Damned if you do Damned if you don't, a double standard I need to question

from JoeUser Forums

OK, so I am not much of a political expert or an economics expert either. The knowledge that I have mostly came from this site. So with that said I have to question something I heard on the news yesterday that, to me, has both good points and bad.

According to a foxnews.com article Wells Fargo had plans to send some of their employees and a, what they called, traditional all-expense-paid trip to Las Vegas for 12 days. Wells Fargo recently acquired Citigroup, one of the banks that received billions from the first Stimulus Package which basically puts Wells Fargo under the federally bailed out banks unbrella. Once the story was out about this expensive trip, lawmakers grilled Wells Fargo for planning this trip considering the problems with the economy and at this time I haven't confirmed but I thought I saw another article that said Wells Fargo received bailout money. Can't verify this yet and am also not sure if Wachovia, acquired by Wells Fargo, received Federal bailout money as well.

Now, I can understand the whole grilling thing. I mean in a time where the economy is not fairing very well, where many banks are getting taxpayers money which most Americans do not approve of and on top of that banks are not lending money; I can see why anyone would question things such as the recent story about the $50 million jetplane for Citigroup, the AIG executives who went to resorts, spa's huntinng trips, etc and now this Las Vegas trip from Wells Fargo. But at the same time we have stories on the news how due to the economic issues, the loss of jobs, the lower wages and high prices at the stores that people are not spending as much money as before. That people are actually saving money as oppose to spending and that this is actually affecting our economy as well. If people don't spend, vendor to make money, if vendors don't make money they make have to fire employee and/or go out of business, the more people we have on unemployment, the worse it is for our economy. This domino effect is not good for us.

So I have to ask, should we be making a big deal on how the banks are spending money considering we actually need some spending to be done? I mean, sure we could argue that some of the things the money is being spent on are luxuries they don't need to be spending money on but I think we need to keep in mind that luxuries require people to make them and provide them so this also helps keep people from losing jobs and companies from going under.

We are in a situation where we need to try to help the people who currently have jobs to keep them. But what about people who work in luxurious hotels, car dealers that sell Jaguar, Ferraris, Porches and Rolls Royce, those who work in really expensive restaurants, funiture stores, casinos and any other type of business that depends usually on rich people to spend money so they can make money? Every time someone buys something that doesn't seem like an expense that should be done during this bad economy, they get scolded. But what about those who depend on thes expenses to make a living as well? How do we save jobs while criticizing people for spending at the same time?

Right now I find myself in a similar situation, where I am debating whether to treat myself to a "want" or save the money in case of an emergency (such as job loss). But if I don't spend someone could lose their job because of me and many others who chose not to spend. If I do, I risk getting scolded by friends and coworkers and maybe regret it if I lose my job.

How do we fix the economy while saving money at the same time? I would like some serious reponses to this question. I think it's something we all need to find an answer to.

7,435 views 23 replies
Reply #1 from Stardock Forums Top

I heard it too, not sure if it's true or not. I feel the same as I do if the little guy spends his welfare check on booze and cigarettes as I do companies spending their welfare checks on vacations and bonuses, it's wrong. Yet we keep throwing money at both.

Reply #2 from PolMach Forums Top

The thing that bothers me is the idea that a company (bank or otherwise) receives taxpayer money to save them from collapse and then a couple months later sends some employees on an expensive retreat.  It just seems like it's in really bad taste.  If it weren't for the taxpayers the entire company would have likely gone under yet they can somehow afford to go on an expensive holiday?  It just doesn't jive.  If their business is hurting they should first cut out the extravegant expenses.

That said as far as individuals are concerned, if you have the cash and you are fairly confident that you aren't going to lose your job anytime soon I say go out and spend.  If you think you are at risk of losing your job then I would highly recommend saving every last penny you can so that you can hopefully ride out the time in unemployment a little easier.  But more than anything I would concentrate on paying down debt, there's nothing worse then losing your job and then still getting that credit card bill in the mail every month when you have no cash with which to pay it.

Ashes of the Singularity II
Reply #3 from JoeUser Forums Top

I agree with both of you. This unnecessary spending from companies that were suppose to be on their last legs and were able to get their hands on billions in taxpayers bailout money is ridiculous and wrong. But at the same time I can't help but wonder about the businesses and their employees that benefit from these extravagant expenses these companies do. How will they survive if we scold these companies for making such huge expenses? Would like to know your thoughts on this.

Reply #4 from Stardock Forums Top

You know what it is?  The CEO's all realize that their companies are failing and that there is nothing they can do about it, so they're milking it for all they can get.

