James Siminoff

Obama’s economic stimulus

I have been meaning to write my thoughts on the Obama stimulus plan since he announced it a few weeks ago.  Fred Wilson did a post today with his thoughts about it which I have included at the bottom of this post which motivated me to finnaly put my thoughts together.

So far I think that the government has taken a very 1920’s approach to a 2009 problem.  The issues with the economy is that we overspent, you can not have Americans spending 120% of their income every year and expect long term viability.

As I continue to watch the TARP funds released, like the latest announcement of $1.5 billion to Chrysler it becomes clearer that the TARP money is really an infected band-aid on a very serious wound.

If the problem is that people are over-leveraged, how is giving Chrysler cheap money to use for auto-loans going to do anything but get more Americans in more debt, making the core economic problem worse.

Long term the government needs to act like the business that they are.  If you want to make your business, in this case the country, stronger you have to put your capital to work on projects that truly increase your value.  Yes it will take time to have those investments help the overall issues but that is just what it is.

The economic stimulus checks that have been given by the bush administration and now proposed by the Obama administration do not solve the problem and in the long term I think they create more issues then the solve.  Remember the money has to come from somewhere and since the government is running at a deficit that money is being borrowed with interest.

So while I am glad that Obama has mostly put his effort into infrastructure I, as Fred states below, am disappointed in the tax break part of the overall package.  Imagine if Obama took the tax break part, $275bn, and earmarked all of that money to projects that get the US off of foreign oil…

Fred’s Post-

Selflessness vs Selfishness

Obama’s first order of business will be to get his stimulus plan approved by congress and signed into law. It’s current form is $825bn, including $275bn of tax cuts and $550bn of “infrastructure” spending.

And over the past several weeks, I’ve seen a number of emails and been privy to some conversations where people have been strategizing how to get some of that money for their pet project. That’s exactly the wrong approach. It’s like we are pigs eating from a trough. The US is going to be totally screwed if this $550bn is spent on everyone’s pet projects. It has to be spent on the projects that will deliver the biggest bang for the buck in terms of future economic activity.

I’m not that thrilled about the $250bn of tax cuts because I don’t think they’ll do much to stimulate economic activity, but I realize why they are in the plan. First, because Obama promised them in his campaign. And second, because it’s key to getting the republicans, both the repulicans in washington and the republicans on main street, on board.

Deciding how we spend the $550bn is really hard because it needs to be spent on projects that are ready to go now, not in 3-5 years, and most importantly, it needs to be spent on super high return on investment projects that will make this country a stronger economic player in the years to come.

And so when I see people plotting on how they can get their hands on some of that money, it makes me mad. It’s time for america to be a little more selfless. We’ve seen what the greed/me first approach has resulted in. And it sucks. We have to put our own individual needs and desires aside just a little bit and think about what the best projects are.

I realize that it’s a good idea to allow everyone to throw out their ideas and suggestions. I’m all for that. But when people are plotting about how they can “spin” their pet project as “infrastructure” spending, it’s gone too far. And we know that congress is susceptible to being lobbied successfully by people, institutions, cities, states, and corporations. So I’m quite worried that this $550bn is not going to get spent in the right ways because it’s seen as a big pot of money to get your hands on.

Maybe Obama and his team are good enough and principled enough to sift through all the requests for funds and filter out the pork. I sure hope so. But it would help a lot if everyone involved in the process of spending this $550bn would just take a step back and ask themselves if they are really acting in the best interests of our country or in their own self interests. A little selflessness right now could go a long way to improving our situation.

• Treasury loans Chrysler Financial $1.5B
• Is Stimulus Pushing Recovery Further Away?