Saturday, February 07, 2009

Obama's Weekly Address



Here is my problem with the economic recovery plan making its way through congress. As President Obama notes, we have lost over 3.5 million jobs since this recession (if I still have my job it's a recession, if you lose your job it's a depression) began. He acknowledges that the economic recovery plan will only create 3 million jobs over two years in the "private sector." Hence, simple math suggests this plan is at best merely keeping the hole from getting deeper but not filling it. More likely though is that job losses will continue to outpace any job creation resulting from this plan. Why must this be so? Just to appease Republicans so they can have more corporate tax cuts which do not work?

If I were a member of congress, I would make my support contingent upon our addressing those items Republicans have forced out of out of this economic recovery plan such as family planning, bankruptcy relief for homeowners who have lost their jobs, education, healthcare and aid to the states.

All this talk about "stimulus" has allowed Republicans to demonize other elements vital to an economic recovery. For example, aid to states does create jobs. Without additional state aid, municipal governments across the country will be forced to raise taxes on citizens and businesses and scale back on public sector projects. Public sector jobs are just as legitimate as private sector jobs. Why are private sector jobs looked upon as the holy grail? It takes both to keep our economy humming.

So called moderates, predatory conservatives and their minions in the corporatist press have dominated this debate while truth has been drowned out. Obama should be using his bully pulpit to fight for something bolder and more expansive than he has.

3 comments:

Prof. Samuel D. Bornstein said...

The Bad Bank, TALF, and the 2 Ton Elephant in the Room

Under the "Bad Bank" and TALF scenarios, the taxpayers will own these “Troubled Assets” which are comprised of "Toxic" mortgages. I believe that we must address another issue at the same time, in order to maximize the success and mitigate the losses of this approach

In effect, the US government (taxpayers) will be bearing the loss on these “toxic” mortgages. The growing concern is that these losses will continue to materialize as defaults increase with the projected 8 million foreclosures expected over the next four years. It seems that the key to this crisis IS THE BORROWER!

Everyone is ignoring the “2 Ton Elephant in the Room”. Many agree that the contributing factor to most of our problems is the consumer's lack of financial understanding. He is like a "Boat without a Paddle" when it comes to managing money and making money choices. Everyone is betting that the Borrower will default and foreclosures will follow. The high rate of foreclosure and RE-DEFAULT should have been expected because the Borrower has no concept of managing money.

It can be argued that the Borrower’s lack of knowledge in financial management was the primary cause of the Subprime Mortgage Crisis which precipitated the Credit Crunch and our current economic woes.

Loan modifications on these Troubled mortgages will not save the Borrowers. The fact is that these measures will fail because the Borrower will fail unless he has guidance. The evidence is that Re-default is occurring anyway at a rate of 60% within 6-8 months.

Let's finally address the real issue which requires developing a program of "Immediate and Specific Financial Guidance" to help the Borrower understand how to manage his financial affairs.

The Borrower is in desperate need of "Financial Guidance" in this complex economic environment that requires "informed" financial decision-making. The Subprime Mortgage Crisis, out-of-control consumer spending and credit card usage, and the spike in foreclosures and bankruptcies provide evidence of that fact.

We must develop a program of "Immediate and Specific Financial Guidance" that will help the Borrower "naturally" be able to make the monthly mortgage payment. This program is NOT the so-called Financial Literacy initiative that simply disseminates "information" and takes forever to complete, but rather it is a program that will help the Borrower "understand" how to manage money in the shortest possible time and avoid the pitfalls that have previously caused financial
distress.

As the Borrower is successfully guided to avoid default, the financial and housing markets will respond favorably. The result will be a reversal of the downward trend in the valuation of the “troubled assets”.

If we are successful, we can turn this crisis “all around” and stimulate the economy “naturally” rather than by “bailout” which does not guarantee success.

Instead of the expected losses, the US government (taxpayers) will benefit from the unexpected gains that will result as these investments grow in value.

Samuel D. Bornstein
Professor of Accounting & Taxation
Kean University, School of Business, Union, NJ
Tel: (732) 493 - 4799
Email: bornsteinsong@aol.com

Tango daddy said...

If I were a member of congress, I would make my support contingent upon our addressing those items Republicans have forced out of out of this economic recovery plan such as family planning, bankruptcy relief for homeowners who have lost their jobs, education,
healthcare and aid to the states.
That is a solution.Unlike the Prof.Who believes It can be argued that the Borrower’s lack of knowledge in financial management was the primary cause of the Subprime Mortgage Crisis which precipitated the Credit Crunch and our current economic woes.Don't blame the little guy when there is so much greed trickling down from up above!

upinVermont said...

//There is no love in politics. Only leverage, respect and fear.//

I wonder if you read Maureen Dowd's editorial this morning?

The Democrats seem to be split into two groups (roughly): those who think this is all part of Obama's master plan; and those, like me, who think he got his bipartisan ass handed to him on a silver platter.

To me, it takes a special kind of incompetence to make the Republicans look good after their policies have practically driven the entire *world* into an economic crisis.