donald Trump is trying to look out for his own country, but he is doing it through an ethnocentric lens. Doing this has led to mistakes before, such as when Franklin Delano Roosevelt passed a 42 percent tariff on Japanese cotton in 1936 in hopes of stimulating the American textile economy. This action was later referred to as the “cotton blunder” because of the backfire it caused; Japan responded to this tariff with a counter-tariff and a threat to trade with other nations instead of the U.S.

There are times when being a businessman is useful, but being able to balance this skill with good diplomacy is more important for the President of the United States. Because Donald Trump sees things through an ethnocentric viewpoint, he fails to recognize that benefitting other nations through alliances and trade agreements can be good.

Bibliography

Henderson, Barney. “Donald Trump Savages Japan, Saying All They Will Do Is ‘watch Sony TVs’ If US Is Attacked and Threatening to ‘walk’ Away from Treaty.” The Telegraph [UK] 5 Aug. 2016: 1+. Print.

Johnson, Sean Sullivan;Jenna. “Trump ramps up rhetoric on trade.” The Washington Post. (July 1, 2016 Friday ): 1348 words. LexisNexis Academic. Web. Date Accessed: 2016/11/15.

Rich, Motoko. “Abe to Meet Trump to Press Japan’s Case on Security and Trade.” The New York Times 11 Nov. 2016: 1+. Print.

Robert, Siegel. “Nationalism V. Conservatism: What Trump’s Rise Means For The GOP.” All Things Considered (NPR) (2016): Newspaper Source. Web. 24 Oct. 2016.

“Trump’s protectionist rhetoric worries Chinese.” Global Times (China). (March 17, 2016 Thursday): 817 words. LexisNexis Academic. Web. Date Accessed: 2016/10/24.

“Boloney!”

John Knott illustrates Al Smith, a notorious opponent of federal policy, disapproving Roosevelt’s Monetary Policy.

The cartoon “Boloney!” published on November 27, 1933 by John Francis Knott illustrates the economist, Al Smith, to be very unhappy with Roosevelt’s Monetary Policy. Roosevelt’s monetary policy, in short, is “how the Federal Reserve regulates the money supply and the interest rates to reach or fine tune macroeconomic goals” (McCusker). The essential purpose of Knott’s cartoon is to highlight how recurrent it is for Al Smith to have opposing views towards national policies.

After taking office on March 4, 1933, Roosevelt made sweeping changes. Within two months he had taken the U.S. off of the Gold Standard. “The removal of the “Golden Fetters” and the devaluation of the dollar to $35 dollars per ounce of gold combined with political events in Europe to cause a flow of gold into America. The economy began to recover” (Napier).  Ultimately, “Roosevelt took away the gold standard to get people to use federal money on programs in hopes of jump starting the economy” (Fisher).  Because of this success, people of the United States were likely to believe that the monetary policy was a good idea.

Roosevelt’s Monetary Policy had great strengths which led him to having many supporters, however, this policy also had adversaries. The most notorious opponent of all was Al Smith. “He was elected as Governor of New York four times and was also the Democratic candidate in the presidential election of 1928″ (George). “Al Smith is known for being an anti-Prohibition candidate”(Richards) which further extends on the idea that Smith supported states rights. Smith’s determination to urge repeal of the prohibition amendment feathered from the fact that he believed in local government majority rather than federally imposed laws and policies.  As mentioned in the editorial that was coupled with this political cartoon, even Al Smith admitted that “his severe condemnation of present national policies is not the first time that he has taken the unpopular side of a question” (No Brass Collar). The article, “No Brass Collar”, delves into Al Smith’s past in order to give critical background information. The fact that Al Smith has always been a supporter of states rights further allows for the viewer of this cartoon to understand and analyze why Al Smith is showing so much animosity towards Roosevelt’s Monetary Policy. Because Smith was also extremely anti-FDR, this could lead to the viewer of this cartoon to believe that his animosity towards Roosevelt was the reason why he hated the monetary policy. However, with the accompanying article of “No Brass Collar,” it is evident that Al Smith hated Roosevelt’s Monetary Policy simply because he had been and always was an advocate for states rights.

