Soothsayer? Nay.
Naysayer? Yes.
And as for the $800 Billion Stimulus working, I say “Nay!”
As I wrote about before, Washington cannot fix this problem because it is not a Washington-induced problem. The problem is not whether there are enough infrastructure jobs in America, but whether companies are willing to retain employees. Of course, with sales and profits down, companies are inclined to release workers, who then are unable to pay bills or buy goods and services, which then drags down the sales and profits of other companies—which then release more workers, close facilities, or simply go out of business.
The question is how to restore the sense of consumerism that built the country to the economic powerhouse it was. The process has to begin with restoring the trust in America’s working class that jobs will not be lost, jobs lost will be replaced, and that mortgages and bills can be paid. With that confidence, consumers will return to their old ways, and with that increased demand, companies and businesses will need to ramp-up again through hirings rather than firings.
So, how do you restore that confidence? I suggested some ways in an earlier post—I won’t re-hash them. But, in addition to those ideas, cutting taxes (a Republican mantra) is NOT a bad idea. You see, Mr Bush had it right, and so did Mr McCain. Let the American public keep more of its hard earned money to spend as it sees fit, or to invest in securities-shored-up through new legislation and guidelines to prevent another Wall Street melt down.
If bailouts and stimulus plans worked, tell me why the credit markets are still frozen? Why the difficulty with banks lending money? Why the continuing bank failures? And how about Detroit?
If a bailout works, then surely my GM stock will be worth something as a stock more so than as an historic piece of paper with some cool artwork on it. But bailing out GM doesn’t bring consumers to the showrooms across America, nor will it put credit in the hands of prospective buyers.
The stimulus will not work because it relies on two concepts that are flawed with regard to this crisis. The first flawed concept is that the money will trickle down quickly enough to go where its needed to create or maintain jobs. Great news if you’re in construction, energy, or other infrastructure jobs, but for the struggling homeowner who works at Microsoft and is about to be let go… no such luck.
The second flawed concept is that the money will actually create or maintain jobs that matter. It’s a problem related to the first one, but emphasizes the likelihood that the money will be scarfed up by contractors who come hat-in-hand out of the woodwork to get government contracts. Sure, some of the money will make it into the hands of the employees, but when the government gives out money in such huge amounts, deception and fraud abound. The unscrupulous are there to get all they can and many go without. One needs only look at two recent examples of mishandled handouts to see the proof: Hurricane Katrina’s aftermath and Blackwater’s operations in Iraq.
Sadly, the thought process of throwing more money at a problem will come back to roost as more problems are created. And then, there will be nowhere to turn for help.
Will the stimulus work?
Better still, will it get passed?
Better that it not.
MORE:
http://trebord.wordpress.com/2009/01/05/the-other-street/
http://trebord.wordpress.com/2009/01/29/the-pessimists-economy/
OTHER VOICES:
http://www.cnn.com/2009/US/02/10/elkhart.reax/index.html
http://www.cnn.com/2009/POLITICS/02/10/infrastructure.jobs/index.html
Post-Script
I was talking to a friend about this and that’s when it hit me. With a critically injured patient, you follow the ABC’s, that is Airway, Breathing, and Circulation. You do this by making sure nothing is obstructing the nose and mouth, check for actual breathing, and then stop any bleeding.
In this current economic crisis, the airways are clear and the patient is breathing. The problem is multiple hemorrhages throughout the body. Meanwhile, Washington is offering an oxygen mask and Tylenol. To fix the problem, the hemorrhaging has to be stopped or the patient will be lost.
How is the country bleeding out? Every corporation that eliminates employees and/or closes down represents another bit of blood being lost, cellular damage, or partial organ failure. While some cells and organs can heal over time, let enough get damaged or lose enough blood and it’s all over.
Remember, this is not a political problem, it’s an economic one with its roots reaching out in all directions through corporate America—rooted in capitalism (profit and loss), consumerism, supply and demand, and basic economic practices that Washington cannot easily fix.
Throw enough money at it—and you end up with a lot less money to throw at the next problem that could have been solved with more money!
