The Ostroy Report

The Ostroy Report is a fresh, aggressive voice for Democrats and a watchdog of the Republican Party and its President-elect Donald Trump.

Monday, August 03, 2009

Hey Americans, You Want Economic Recovery? Spend Some Money, Dammit!

By any measurement, the United States economy, mired in steep recession since December 2007, has bottomed and has recently shown signs of recovery.

Second-quarter gross domestic product contracted by just 1% after Q1's -6.4%; home sales and construction starts continue to rise; the index of leading economic indicators has risen for 3 consecutive months; major banks and financial institutions have begun reporting solid profits; 70% of Q2 corporate earnings have met or exceeded estimates; monthly unemployment claims are declining precipitously; Wall Street's bull is roaring; and even the comatose auto industry is showing signs of life.

Yet the one critical thing absent in this economic turnaround is job growth. Without it we'll have the longest U-shaped recovery known to man. And the only thing that's going to get America's businesses, both big and small, to start hiring again is when they see a sustainable increase in sales. It's not enough that earnings are stronger. They've come at a huge price: significant cutbacks in operating expense and massive layoffs. But if the economy is to truly expand, it's now the top line that must appreciably grow. And this can only happen if the American consumer stops hoarding cash like squirrels with their nuts and starts spending money on the goods and services of manufacturers and retailers; buying big-ticket items like homes, cars, electronics and vacations, as well as clothing, music, books, etc.

The personal savings rate today is around 7%, while it was at zero just a year ago. Americans are practically stuffing cash under their mattresses like their Depression-era counterparts, still saving for that proverbial rainy day despite the torrential rains having waned and the skies clearing. If this continues, we risk stagflation, when prices rise amid high unemployed and slow growth.

What we need is a more forceful President Obama encouraging consumers to loosen the purse-strings a bit. People need to believe in the economic system, but they also need strong leadership, optimism and encouragement. Former President George W. Bush, after the 9-11 attacks, urged Americans to go out and spend money in order to avoid recession. For all his warts, and he had plenty, he wasn't that off the mark. The underlying sentiment was, let's get back to normal. Well, regarding the current economy, already in recession, we cannot get back to normal unless Americans start spending again.

On another note, we could use your help at The The Adrienne Shelly Foundation. We're a 501 c 3 tax-exempt, non-profit organization dedicated in my late wife's honor, and with a simple mission: supporting women filmmakers. Adrienne, who wrote, directed and starred in the hit film WAITRESS, was killed November 1, 2006. Through the Foundation, her commitment to filmmaking lives on. We've established scholarships, grants, finishing funds, screenwriting fellowships and living stipends at NYU's Tisch School of the Arts/Kanbar Institute of Film; Columbia University; American Film Institute; Women in Film; IFP; the Nantucket Film Festival; the Tribeca Film Institute; and the Sundance Institute. Your generous contribution will go a long way towards helping us achieve this very important mission. Please click here to make a donation. Thank you.


  • At 8:16 AM, Anonymous Anonymous said…

    Folks without jobs have no money. Folks who still have jobs (like me) are afraid to spend any money. My firm does not replace anyone and this year since I've been here (10 years) did no hire and summer help. Many of us wonder will we be the next to go. I must say though my firm does not lay folks off. They make it hard on you so you leave. Nice huh? Guess what? The higher ups here are all Republican!

  • At 9:44 AM, Anonymous Anonymous said…

    I'm a senior -- you can't be talking to me. Soc Sec. gets no cost of living increase this year; Medicare charges have gone up; there is absolutely no return on my CD savings account so no money from there; my stocks have dwindled 65 percent; inflation has hit my grocery bill and my state is raising sales tax.Plus, everybody I deal with continues to cheat an old woman. Not only that there is the threat of increase expenditures if Obama's health plan goes through. That is, if I'm allowed to live.

    Plus, if I don't put my money under the mattress I'll feel even less secure sincd the government's financial structure is collapsing.

    I think the Dems laughed at Bush and probably rightly so. Look at the mess we're in since peoeple followed his advice.

  • At 10:04 AM, Anonymous Anonymous said…

    Beforw spending read Paul Krugman's column today about Obama's siding with Wall Street and how dangerious for us that is. There is more of the same. Nothng has changed on Wall Stree.

