Friday, January 25, 2008

Stimulus Package - Handout or Help?

The President and Congress believe that providing rebate checks to 117 million families, and $50 billion in incentives to businesses will prevent our economy from going into a recession. In an election year, there is bi-partisan agreement on both sides of the political aisle that it is a handout that Americans need, and a handout they shall have. A handout?

Yes, a handout. In my mind, a rebate conveys that the receiver of the money did something productive as a result, and for this, the taxpayer will be rewarded. But in this case, the taxpayer did nothing except noddingly approve that perhaps it would be a nice idea to receive a check either in May or August for $600.

What will the taxpayer do with this money? Invest (too small), buy stuff, or pay off debts? Smart money people say that the average American owes almost $10,000 in credit card debt, and should pay off as much as this balance as the person can to avoid as much of the $1,400 a year in interest that he pays for carrying the debt. Obviously, our politicians want the taxpayer to go out and buy a new computer or couch, and to continue to live beyond this means, including carrying this ridiculous interest payment every month.

So the Chinese ought to really be loving the thinking of our politicians - giving every family a check to buy Chinese goods that we can't afford to buy, and as a result, have to borrow from the Chinese in order to live beyond our collective means. