Thursday, February 12, 2009

Obamanomics: Stimulus or a Fix ? Some Alternative Proposals

Every day the bill for "economic recovery" goes up. the temptation to pander with pork has proven irresistible to those in Congress who are in effect buying votes in their home states. Warning bells should be sounding in the halls of Congress when the salesmen for massive bailouts from the President on down urge Congress to hurry and say that" Time is running out!" When someone calls me with such an offer during dinner, I hang up, because it is usually a scam.

Some people say that periodic corrections of economics are to be expected, that this latest downturn is a 'correction'. Certain aspects of the economic downturn such as the real estate market do conform to such an explanation. But the emphasis on market corrections should not preclude reasoned intervention in economic cycles.

What concerns me most is the tendency to view government as a leader rather than a facilitator of economic recovery. No clear answer has been given to the question of how much new money is being printed to stimulate the economy. Some relief packages resemble a blood transfusion to a patient with a severed artery. Systemic shortcomings are being overlooked as corporate bigwigs line up for welfare checks that are now being given to corporations instead of individuals.

What is being totally overlooked is the role of government as a facilitator. Certain financial instruments such as municipal bonds offer tax free interest. The idea of this incentive is to foster public interest in investing in roads, schools and other public projects that ultimately make a municipality a magnet for investment and business. Well maintained roads facilitate transportation of goods. Well educated workers can perform more sophisticated tasks and need less basic training.

There is a clear public interest in saving ailing companies. There are actually corporations that invest in businesses that will go under without major changes. it would make a lot of sense for government to create incentives for businesses and especially banks to enter into such arrangements to become financially viable. There should be additional incentives to save jobs as well as corporations. A company that survives a shell does not deserve tax breaks. A company that retrains its workers and redesigns its assembly lines is by contrast performing a public service. Most importantly, there should be strong financial incentives to choose restructuring over bankruptcy.

There are companies that create jobs for American workers who in turn become a source of tax revenue. Some of these companies are foreign and some are domestic. A company that creates thousands of American jobs should be taxed at a far lower rate than a company that outsources jobs to China, India or other countries with a far lower wage scale. This is not a simple proposition. There are Japanese cars that employ a lot of American workers. And there are computers that are "assembled in the USA from foreign components". Our government and citizens must look at the economic impact of our buying decisions.

Some American products are failing because they are shoddy. American cars are designed to use steel and gasoline. They are designed to need regular replacement. The American consumer is being ignored. The American consumer is going elsewhere. Affordable, safe , fuel efficient cars should have been designed long ago. Much that is wrong with our Auto industry is self inflicted.

American print news media is likewise ailing. Part of the problem is the internet Adapting to the new technological landscape is a part of the problem. But it is not the entire problem. Media bias is blatant. Television and newspapers openly campaigned for Barack Obama. They show blatant bias on many issues. They have forfeited public respect. They are going under. This is a market correction. Talk radio thrives by providing a voice to a more conservative strain of public opinion. Proponents of the "Fairness Doctrine" want to regulate it out of business. They have tried floating liberal talk radio. It flopped. They are pushing an ideological system that is as poorly designed as most American cars. Americans are buying their news elsewhere. What do you expect?

In many markets, houses are not homes but investment instruments. it would be useful for government to separate owners of single dwellings from those who own more property. High priority should be given to restructuring mortgage debt so it is a realistic percentage of a family's income. There are families that endure gilded serfdom working to pay a daunting mortgage. In many areas, homes that were built for workers cost far more than a modern worker could ever afford. Taking bad real estate debt and turning it into a reasonable source of income for banks should be a high priority. Companies that are willing to pick up an ailing book of mortgages and salvage it should get generous tax breaks. 'Flippers", people who buy and resell for speculative purposes should be taxed harshly. A distinction should be made between speculators who add paper value to a house and those who buy decrepit property and make it inhabitable.

It is possible to salvage some good news for the millions of Americans who now have deferred indefinitely the dream of home ownership. There are some "market corrections" that can be good news for home owners. Past failures and foreclosures should be analysed to prevent repetitions. Clear mortgage contracts and honest income verification could prevent a lot of heartache for homeowners. Income verification for mortgages should be performed by bonded investigators who become liable for any willful deception by a borrower

America has a great deal of economic strength that is being bypassed in an effort to involve government as much as possible. It is maddening to see new taxes levied and money printed when vast wealth and expertise is untapped. The Democrats do not have a monopoly on concern. They certainly do not have a monopoly on ideas. Many Americans understand the folly of trillion dollar bailouts. We deserve better solutions. But we must demand them. Sphere: Related Content

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