Posts Tagged ‘u.s economy’

President Obama’s recovery plan : so far not good enough

February 28, 2009

 

 

A. Preliminaries

 

Here will be outlined another approach towards economic recovery but first –the groundwork

 

 

 That which  follows are ideas. All ideas must be sieved through pp ( practical considerations and political considerations). How does it work and will it work, and will it be accepted by the public and/or  Congress,.

 

Further, the situation, including eight years of dismounting the even then necessary oversight, is an open field for graft and Hurricane Katrine type inefficiency and waste. To add just another layer of bureaucracy is countereffective. Instead, for every program the following requirements must be met

1        Imaginative enforcement and auditing points for just that program must be identified and part of the program.

2        If possible, current enforcement agencies must change their procedures to include these programs.

3        If possible, legal challenges should  be difficult. The recovery  is a question of incentives and not of rights. 

All of the above subject to the pp sieve.

 

A final problem, which,  if recognized, is easy to solve, is the problem of benchmarks. The problem with any government program is that the bureaucracy involved has an interest in preserving it. This has often been solved by brutally cutting programs short before they have achieved their purpose or letting them drag on when they serve no purpose. So agricultural supports which were designed to even the demand cycle for small farmers and ranchers have turned out to be a handout to agrobusiness (the wealthys’ form of socialism). A benchmark for completing a program should be tied to the economy’s progress to normalcy. (Obs! It is important that this not be confused with returning to previous levels)

It is really a pp but examples of benchmarks are: new housing starts, federal   interest rate, or increasing business orders. There could be one single benchmark for for most programs or one tailored to each particular program.

It could either be a benchmark for most programs or tailored to each particular program.

 

When I propose something I stand in back of it unless convinced otherwise. When I suggest I send up a trial balloon to be shot down by any thought out proposal.

 

  1. General Considerations

 

 Recovery is not reconstruction. It would be a grave error to try to recreate the economy as it was. After all that is the economy that crashed. Nor would more oversight solve the imbalance of the economy, though greater transparency would be a great help.

 

  1. A Case in Point: the autoindustry.

 

The autoindustry was bloated, outcompeted and a menace to the environment before the crisis.

A bailout means a return to its original disastrous state. For the workforce the problem is to keep it gainfully employed in the viable parts and to provide alternatives, see below, for the rest. I propose that a joint taskforce of banks, private enterprise and government decide which parts of the autoindustry has a chance to survive if bailed out.

I suggest that this be done as follows: The taskforce above establishes guidelines for investors with a proven track record. These may bid on the viable parts of  the autoindustry. The bids will be the percentage they are willing to invest  in the viable part bid upon with the government bailing out the rest. As the economy recovers the government will sell out its stake on the general market preserving these investors’  voting rights under a benchmark period + 1 year.

 

 

D. General Incentives

 

Bailouts are not the answer. Handouts (such as tax cuts) are not the answer. Consumer earnings are the answer.

 

Bailouts keeps the economy from crashing but stimuli enables the economy to rise to an acceptable level.

 

The stimuli to start with are the most basic – consumer earnings that  have to be spent or invested without too great a delay.

 

Consumers need food, shelter, transportation, and hope for the future. What the government must do is to create an economic incubator which leads to free enterprise regaining confidence to produce and invest.

 

Where to start?  With the farmers. You can’t mothball a farm or make an instant farmer. If the farmers have a reliable market source they will make the necessary investments for the following harvest and they will be a good credit risk.  Where is the credit to come from? The regional banks serving them if such banks have a sound balance sheet and don’t need bailouts. The major financial institutions may need bailouts to keep from crashing but there is no need to support uncompetitive regional banks.  On the contrary there is a need to support reliable ones so the farmer can count on sound credit givers till the next harvest

 

How to get a reliable market source for farm products? That is a pp question. One of many suggestions is to create communal eating halls where anybody can get a square meal for an affordable amount. Many other solutions are possible.

 

We now have a recovering production sector (farmers), a demand for credit (again farmers), a demand  for their products (paying low income consumers) who can get a square meal for themselves and their families at affordable prices.

 

But where are the consumers to get their income, how much  and for doing what? Let us start with the communal eating halls. Use this as a placeholder for useful activity for elemental infrastructure which demands agricultural products. (In other words I  am making a suggestion here which easily can be replaced, and not a proposal such as supporting the farmers and the sound regional banks).

 

They have to be built and run. This creates jobs. which among other things, pays for the food. Another activity is to prevent destruction of capital by buying repossessed housing from the banks or from a “toxic reservoir” ( a government or nonprofit institution which takes over bad loans), and maintaining and improving them. To providing an additional incentive for doing a decent job there may be provisions to allow a share  of the selling price or the rent of the renovated housing or reduced rent on a longer contract for living in them.