They'll retire rich and happy, thanks to the bailout.

Reply #5 from PolMach Forums Top

How will they survive if we scold these companies for making such huge expenses? Would like to know your thoughts on this.
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I think what should have been done with the bailouts is that a moritorium or at least 12 months was put on bonuses, business paid vacations, etc.  That way it's not that they won't ever be able to get bonuses and whatnot but for the year after getting a bailout they aren't allowed to as a kind of penalty for needing federal money.

Reply #6 from JoeUser Forums Top

Doesn't this prove that the governments ability to make wise decision is very poor?

Company is struggling

Gov't gives money

Company uses money to retreat and bonus (wells fargo, AIG, etc)

Gov't complains company mismanaged the money and wants caps.

 

Isn't this a clear arguement NOT to give bail outs?

Reply #7 from PolMach Forums Top

Isn't this a clear arguement NOT to give bail outs?
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The clear argument was that businesses mismanaged funds and made too many risky investments in the first place.  Yes let's throw taxpayer money after a failing business strategy without even bothering to ask what the business plans to do differently, brilliant idea.

But yes this should be a clear argument that no more bailouts should be given.  How can we expect any investor to be confident in the market when no one knows if and/or when the government will step in and bailout the competitor to your investment?  Why invest in one company when in a day, week, month, year the primary competitor is bailed out?  That's what's fueling the lack of confidence in the market and thus prolonging this recession.

Reply #8 from JoeUser Forums Top

Individually, the wisest thing to do is save if you can afford to. Collectively, the worst thing to do is to save instead of spending.

 

Since the impact of you saving a bit of money instead of spending it is going to be negligable, the best thing for you to do is to save - that way if you lose your job because of everyone else saving (or just because of the recession), you'll have a safety net, while if you try and do whats best for the economy, and are the only one, you'll bew in real trouble should you lose your job.

It's then the governments job to try and encourage people to spend instead of saving more, or even to spend for them, or just to hope that a lot of people aren't smart enough to plan ahead and start saving.

Reply #9 from JoeUser Forums Top

Doesn't this prove that the governments ability to make wise decision is very poor?

Company is struggling

Gov't gives money

Company uses money to retreat and bonus (wells fargo, AIG, etc)

Gov't complains company mismanaged the money and wants caps.



Isn't this a clear arguement NOT to give bail outs?
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Hah! Best comment on this subject so far. Fool me once shame on you (the banks mismanage money aand loans) fool me twice shame on me (they mismanage the bailout money).

Reply #10 from JoeUser Forums Top

Since the impact of you saving a bit of money instead of spending it is going to be negligable, the best thing for you to do is to save - that way if you lose your job because of everyone else saving (or just because of the recession), you'll have a safety net, while if you try and do whats best for the economy, and are the only one, you'll bew in real trouble should you lose your job.
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That makes perfect sense and is one of the reasons for debating with myself, but the savings is more collective than individual.

Reply #11 from JoeUser Forums Top

Individually, the wisest thing to do is save if you can afford to. Collectively, the worst thing to do is to save instead of spending.

Since the impact of you saving a bit of money instead of spending it is going to be negligable, the best thing for you to do is to save - that way if you lose your job because of everyone else saving (or just because of the recession), you'll have a safety net, while if you try and do whats best for the economy, and are the only one, you'll bew in real trouble should you lose your job.

It's then the governments job to try and encourage people to spend instead of saving more, or even to spend for them, or just to hope that a lot of people aren't smart enough to plan ahead and start saving.
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I disagree, I don't want the government telling me what I should be doing with my money.  They can't manage their money, what gives them the right to tell me how to manage mine?  Just because?

They already take more than I can save/invest and they are talking about taking more.  I'd rather suffer collectively for a short period (people saving) than to suffer collectively on a longer term because the government encouraged poor money management and we will have to pay this back with interest. 

 

We are in the trouble we are because people have been living beyond their means:

-Sub-Prime lending to those who should be buying a house.

- "72% also believe that debt is a part of modern life and difficult to avoid." - LINK

-"The average interest rate for standard bank credit cards topped 19% in March 2007, compared to 16.5% in 2003." - above link

 This increase in average rate indicates that people are having to pay more for the money that they didn't have in the first place.

 

This push for spending created an artificial bubble that only delayed the inevitable and just like interest compounded into the problems we are seeing today.  The bottom line is fiscal responsibility promotes health of a company, household, and country.