Analyzing Knott’s carefully illustrated cartoon, the viewer is able to dig deeper into the real issues proposed in the cartoon. The expression that Al Smith exudes is mainly of disgust and resentment towards the monetary policy. In addition, Al Smith has his hand flexed in a manner that is almost his way of saying that the monetary policy is not even worth looking at, that it is worthless. It is evident in the cartoon that Al Smith does not believe that this policy will be successful by any means. Furthermore, with the title of the cartoon being “Boloney!” which is commonly coined to represent foolishness, the reader can assume that to be Al Smith’s reaction toward the “nonsense” that is Roosevelt’s Monetary Policy. The humor in this cartoon comes mainly from the title itself and how the word “boloney” is certainly not a common word used in politics. Also adding to the overall humor of the cartoon is of course, Al Smith’s facial expression. His face is masked into such disgust that one would believe his frown would never turn upside down. There is just enough humor in the cartoon to enlighten the viewer while also still adequately conveying the political component.

In essence, this cartoon depicts the antipathy that Al Smith exudes towards Roosevelt’s Monetary Policy because of his firm belief in local majority versus national regulation. With the accompanying article, the reader is able to understand that the purpose of Knott’s cartoon is to depict the idea that Al Smith is notorious for opposing federal policy, and that his opinion on Roosevelt’s monetary policy would be no different.

                                                                  Works Cited
“Alfred Emmanuel Smith.” Encyclopedia of World Biography. 2nd ed. Vol. 14. Detroit: Gale, 2004. 284-85. Gale Virtual Reference Library. Web. 9 Dec. 2015.

    Fishback, Price, 2010. “US monetary and fiscal policy in the 1930s,” Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 385-413, Autumn.

George, Alice L., John C. Stoner, and Daniel J. Walkowitz. Social History of the United States. Santa Barbara, Calif.: ABC-CLIO, 2009. 164-65. Print.

   McCusker, John J. History of World Trade since 1450. Farmington Hills, MI: Thomson Gale, 2006. Print.

Napier, Steven, “Roosevelt’s Monetary Policy” (2005). Theses, Dissertations and Capstones. Paper 746. http://mds.marshall.edu/etd/746

“No Brass Collar.” Editorial. Dallas Morning News. 27 November 1933, sec 2: 2.

Richards, Lawrence. “Prosperity, Depression, and War, 1921-1945.” Encyclopedia of U.S. Political History. Vol. 5. Washington, DC: CQ, 2010. 316-319. Print.

The Credit Crunch

INKCINCT Cartoons, "The Credit Crunch"  A car crash occurs between subprime mortgage market, private investors, and the financial sector.
INKCINCT Cartoons, “The Credit Crunch”
A car crash occurs between subprime mortgage market, private investors, and the financial sector.

“The Credit Crunch”

INKCINCT

September 11, 2008

The Credit Crunch

In 2008, a large number of Americans were fighting staggering unemployment, plummeting house prices, and a complete meltdown in their retirement accounts.  Naïve homebuyers and controversial banking practices had created the biggest financial catastrophe since The Great Depression.

In the years leading up to 2008, the financial sector utilized loose lending practices to qualify individuals with low income and poor credit to purchase homes.  This collection of homebuyers was known as the subprime mortgage market (“U.S. Housing Bubble and Credit Crisis in the Late-2000s”, 340).  By extending credit to an unqualified subprime mortgage market, the banks created an artificial surge in demand for housing, consequentially inflating house prices (Arner, 92).  To further fuel demand for their mortgage products, the banks provided options for small down payments and low introductory rates (“U.S. Housing Bubble and Credit Crisis in the Late-2000s”, 340).  These types of lending tactics enabled individuals in the subprime mortgage market to buy bigger homes than they could actually afford (Arner, 92).  As introductory rates began to expire, these homeowners were unable to make their full monthly payments and the number of foreclosed homes rose at a startling rate (Hirsh, 38).

