Insights & Advice

|

Half Full or Half Empty?

No matter how hard I try to avoid it, the onslaught of depressing news, dire forecasts and plummeting markets beats down upon my head like a winter thunderstorm. Thanksgiving is around the corner. I don’t even care. All I worry about is how to cut corners, make-do and pray that the pink slip doesn’t show up a week before Christmas.

But today I am not going to add my voice to the chorus of doomsayers. Sure, this country has problems aplenty but instead of repeating them in an endless litany, I thought I might suggest a couple of home grown solutions.

Let’s start with this week’s most pressing problem: the auto industry. Congress failed to appropriate the additional $25 billion the Big Three said they needed to survive. Setting aside the blame game as to why they are in this predicament, the fundamental problem as I see it is simple– people are not buying cars. What can we do to change that?

How about making interest payments on auto loans tax deductible? It would work just like mortgage interest on homes. At the same time, Congress could insist that in order to qualify, the auto companies must sell their vehicles at the employee discount price. Now this could be a temporary program, say for five years to match the average auto loan period. I think a lot of people would jump at that offer. I know I would. Sure some kinks would need to be worked out but at least it would be a win-win for the consumer, auto companies and even your local banks.

Another issue is confidence. Many of those who are charged with solving the credit crisis say that confidence is one of the thorniest problems we face. Neither lender nor borrower has any faith in the system. In addition, the consumer has no faith in the future so they are not spending; ditto the business manager. Is it any wonder unemployment is climbing? It is a vicious circle that if left to its own devices could result in a recession-like span of several years. Fortunately, I believe a solution to that problem is already waiting in the wings: Barak Obama.

Whatever you may think about our next president, most people would agree that he is a great communicator along the lines of Ronald Reagan, JFK or possibly even FDR. His message of change resonates within all of us. We may not all agree on the direction of this change but we agree that some changes are necessary. His message, I believe, is exactly what we need to restore confidence in ourselves and our country. We need a leader who leads, offers hope and can restore confidence something that was sadly lacking throughout this crisis.

Finally, there are some on Capital Hill who are talking about another stimulus plan although it failed to get much support in the Lame Duck Congress. I believe it will be resurrected in the new administration. It should be far larger than the previous plan, something along the order of $300-500 billion. It may or may not have a direct cash- to- taxpayer element within it. Clearly, the last stimulus package had at most a temporary impact on the economy with many Americans choosing to save the extra cash rather than spend it. That turned out to be a wise choice by Joe Six Pack.

This time around the money could be directed in a more focused approach, for example, jobs creation via infrastructure projects like re-building bridges, dams and highways. God knows this country’s need for such repairs is desperate. Money spent in this way would have a multiplier effect changing hands several times and thus providing further economic growth. It works like this: the government pays the builders who buy materials and tools, which pays the workers who spend at the supermarket, etc. etc. That kind of spending would provide a real boost to the economy as well as helping Main Street.

Finally, a tax cut (income or capital gains or both) would also boost spending and growth and could be one of the first things Barak Obama does when he reaches the White House. Wouldn’t that be a hoot! The candidate accused of being a socialist turns around and does the very thing that made Ronnie Reagan a hero. Well stranger things have happened, dear reader. So you see, just because the media is feeding you a steady diet of discouragement does not mean you have to be discouraged. It’s your choice to see the cup half full or half empty.

Posted in A Few Dollars More, Macroeconomics