 

How much should they be paid?. At least the minimum wage with a bit more for specialists. Why?

First to establish a demand floor. That is : the demand for goods and services will not be less than the minimum wage for the majority of wage earners. Second to establish an turnstile which will allow only productive enterprises to establish themselves and not ramshackle ones who precariously survive by cheating the taxpayer and preying on the wageearner.

 

Now we have discussed, food, shelter and wages. We still have transportation to cover.

 

The problem of the auto industry has already been  considered. We are still left with minimum wage earners who need an inexpensive temporary people mover until such time as they get off the wage and get a job which at least will support a used car and its fuel and  garage costs. Such a people mover which can carry two persons and about 100 lbs at max 40 miles an hour, powered by a combination of solar panels and rechargeable batteries may exist. Otherwise govt support of research and production will quickly create it. The problem is to prevent them being broken up for sale of the components.

To encourage small business, even if it means a slightly larger production cost, production should be reserved for small machine shops, engineering firms and do it yourself assemblers from kits. It should not be a crutch for the auto industry.

In addition I propose the return of public transit to major metropolitan areas should be supported by bailout funds as a means of employment, as providing inexpensive transportation for minimum wagers, and as a pollution reducer.

 

The risks for featherbedding are however enormous but can be reduced by making this transportation free thus eliminating both  collection devices and computer systems as well as expensive audits in just the payment sector.

 

  1. Special Incentives

 

Now for hope for the future I have 4 proposals plus some replaceable suggestions to implement some of them:

 

  1.  
    1. A Mississippi Valley Authority

 

      The Tennessee Valley Authority, chartered by congress, already exist for the production of electricity, flood control, support of agriculture, improvement of  navigation etc. The Mississippi valley is one of the more depressed economic areas of the United States. The very planning of such an Authority will give the economy a positive jolt and as the planning becomes reality will give employment and hope to many wage earners both directly and indirectly. However, there is a political trap here, the

Obama administration should make it clear that it will only undertake such a major operation, if asked by a joint resolution of the Senate and the House. Otherwise the project would be an

albatross  round the administrations neck like the League of Nations was for the Wilson administration.

 

 

  1.  
    1. A Student Bill of rights.

     One things which concerns the middle class even more than housing is affording their children’s college education.

I propose a federal loan system with student loans paid monthly to anybody attending a state university and keeping up their grades. The loans to be repayable only when the student reaches a generous wage or property level and even then at a low interest rate rate with early repayment giving a massive reduction. In short education should in principle be affordable by anybody accepted at a state university repayable after recovery is certain.

This in turn will immediately mean a demand for increased student housing which will benefit both wage earners and smaller construction firms.

 

  1.  
    1. A High School bill of rights

 

High schools today are, for all too many more of a prison or a place of storage, than an opportunity for learning. Even high school students need a break. I propose that for all above a certain age (the age is a pp) there will be an opportunity to take time out for a year if enlisted in a program which could either be local community service or a national  one.

 

Suggestions for programs (see below). The important thing is that they be adequately supervised to keep out predators and that they do not turn out to be a playground for juvenile delinquents. Obs! Participation in a national  program is a privilege, not a right.

 

  1.  
    1. A Wage Earners bill of rights (sabbatical)

 

I propose  a government program giving all, who have worked in the caring or protective sectors a certain number of years, a year’s leave for a minimum wage. The number of years, the number covered and the wage level is a pp. By caring or protective I mean the health sector, police, firemen, sanitary personnel and prison guards.

 

 

                 5. The coasts

 

a. Fish farming

 

This is a suggestion to aid the seaboards. The important thing is that if it is practically workable this should be channelled to small business and not to agrobusiness and should, if possible be supplemented by normal fishing and small ship handling activities.

                

                 b. Ship building and sailing for recreation.

 

I suggest  as one of the possible High School programs’ the building of a sailing ship and sailing it from one coast to the other.

 

                 

    6. West of the Mississippi

 

     Recreation – get the horse back into the country

This suggestion is the one of the high school programs.  Every young person that is capable should have a  chance to learn how to ride and a year to explore the country on horseback. This involves both building stables, care of horses and organizing the programs the hostels and  the trails. It, as several of the others puts money in the hand of consumers for work performed and benefits the coming generation.  (And gets them out of “jail” for a year.)

 

Start from the bottom and build upwards. Don’t start at the top and hope recovery will trickle down.

 

 

                              

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