The increasing foreclosures led to a degradation of the entire real estate market and caused downward pressure on housing prices overall (Arner, 93).  Suddenly homes were not worth enough for banks to recoup their loans amounts from the perpetually growing defaulters in the subprime mortgage market (“U.S. Housing Bubble and Credit Crisis in the Late-2000s”, 340). Accordingly, the banks were forced to take huge accounting losses for their failed loans (“U.S. Housing Bubble and Credit Crisis in the Late-2000s”, 340).  The resulting downturn in the housing, financial, and consumer sectors had a ripple effect throughout the entire economy.  Consequently, stocks and bonds of just about every company tanked.  Small investors who were invested in mutual funds of stocks and bonds through their retirement accounts, college funds, and pensions were unexpectedly devastated (Arner, 96).  Government officials were afraid of the economic ramification of the financial sector collapsing and the lack of consumer protection available to subprime mortgage borrowers (“U.S. Housing Bubble and Credit Crisis in the Late-2000s”, 341).  Therefore, they offered assistance programs to the subprime mortgage borrowers and created enormous bailout plans for the vast majority of the financial sector (“U.S. Housing Bubble and Credit Crisis in the Late-2000s”, 341).  On the other hand, many small investors were losing a large part of their life savings and were left to deal with the consequences on their own.

The article, “More Zeroes for Investors,” described the multi-billion dollar loss in the stock market caused by the subprime mortgage crisis.  Specifically, it highlighted the large percentage drops in each sector of the market and the impact of those declines on small investors (Craig, 1). The editorial provided an anecdote from a non-profit worker, Barron Segar, who was too afraid to look at the computer due to the falling mutual fund prices but considered buying more funds if the downtrend continued (Craig, 2).  It also described a 59 year-old doctor, Roy Steiman, who planned to purchase additional shares in Bank of America and mentioned, “If Bank of America [failed, we’d] be in big trouble” (Craig, 1).  Through those examples, the article emphasized the hopes of people like Mr. Steiman and Mr. Segar as they looked to recoup their losses by purchasing additional shares at lower prices.  The editorial also underscored the notion that these individuals were undoubtedly afraid of further losses.  Mr. Segar was quoted as saying, “I think the biggest lesson that investors [learned was] that there [was] no safe haven” (Craig, 2).  Another example of investor fear in “More Zeroes for Investors” was a story about Mr. Segar’s father.  He was described as a 76-year old man who was heavily invested in financial stocks due to his employment within a bank trust department (Craig 2).  It could be inferred that he was nearing retirement age and depended on those investments to provide him support.  Mr. Segar expressed concern for his father in the article and mentioned, “My dad [was] going to fall over when he [received] his next statement” (Craig 2). The article concluded by noting other areas of the market which were likely to be pushed down and provided a forecast for the general downtrend in the economy to linger (Craig, 2).  In short, as there was more pain ahead for the stock market, small investors were expected to continue to get hurt.

The political cartoon, “The Credit Crunch” also portrayed the suffering of small investors as it illustrated the interaction between the three primary participants in the 2008 credit crisis:  “small investors”, the “subprime mortgage market”, and the “finance sector”.  The involvement of these groups was shown through a car accident in which the small investors were crushed in between the subprime mortgage market and the finance sector. Though there were several elements that contributed to the 2008 credit crunch, the artist placeed an emphasis on the general obliviousness of the subprime mortgage market and the cold-hearted greed of the finance sector.

