Regarding the economy, he mentioned two things, job creation and credit markets. The President touted the job creation measures in the $787 billion economic stimulus package. He indicated the saving or creating of 3.5 million jobs over the next two years, claiming over 90% of the jobs would be in the private sector.
Job Creation by Government, Not Private Sector
The President then went on to talk about building roads and mass transit, saving teaching jobs and those of police officers in Minneapolis. It is hard to see how these jobs are in the private sector. When the government builds roads or bridges, it may contract the work to privately held companies, but it is still government work. When government has a near monopoly on education, teaching is still government work. When the government has a monopoly on law enforcement it is still government work.
Transportation infrastructure, education and law enforcement are all important functions of the government. They are not private sector employment. They do not produce goods that can be sold to others and reduce our trade deficit.
Credit Markets
President Obama blamed the credit freeze on bad loans made in the housing market. He briefly explained the fear of lenders to make new loans because of huge amounts of bad loans on their books. He did not mention that lenders now want to be certain that money they loan will be paid back.
He wants the lending of money to start to flow again. He touted a government fund for providing auto loans, college loans and small business loans. He outlined a rescue plan for homeowners in difficult loans. He is now making the government the lender of last resort.
With that approach there will be shifting of bad loans from one market sector, housing, to loans of all types across the economic spectrum. Lenders may begin making new loans in other reckless ways because ultimately the American taxpayer will be responsible for making lenders whole.
With good paying private sector jobs Americans would be credit worthy and credit would be flowing again. If jobs paid enough for Americans to afford loans, loans would be made.
A great circle is created again. Credit resumes because of various government funds and guarantees. Lenders lend again not because of increased credit worthiness of the borrowers, but because ultimately they are not responsible for the money they are lending; the US government is and the risk is placed on taxpayers, not the bank managers or its stockholders. The plan shifts the risk laying the foundation for a new crisis down the road. What happens when the credit of the US government is no longer acceptable?
Technology Investment, Where Will the Results be Produced?
The President touched upon an annual commitment of $15 billion for energy research. Basic research is an excellent goal. It brings about new goods and services, and potentially new jobs. He talked about new vehicle types built right here in America evolving from this research. The problem currently is that in recent history American workers have not been used to produce the products that are the fruits of the research.
The investment in research will do little long term good unless current law and regulation that create incentives for American companies to locate manufacturing outside our borders are reviewed and overhauled. Technology breakthroughs will not help the US if production of new products does not happen here. The President mentioned nothing about America maintaining ownership of the fruits of the government investment.
He ultimately speaks of working with an international group called the G-20 to avoid the possibility of escalating protectionism. It is not protectionism to have policies promoting American manufacturing. It is simply common sense that when the American people invest $15 billion a year in new technology they should be the greatest beneficiaries of that investment.
US Must Address the Real Problem
During the campaign both Senator McCain and then Senator Obama, and President Bush during the early days of the collapsing credit markets ignored the core problems of loss of manufacturing and the US status as a debtor nation resulting from a massive trade deficit. President Obama is ignoring those issues now. Until those issues are seriously addressed there will continue to be a shell game with nothing under any of the shells.
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