How about we ask Government to balance the budget?

Reply #12 from PolMach Forums Top

This push for spending created an artificial bubble that only delayed the inevitable and just like interest compounded into the problems we are seeing today. The bottom line is fiscal responsibility promotes health of a company, household, and country.
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Agreed.  However the problem is that we live in a consumer based economy and we have nothing to fall back on.  If people start to save money rather than spend it we end up with massive unemployment which only makes the problem worse.  What we really need is a return to manufacturing our own goods so that when people do start to pull back on spending there is still something to fall back on albeit at a slower pace.

We definitely need to return to an era of fiscal responsibility but that is going to be a very tough transition when our entire economy is based on people spending money that they don't have.

Reply #13 from PolMach Forums Top

How about we ask Government to balance the budget?
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That would certainly be a start.  It would be nice for the government to lead by example for a change.

Reply #14 from JoeUser Forums Top

That would certainly be a start. It would be nice for the government to lead by example for a change.
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Especially since they LOVE to tell us what to do?

Reply #15 from JoeUser Forums Top

However the problem is that we live in a consumer based economy and we have nothing to fall back on. If people start to save money rather than spend it we end up with massive unemployment which only makes the problem worse. What we really need is a return to manufacturing our own goods so that when people do start to pull back on spending there is still something to fall back on albeit at a slower pace.
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E-D, there are two aspects that we are dealing with here.

First of all we are a consumer based economy because the vast majority of manufacturing was forced (financially) to move out of the country.  The only way we would see a manufacturing revitalization is a reduction on corporate taxes in addition to reduction of union influence.

The Second area is the fact that we have nothing to fall back on.  Remember the old saying, "saving for a rainy day?"  People haven't been saving and continue to over extend themselves living on borrowed money.  I have money in a savings account for that very reason, to fall back on.  To get me through the hard times.  

A little about me (not to gloat but to make a point):

-I am married and we currently rent.  We haven't bought a house because over the long term we couldn't afford one.

-We strive to live off of one income.  My wife's isn't a great income but every little bit helps.

-We don't go out to eat much (once every two months?), we don't have nice cars, we don't have alot of 'nice' things.

-but we DO have money in the bank and investments, food on the table (simple, edible, nothing fancy), a warm place to stay at night.

-the only debt we have is my student loan.

BTW, I'm only 29.

Reply #16 from PolMach Forums Top

First of all we are a consumer based economy because the vast majority of manufacturing was forced (financially) to move out of the country. The only way we would see a manufacturing revitalization is a reduction on corporate taxes in addition to reduction of union influence.
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Yep, and that's what needs to happen, we need to reduce the corporate taxes to attract those businesses back.  The whole ida that we would become a "service" economy was a very bad idea and we need to get out of the mindset that corporations are evil.

The Second area is the fact that we have nothing to fall back on. Remember the old saying, "saving for a rainy day?" People haven't been saving and continue to over extend themselves living on borrowed money. I have money in a savings account for that very reason, to fall back on. To get me through the hard times.
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Again I agree.  We need to get out of the whole consumer based lifestyle and back to fiscal responsibility. 

Personally I can't say that I have much in my savings account, I wish I had a lot more but I have been spending the last couple of years getting out from under a lot of debt that I incurred by living in the DC metro area on a single (modest) income.  I now live in WV which has a much lower cost of living, it's still a bit of a strain on a single income but much easier than the DC area.  I am just about out from under the debt and it only took me a couple of years.  Now I should be able to start saving money, unless some major expenses rear their ugly head.  And just round out the bio here, I am married, will be 30 in about a month and own a home but it's not a mcmansion or anything like that.  Luckily I don't have a student loan to deal with or else I wouldn't have been able to afford the house.

Reply #17 from JoeUser Forums Top

Personally I can't say that I have much in my savings account, I wish I had a lot more but I have been spending the last couple of years getting out from under a lot of debt that I incurred by living in the DC metro area on a single (modest) income. I now live in WV which has a much lower cost of living, it's still a bit of a strain on a single income but much easier than the DC area.
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But you are headed in the right direction of fiscal responsibility.

 

And just round out the bio here, I am married, will be 30 in about a month and own a home but it's not a mcmansion or anything like that. Luckily I don't have a student loan to deal with or else I wouldn't have been able to afford the house.
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Yeah Student loans will do that. Good for you on being able to purchase a house.

 

I don't know about where you live but the median house value being $383K according to Zillow.com and condo being $198K.  It sucks but it is our choice to live in the beautiful mountain area we do.