  • At 10:55 AM, Blogger VennData said…

    Chrysler plants working overtime

  • At 11:51 AM, Anonymous Richard Moore said…

    It's hard to spend money when you don't know if your employment is going to be there next week. It's easy to scream at the consumer for tightening their belts, how about turning that eye around to the financial institutions?

  • At 12:08 PM, Anonymous mauicharlie said…

    So, Ostroy, I guess that means I can sign you up for a couple million dollar vacation getaway home here on Maui.
    I have to tell you that I'm truly relieved.
    I haven't been able to find any significant work in about the last four months.
    So, let me know when I can collect the first draw in order to employ a crew of guys and start spending for the purpose of saving our economy!......
    Yeah, I didn't think so......
    You're out of touch with the reality on the ground...

  • At 12:22 PM, Anonymous Anonymous said…

    What a joke. Telling us to spend the money that we don't have.

    In case you hadn't noticed, that money you want us to spend has been stripped away from us. We're struggling to feed our families and hopefully - just maybe - keep a shelter over their heads.

    But this is a real nice try at blaming the economy on the victims instead of the criminals.

    Good work.

  • At 12:26 PM, Anonymous Anonymous said…

    They took all the bailout money and sent it to Israeli banks. We don't have any money. Even if we did, buying Chinese made crap is NOT going to help OUR economy.

  • At 12:26 PM, Anonymous Anonymous said…

    You first, sucker.

  • At 12:41 PM, Anonymous Anonymous said…

    Mr. Ostroy, this article should be retracted immediately. You predicate this whole thing on spending, yes, we know GDP is 70% consumer spending.

    And since so many people are losing jobs, the unemployment rate is all but guaranteed to continue its upward climb for at minimum 6 more months - WHY WOULD ANY SANE PERSON SPEND IN THIS ENVIRONMENT?

    Additionally, left out of course is the fact that President Obama is now sidestepping the issue of raising middle class taxes. Everyone is aware of it, so there's yet another disincentive to spend knowing you're gonna get squeezed down the line. Saving up makes total sense.

    Finally, heard of the impending CRE disaster? Commercial real estate, $3 trillion according to most estimates, about to follow its residential brother into the meltdown cesspool. Meaning another round of bank meltdowns coming soon, and this time it's the regional & community banks who stayed away from the residential circus. But they won't be deemed "too big to fail" and the carnage wrought will be worse than the subprime meltdown.

    This article is irresponsible at best, and downright treasonous at worst, Mr. Ostroy.

  • At 12:43 PM, Anonymous Economist said…

    The OP must be an economic illiterate.

  • At 1:57 PM, Anonymous Anonymous said…

    Ok Petey, I'd be happy to spend some money. But, you see, mine is tied up, so I will have to use some of yours. Email me ( and I'll give you my PO Box and you can send a check straight away. I would think anything less than $100,000,000.00 would be a waste of time, given the magnitude of the fiscal crisis.

    I will be sure to donate to your cause with some of that cash too. I would not be so ungrateful as to pass up that opportunity to return your gesture.

    I await your reply,

    American Guy With Brain

  • At 2:28 PM, Blogger brisa said…

    Our economy for the last 10 years has been expanded by increasing notional (fictitious) wealth. The man behind the curtain has been revealed and all that "money" went poof.

    There is no going back to when US consumer sales were 70% of our GNP. Energy costs and real net energy depletion will ensure that the perpetual growth economic model has no future and a new one is taking shape.

  • At 3:27 PM, Anonymous Anonymous said…

    Is this guy for real? We're all BROKE1

  • At 5:17 PM, Anonymous Anonymous said…

    Look at the counter on the website. Not the viewer counter, but the Iraq war counter. Now any questions about spending?

  • At 7:37 PM, Anonymous Anonymous said…

    Andy is in the marketing business. His whole life is based on people responding to his business efforts.

    Forget about the fact that saving - thrift - is a virtue. Ask Benjamin Franklin. Forget about the fact that we are a debtor nation and our most powerful adversary is our largest creditor.

    No - we have to respond to what Andy WANTS.

    Libs seem to respond to their visceral desires rather than what is in their best interests.

    Why should Andy be any different?

  • At 8:26 PM, Blogger The Ostroy Report said…

    I always love to see such spirited responses! That said, "Andy" is in the same crappy economic mess as everyone else. My business has suffered, and my personal comsumption, given greatly reduced earnings, has decreased. But, I am trtung to do my share and spend a little when/where I can. And there's a lot of people out there with jobs and good incomes who are simply just spending nothing. All I am saying is, we don;t have to be at 7% record savings levels. How about 5%? 4% That would still be fiscally prudent and yet inject some mnuch-needed capital into the economy. But if we don't spend we run the risk of perpetuating this recession. At some point we all just have to bit our lips, loosen the purse strings a little bit, and start living again, assuming that the worst is behind us.

    But for the record, I am not suggesting that people without jobs, who are living on fumes, go out and spend money.

  • At 9:21 PM, Anonymous Anonymous said…

    Sorry my friend, you are seriously out of touch with the economic situation facing much of America, nothing is going back to normal, research the subject then write the article, my Lord.

  • At 10:21 PM, Blogger The Ostroy Report said…

    Really, Mr. Anonymous? I'm out of touch? I run a business with 50 employees. I'm willing to bet I'm plugged into this economy--the good, bad and ugly--as much if not more than you. How many people do you employ (and prove it, Mr. Anonymous)? How big is your payroll? How much do you spend on health care each year? How much corporate and personal taxes do you pay? How many clients and competitors of yours have you seen go out of business...leaving you to deal with the financial fallout? I suggest you accept the fact that just because people have a different viewpoint than yours doesn't mean they're insensitive, ill-informed out out of touch.

  • At 2:24 AM, Anonymous Anonymous said…

    In case you have the cajones to post my original post I supplied it for you again.

    ""Stagflation"??? Are you serious? When a 'government', through a central bank, starts printing money like its going out of style generally it has been called hyperinflation. The source of the problem being that there are no jobs created by these actions; or the ones that are created pay so poorly people are forced further and further into poverty.
    The 'failure' of the people to comprehend these events is the result of the sense of complaceny that they have developed in thinking that corporate/government intrests are linked to theirs, which they are not.
    While Bernanke, Geitner, and obviously you would like us to believe that these events are, as they like to say, a "phenomenon" the truth is that there is nothing "phenomenal" or strage about it. It's like the 'law of gravity' bound by the parameters of a science. Sadly a science which justifies the greedy hoarding of a rich elite as the people that struggle to survive are slowly being starved to death.
    It's hard to believe that the US has tens of billions of dollars to chase a dead man in a cave yet they have yet to correctly identify and remeby the terrorists that occupy the White House and Wall Street."

  • At 7:18 AM, Blogger King of the Paupers said…

    "What we need is a more forceful President Obama encouraging consumers to loosen the purse-strings a bit."

    Jct: There isn't enough money in circulation to repay the exponentially-grown debt. New money is needed to create new jobs. Of course, those who believe inflation is too much money, Shift A, can't even imagine Shift B inflation. Google for it.
    See my channel for info on interest-free community currencies.

  • At 2:44 PM, Anonymous Thomas Jefferson said…

    Hey Paupers, do you know how the corrupt money system in this country works? If all debt was paid off, there would be NO money in circulation, thanks to the criminals at the Fed.

  • At 3:05 PM, Anonymous Thomas Jefferson said…

    What Im saying is: The Fed WANTS debt. Thats how they survive. Ther is NO way possible for all debt to be satisfied. Its not possible. That is the way the corrupt bankers from Jekyll Island planned it and according to their plan, it is working swimmingly. Did you know The Fed is not even a government agency? Its an independent agency and Greenspan has admitted on camera that they are more powerful than Congress. They need to be shut down. Dont ask Obama to end the Fed, he'll be killed too like JFK was. Presidents have a line they cannot cross, or the people who are REALLY in charge will step in a run things accordingly.

    The president is just a puppet...a figurehead. Elections only exist to make us think we have a choice in the matter. We dont. And we havent had a choice in a LONG time. Look who our choices were 9 months ago----a black elitist and a white elitist. BIG choice there! The bankers and corporations are the REAL people in charge.


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