In “The Credit Crunch”, the finance sector was driven by a pointy-nosed chauffeur inside of a large Roll Royce.  This representation alluded to the enormous amount of wealth generated by the banks using their loose lending policies.  It also underscored the greed that was involved in carrying out their deceptive practices.  The subprime mortgage market was shown through what appeared to be a lone driver in a giant SUV.  This portrayed the consumerist nature of the subprime mortgage market participants and their inclination to purchase items that were larger or more expensive than necessary. The finance sector was depicted as leading the pack and could be seen as the forerunner in the crisis.  The subprime mortgage market was thoughtlessly following the path laid out by the finance sector unaware that it caused small investors to suffer.

The individuals shown inside the cars also contributed to the message of the artist.  The finance sector participants were shown with emotionless, forward looking faces, which indicated their apathy towards the individuals they had hurt and the general unawareness of the destruction they had left in their path.  The individual shown inside the subprime mortgage market vehicle looked young and clueless.  His youthful demeanor and wide-eyed smile indicated his naïve nature and obliviousness to the damage caused by his actions.

Both the subprime mortgage market and finance sector were illustrated as larger vehicles that were seemingly damage free.  Meanwhile, the artist portrayed the small investors with a tiny automobile that was completely crushed and had a life-less hand of one its passengers hanging out from the side.  It appeared that there were many passengers inside the small investors’ car; however, they were shown without faces in order to possibly hide the emotional turmoil they encountered. Through an otherwise humorous medium of a political cartoon, the author emphasized the seriousness of the anguish and devastation felt by small investors during the 2008 credit crisis.

The article, “More Zeroes for Investors”, and the cartoon, “The Credit Crunch” both highlighted the damage the banks and the mortgage market created for the small private investors during the 2008 Credit Crisis. The excessive borrowing, lending, and fear in the markets that were seen in the modern credit crisis echoed the events that led up to The Great Depression (Arner, 98). The 1931 Knott cartoon, “Urgent Letter to Santa Claus” and the accompanying editorial, “Panic or Prosperity” referred to the extreme borrowing of Germany following the First World War that ultimately led to the disastrous Great Depression. Likewise, the concept of over-lending and over-borrowing was present in the modern credit crisis between the banks and the mortgage market.

Works Cited

“Credit Crunch.” The Encyclopedia of Money. Larry Allen. 2nd ed. Santa Barbara, CA:   ABC-CLIO, 2009. 92-93. Gale Virtual Reference Library. Web. 17 Nov. 2015.

Hirsh, Michael. “Mortgages And Madness.” Newsweek 151.22 (2008): 38-40. Academic Search Complete. Web. 17 Nov. 2015

“U.S. Housing Bubble and Credit Crisis in the Late-2000s.” Corporate DisastersWhat   Went Wrong and Why. Ed. Miranda H. Ferrara and Michele P. LaMeau. Detroit: Gale, 2012. 339-342. Gale Virtual Reference Library. Web. 17 Nov. 2015.

Arner, Douglas W. “The Global Crisis of 2008: Causes And Consequences.” International Lawyer 43.1 (2009):91-136. Academic Search Complete. Web. 17 Nov. 2015.

“Credit Crisis: Market Effects | Investopedia.” Investopedia. N.p., 18 Nov. 2008. Web. 17 Nov. 2015.

“What Is a Subprime Mortgage?” Investopedia. N.p., 02 Sept. 2007. Web. 17 Nov. 2015.

“The Credit Crunch.” INKCINCT Cartoons. N.p., n.d. Web. 17 Nov. 2015.

Craig, Susanne. “As Subprime Write-Downs Top $100 Billion, Dow Industrials Drop 306.95 Points; Small Investors Brace for More.” Wall Street Journal 18 Jan. 2008, Eastern ed., sec. 15: 1-2. EBSCO eBook Collection. Web. 12 Dec. 2015. <http://web.a.ebscohost.com.ezproxy.lib.utexas.edu/ehost/detail/detail?sid=121db932-d031-4e4f-aa5f-64985dccdfef%40sessionmgr4002&vid=0&hid=4114&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=28450284&db=a9h>