Okay, on number 2:
1: I would question whether economies that fall ALWAYS rise again.
A: For an economy to rise again, the resources must be available to rebuild those sectors of the economy that have fallen. This is variant from one situation to another.
For example, let's take the 72 stagflation crisis. The oil embargo raised the price of oil, creating a recession and inflation at the same time. To get out of the recession, oil needed to be put back into the economy. Especially in this scenario, there was no alternate way to fix the economy: Any economic growth would be offset by inflation in the oil market, negating growth. Thus, action would need to be taken to ensure that oil was put back in the market. In instances such as the above, the private sector isn't adequately able to fix the issue because the reason for the crisis was purely political.
B: Government action can serve a greater purpose than the action itself: Even a token economic policy can have symbolic meaning, which is of critical value in economics. When the government takes action that is widely believed will help the economy, or when the government at least looks like it's "on the ball" regarding the economy, it helps out both investor and consumer confidence. Without these two, any economic policy will fail because, regardless of how much money the government puts in the economy, if confidence is shot to hell, individuals and businesses will hoard money rather than spend it.
Let's take another example: The current economic crisis. Now, I am not going to get into the issue of the bailouts or the stimulus package. Rather, I want to take a moment to discuss HOW Obama has sold the packages to America. We hear over and over on the news that America is in an economic crisis, that we're in a recession as bad as the Great Depression, etc. Now, it can be harmful to confidence when economists and stock market analyzers on the news say that the economy is bad. But when the President says things like this, it becomes uniquely bad because a huge amount of people listen to Obama, and he is seen as the leader of the nation.
As a result of this, along with the general atmosphere among economists and pundits that the economy is really bad, confidence is shot. Banks are scared to loan out money right now, even when the Fed is injecting huge amounts of capital into their accounts. People reduce their buying habits on non-essential items, which hurts retail sectors of the economy. People are just scared shitless.
Government action can create the perception that, however bad the economy is right now, the future will be better. This instills the consumer and investor confidence necessary for economic growth.
2: There is also the question of HOW the economy rises again.
A: Recessions are usually times when the economy gets rid of the fat and works to become efficient. Sounds good, right?
WRONG!
Let's take the current banking crisis as an example:
Okay, pretend there were 20 major banks in the pre-crisis economy.
During the recession, 15 go out of business. Each of those are bought out by the other 5.
After the crisis, we now have 5 financial institutions that have nearly monopolized the banking industry. Whenever there are less competitors in the economy, these businesses will be able to better predict each other's price changes, and they can, in effect, coordinate their prices without any interaction between businesses. This, in effect, causes a monopoly effect: Businesses can start to raise prices without any added value in their goods.
B: Then there's the social issues associated with the post-recession society. Immediately, there will become a mistrust of the institutions responsible for the recession. For example, many people who lived during the Great Depression still keep their money under a mattress, even when the government has created the FDIC, and a host of other safeguards against that person losing the $500 they would stick in the bank. But after this, it becomes the issue of stopping the ripple effect.
Let's take the Great Depression as an example. The Depression caused the bank industry to start foreclosing on homes to regain capital... including the Midwest farms. The result? The Dust Bowl made a huge farmland region unusable for a long time.
C: Then there's the simple final issue which needs little explanation, but for which I will give a giant explanation: Stopping economic crises is a reflection of confidence in the government. The ability of the government is reflected in the actions visible by the people.
Let's take a couple examples.
What is everyone's opinion about US counterterrorism efforts in the Philippines following 9/11?
I'm willing to bet that most people would say "Wait, what? What people in the Philippines?" Exactly: We have no opinions about issues we don't know about. Now, if you are from the Philippines, if you know someone from there, or if you were specifically paying attention to the area, you may know about it. But aside from that, it's unlikely.
Now how about Iraq? We get tons of information on the news. Some of us may have directly felt the effects of the war. Thus, it's easier to form an opinion. However, for most people, the war is an abstract idea: We are told about it like we are told about Angelina Jolie adopting a baby or the finale of Battlestar Galactica. While getting information is important, people can much easier set aside the issue as unimportant if they are not affected.
Now what about the economy? Bullshit. You can't escape the economy. Even if I turn off the news, stop talking to anyone, and only buy things online so that I don't hear anything about the economy, I will still be affected by the economy. Unless I live in a spinning solar powered tree house with crops grown by robots and a system for turning my urine back into water, I'm affected directly. And even in that tree house, there may be external influences (people coming to my spinning tree house and stealing a solar powered radish).
It's simple: We don't hear about the war in Iraq anymore on the news, except for little blurbs, because the public is more concerned with the one issue that is directly harming their personal lives: a bad economy. The only issue that could possibly attempt to overshadow an economic crisis in significance would be a war... a BIG, WW2-esque war where most men were sent to war, most women were building missiles, and there was the risk of a foreign occupier within a nation.
When the government says "screw it, let the economy fix itself," it is seen as a failure of government. The government is perceived as a tool to better the lives of the people. When it takes a hands off approach (in this case meaning "I don't care," not "it will do better if I don't touch it"), the government is seen as a useless tool.
Even outside the economic sphere, assuming we got out of the recession, there will still be the lingering, "well, why should we trust _________ with this issue? They sure showed how much they care during the recession!"
Now I want to take a moment to flag some of the problems with this:
First of all, some of the most radical groups in history have taken over nations, including industrialized nations, during periods of economic turmoil. Prolonged turmoil is often met with a feeling of desperation combined with the feeling that society has rejected you despite your skills. Radical groups are able to utilize this by saying, "no, it's not your fault. It's the fault of the current government. Let's get them out of here."
Here's some examples for you:
Nazi Germany took over after the prolonged economic collapse in the 20's and early 30's, blaming the collapse on the West, the Jewish people, and democratic society.
The Bolsheviks took control of Russia in World War 1 as the Russian military increasingly militarized the economy, forcing farmers to sell grain at cheaper than market prices, and with little goods that the people could actually even buy with the money earned from farming due to the militarization of the industrial sector. (Note: Not saying that the Bolsheviks were extremists necessarily because I don't want to get in that debate. My argument is just that people lose confidence in the government in power when it neglects the economy).
Palestine: The Hamas government refuses to pay its employees for a few weeks due to financial problems. Oops, they just lost the people's support!
I could also cite examples of terrorist recruitment in various regions of the world as a result of economic crises. Poor Iraqis placing an IED in the road because some terrorist offered them $500? Afghani farmers forced to produce opium instead of wheat because most granaries have been destroyed?
3: The people who you think should be valued over the economy... are hurt by the economy. If you care about those people, getting out of the recession is a prerequisite issue.
I also want to disagree on #11:
Yeah, there's a bad reputation on warning labels after the hot coffee incident. However, that's definitely an extreme situation.
There are people allergic to various nuts that they WILL die if they are even near an open container of nuts. Now, it is obvious that a bag of Planter's peanuts "may contain nuts." However, what about ice cream? Yeah, you can check the label of ice cream to see if it is peanut butter ice cream. But often, even a little bit of powder from some nuts in the machine that made a batch of non-nut ice cream can have enough nuts in them to start an allergic reaction.
It may seem like a small annoyance for you, but it's a matter of life and death for thousands of people.
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