Saturday, January 17, 2009

Stimulating the economy.

It’s not complicated, but that doesn’t make it easy. There is no secret why people aren’t spending money, which is why the economy has tanked. First it was dropping home values and stocks coupled with rising gas prices that made people leery of spending money they might need for essentials, while watching their nest eggs and equity (traditional sources of backup) dwindle. Then the expected rise in unemployment made even those with money insecure about spending it lest they find themselves in dire need in the near future. To turn the economy around quickest, we need job creation, which will remove the fears of unemployment that get exacerbated when jobs reports show growth in unemployed instead of employment. Then we need the stock market to start rising. When people feel secure, and that their safety nets are okay, they will start gobbling up deals—whether in stocks or housing, and prop those up as well. However, for them to feel that way, not only do jobs need to be growing, but stocks and homes need to show a bit of a rebound on their own. Enter the government. Obama’s job creation plan seems like a sound beginning. We also need to bailout the states with ballooning deficits or we could lose as many jobs as Obama’s stimulus creates. I keep mentioning this, but I am not hearing much about it from anywhere else. This is one of the cheapest things we can do (less than $100 Billion for part of 2008 and all of 2009) that would give greta returns in saving jobs and building consumer confidence. We need to continue to help the car companies weather the storm while they retool. We need some of the financial bailout to be sued to ease credit and also refinance mortgages and give extended terms to those unemployed by the recent downturn so we can stop the foreclosure morass. If we bailout the state governments, they will be able to stop their own layoffs, stop layoffs from their contractors and suppliers, and continue to invest their pension system assets into the stock market, helping to push that up. It will be expensive, but this multi-prong approach will help the economy get in the black before the end of 2009. When America's economy is humming, the world will follow close behind. Then we can focus on the savings and improvements that HealthCare reform will bring!


Bruce said... call "one of the cheapest things we can do" and then talk about a $100 Billion is a bit frightening. I don't know much about mega economics, but i fear we may be throwing our problems on our children's generation.

LHwrites said...

True, debt is a bad thing. Certainly, before Obama steps in, the Republicans did more for mortgaging our children then all the Presidents before them combined, plus Clinton of course, who managed a surplus! Nevertheless, to take care of all the states with a deficit, keep them humming along, no state layoffs, o state supplier layoffs, no slowdown in their infrastructure and health care agendas, where in our economy can you take care of all of that for $100 Billion. Look how little we have gotten for our $700 Billion thanks to banks pocketing rather than spreading the wealth. No, this would be excellent money spent, and do more for reducing the burden on our children by turning things around quicker, and softening the blow in the meantime.