Reply #18 from JoeUser Forums Top

Yep, and that's what needs to happen, we need to reduce the corporate taxes to attract those businesses back.
End of quote

 

creating SUSTAINING jobs.

Reply #19 from Stardock Forums Top

we definitely need to find a more logical way to bring back our economy without repeating history. Responsibility, respect and decency should be our primary goals. Greed needs to hit the road.

Reply #20 from Stardock Forums Top

I think most folks here know that I'm ageist any bail-outs. But lets face facts some payout, bail-out, or stimulus, whatever you want to call it, is going to happen regardless. So we can give it to the banks or companies or we can give it to the people. I suggest that if we give it directly to the people, it will "stimulate" the economy faster, than the top down. Sure some people will save it (in that case it goes to the banks anyway) some will buy new cars (goes to the auto makers), some will use it to pay mortgages (again to the banks), and many will use it for food, bills, basics and small purchases (all back into the system).

Even it the banks get the money and offer loans, who wants one when they don't have a job? Now who and how much should they get? IMO the money should go on a per-household basis, not based on number of family members (IE. one house 5 people one payment, one house 1 person, one payment). This could be based off the tax return social security numbers and address listed on the return. If more than one family lives in a house (and files separately) they would have to make fragments for dividing the cash, otherwise the person with their name on deed, or lease would get the money. People that don't normally file would have to do so (like they did for the last stimulus). Nothing if someone else can claim them on their taxes, split payment for married filing separately (even if two different households). I estimate there are between 100 -140 million homes that would qualify.

So how much to give? Well $10k would probably be the max if it were a flat pay out. I would imagine though that it would be tiered according to income. Perhaps people making over 150K would get nothing (again reducing the number of homes that qualify) and increasing from there. This could potential raise the payout to a much larger figure as it hit the lower tiers. One other thing I would do is make it taxable as income the following year, but perhaps at a reduced rate) to offset some cost. This would not impact most of the poorest workers much as they generally make money at tax time (from credits). Information on what expected taxes would be bases on income plus the payout would be widely available.(mail Internet) so people will know what to expect the following tax year. Definitely not a perfect solution, it reeks of income redistribution, but so does giving it to banks and companies.

Let me say again I'm totally against any form of bail-out, but if there is the folks should get it (and not dribbled to them like the last time). Obama would almost guarantee his reelection if he did that too.

Reply #21 from JoeUser Forums Top

I think most folks here know that I'm ageist any bail-outs. But lets face facts some payout, bail-out, or stimulus, whatever you want to call it, is going to happen regardless. So we can give it to the banks or companies or we can give it to the people. I suggest that if we give it directly to the people, it will "stimulate" the economy faster, than the top down. Sure some people will save it (in that case it goes to the banks anyway) some will buy new cars (goes to the auto makers), some will use it to pay mortgages (again to the banks), and many will use it for food, bills, basics and small purchases (all back into the system).
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In theory, wouldn't tax cuts do the same? 

The scary part to me is there is NO talk about balancing the budget coming from Washington.  Tax cuts or bail outs in the end are gonna come back and bite us, nay its gonna rip and tear with no mercy unless we start talking about balancing the budget.  Right now, tax cuts or bail outs directly effects the budget which with our Blue friends in DC means increase in taxes.

Reply #22 from JoeUser Forums Top

Even it the banks get the money and offer loans, who wants one when they don't have a job? Now who and how much should they get? IMO the money should go on a per-household basis, not based on number of family members (IE. one house 5 people one payment, one house 1 person, one payment). This could be based off the tax return social security numbers and address listed on the return. If more than one family lives in a house (and files separately) they would have to make fragments for dividing the cash, otherwise the person with their name on deed, or lease would get the money. People that don't normally file would have to do so (like they did for the last stimulus). Nothing if someone else can claim them on their taxes, split payment for married filing separately (even if two different households). I estimate there are between 100 -140 million homes that would qualify.
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Again tax cuts go to those who PAY taxes.  Obama's tax cuts (aka welfare) are only aiding to increase poverty as well as incentivize people to move towards poverty to live better off the gov't.

Reply #23 from JoeUser Forums Top

Let me say again I'm totally against any form of bail-out, but if there is the folks should get it (and not dribbled to them like the last time). Obama would almost guarantee his reelection if he did that too.
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NC, lets be against any form of 'bail-out' and be for something that will accomplish the same thing and be longer term.  A cash hand out only begs for another and is very short term.  Tax cuts can have a longer effect over time.