Ideas For Getting The Economy Back On Track

Posted by jerry as finance, politics

I was driving my family to lunch yesterday when my 8 year old son asked “Dad, why are so many stores going out of business?”.  I thought for a second and gave him an 8 year old appropriate view of what has happened.  As I was talking to him, I couldn’t help but think that he is living through what may well turn into the second great depression.

A lot of insanity has transpired lately.  We have seen an unprecedented level of government intervention trying to stop the economic bleeding.  The US has declared handfuls of companies “too big to fail”.  The US was already spending hundreds of billions of dollars on the Iraq and Afghanistan wars, now nearly a trillion dollars more to save some key companies.

With all of that in mind, here are my humble ideas for getting the US back on track:

Stop spending so much damn money

1. Discontinue the practice of injecting money into troubled companies.

Instead, let bankruptcy work the way it is designed to.  In extreme cases, facilitate an orderly unwinding of a dying company, such as AIG.

GM does not need $25B from the US to stay afloat.  It needs to fundamentally restructure itself.  This is what chapter 11 bankruptcy is for.  It is possible, even likely, that one or two of the “big three” will not emerge from bankruptcy.  Yes, it will be a terrible set back for the economy, but it is inevitable.  The US automakers have been slowly dying for decades now.

2. End the Iraq and Afghanistan wars to save money

3. Unwind a majority of the new, post 9/11 surveillance infrastructure and foreigner harassment programs to save money and start making the US a world travel destination again

Leverage the savings from 1 through 3 above to establish the following programs:

4. Establish a program to offer new mortgages at a rate of 4% for a set period of time

The near nationalization of the US banking system, and having Freddi and Fannie in a conservitorship should make this possible.  Note that I am not recommending the relaxing of lending requirements.

We do not want to try to re-inflate the housing bubble, but at the same time, the broken and dysfunctional state of housing is likely to be the weight that carries us in to another depression.

5. Establish a series of large scale, nation wide programs to address specific infrastructure issues, such as bridges, water distribution, or power.

For some reason, economic stimulus in the US has to come in the form of a check from the government.  I think that is a fundamentally bad approach to the problem it’s trying to solve.

I generally identify myself as a Libertarian, and some of these ideas are uncomfortable to me, but in many ways, the direction has already been set, now we have to find a way to undo the damage and get back on the right track.