CHESSNOID

The economy will continue to get worse. The actions the new government will take based on theory will make it worse. Over the weekend, a 14 page overview of what the Obama administration came out. The first page is the title and credits page and the second page is the table of contents of the next 12 pages.   Yes, I read it and you should too.  It kind of reminds me of the 3 page bailout plan for a trillion dollars back last October.  For a lot of money (about another trillion dollars of tax money) this is a very short business plan.  In fact, if you took this to the bank for a business loan, you would be turned down.

The people who put the report together have credentials and are highly educated but really just put together a plan that theoretically states that if you can increase GDP by 1% you get a million jobs. They hope to increase the GDP by about 3-4% thus somehow creating 3-4 million jobs, give or take a million in the private sector.

The final step is to take the effect on GDP and translate it into job creation. Not all of the increased
output reflects increased employment: some comes from increases in hours of work among
employed workers and some comes from higher productivity. We therefore use the relatively
conservative rule of thumb that a 1 percent increase in GDP corresponds to an increase in
employment of approximately 1 million jobs, or about three-quarters of a percent. This has been
the rough correspondence over history and matches the FRB/US model reasonably well. The effect
on jobs using the estimates from most private sector forecasting models would be somewhat larger.
We look at the effects in 2010Q4, which is the end of the two-year period that is the focus of the
recovery plan. (page 4 of 14)

This is not a plan but just a hope. That is why both Republicans and Democrats are questioning this plan. This is too general and everyone wants to know specific plans of how we get to point A to point B. How do we Really create 3-4 million jobs.

We can’t continue to spend without seeing results. I liked the idea of creating jobs from creating green jobs by restructuring our nation on different types of fuels and getting off oil dependency. His written plan doesn’t state that. They hope to create 90% of the jobs in the private industry through tax cuts and incentives. Again, the lack of specifics make this plan unbelievable.

I did read the transcript of Obama’s radio address which sounds good, but it is not the same as reading the report.  He is trying to sell this plan, but when I listen to him I can see he doesn’t truly believe it.  He hopes it will work, but he is not sure if it will work.

We also have experts that doubt this plan will work and explain specifically why. NYTimes:

But the report also makes it clear that the plan falls well short of what the economy needs.

According to Ms. Romer and Mr. Bernstein, the Obama plan would have its maximum impact in the fourth quarter of 2010. Without the plan, they project, the unemployment rate in that quarter would be a disastrous 8.8 percent. Yet even with the plan, unemployment would be 7 percent — roughly as high as it is now.

After 2010, the report says, the effects of the economic plan would rapidly fade away. The job of promoting full recovery would, however, remain undone: the unemployment rate would still be a painful 6.3 percent in the last quarter of 2011.

Translated, the plan won’t work to fix the economy on a short or long term basis. Unemployment stays the same after spending a minimum  trillion dollars.  It’s in the report, but not in his radio address.

CNN.Money:

Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments, wrote in a research note the stimulus debate has not done enough to focus on the cost to taxpayers that will come from the programs.

“The truth is that the only way out of  this mess is less government, more savings, and increased production,” Schiff wrote. “Obama’s plan is a recipe for economic ruin.”

Wesbury said he is pleased by various tax cut proposals being discussed as part of the plan, but he is worried that taxpayers will still have to eventually foot the bill for all the new government spending.

He said the only way to pay for stimulus is by taxing those who are productive, joking that the plan is more like a Ponzi scheme than any creation of wealth.

“Every time we bail somebody out, we have to get that money from somebody else. It’s like [Bernard] Madoff,” he quipped, referring to the financier accused in a $50 billion securities fraud case.

I have heard Peter Schiff before and respect his opinion on the economy. He called the housing bubble  when everyone was still in euphoria mode.  I agree of how to get our economy back on track about less government, more savings and increased production which sounds basic but is realistic.

Think about it. Right now things are tough, so the best thing to do is to start spending less and spend your money more wisely. You do the basic thing that will help you the most, which is start spending less than you earn or what is known as “live within your means”.  The federal government is not an exception to this rule.  Check out the movie I.O.USA which will put things in perspective.

We are up to $7 trillion in bailout money spent and Obama’s plan will put us at $8 trillion. These previous bailouts didn’t work and he personally voted for the last bailout.  CNN.Money:

There was $29 billion for Bear Stearns, $345 billion for Citigroup. The Federal Reserve put up $600 billion to guarantee money market deposits and has aggressively driven down interest rates to essentially zero.

The list goes on and on. All told, Congress, the Treasury Department, the Federal Reserve and other agencies have taken dozens of steps to prop up the economy.

Total price tag so far: $7.2 trillion in investment and loans. That puts a lot of taxpayer money at risk. Now comes President-elect Barack Obama’s economic stimulus plan, some details of which were made public on Monday. The tally is getting awfully close to $8 trillion.

The economy will get better and the recession will eventually end. This stimulus plan will not get us there. Wasteful spending must be ended. Yes, I do think the Federal Government needs to live within its means.  Our economy will get back on track with less government, more savings and increased production which starts with balanced budgets.