Monday, November 10, 2008
As I said in an ealier post, Barack Obama and his team have their work cut out for them and ultimately I wonder if they won't see that their planned economic policies just don't make sense. It isn't rocket science.

A key benchmark of their plan has been to create a federal works program to rebuild America's infrastructure. Bridges and tunnels in particular have been mentioned. This is fraught with problems:

1) It takes forever to put these types of projects together. It is a very slow process. According to Obama, that will be sped up because part of the federal support will go to projects that have already been planned but not implemented due to a lack of local funding. There may be some projects out there like that. I don't know. But I do believe that, as soon as federal dollars are involved, much of the planning will be re-set to initial planning stages.

2) These projects are pretty isolated in terms of geographic scope. Congresspeople will be fighting for projects in their states and districts. It will be hard to not see lots of pork thrown in. Do you realize how much pork was thrown into the Bailout Bill? It happens whether you want it to or not.

3) These projects are also pretty isolated in terms of industries they affect, Engineering, Heavy Construction, Steel, Concrete. Yes, there is some periphery benefit but those are the main industries. The latter three in particular are all very top-heavy industries. If we're going to rely on them to spread this money around, we better hope that trickle-down works. Additionally, with all four industries, you're talking about industries that have been staying relatively strong and are just now beginning to feel recessionary impact. I am concerned that these public works projects will amount more to job retention rather than job creation.

So, I see this as a very slow way to jumpstart jobs and the economy. And, where does the money come from? Obama has been clear on that -- from businesses and upper end income earners.

But, get this, many businesses are not doing well. If they aren't profitable, it makes no difference what their tax rate is. This is why many municipalities and schools are struggling and will continue to struggle -- a declining business tax base. The well is dry and must not only be primed but refreshed if you hope to tap into it again.

And, in some cases, there are businesses making money but, get this -- the banking crisis has their hands tied. Banks have gotten crazy with covenants and ratios that they wnat their business accounts to maintain. They are in many cases just itching for businesses with assets to miss ratios so they can come in and generate cash byt taking them over. If you tax these businesses harder, many of them will not be able to meet banking ratios and covenants.

It's all a slippery slope, president-elect Obama. You must be careful what you're flinging ahead of you because you will step in it soon thereafter. You can't fling things very far in this economy.

Most of this country's lost jobs have been in the manufacturing sector. Last month, one of the sectors to add the most jobs was government. That is scary and I wish I knew the details behind those numbers. If you wnat to bring jobs back, you'd better encourage and support the manufacturing base ... and you do that through incentives both for them and for their customers. If you want to encourage clean and renewable energy at the same time, that's great. Provide cash rebates and tax credits for purchasers of those things.

  posted at 7:45 AM  


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Todd M


An ordinary guy. A wife I love very much. A great son. Wonderful friends. A metal roofing business and a sales training business. A loving church family. A few trade associations. A Christian school. And a four-pound poodle. Just trying to follow God and see where He leads.

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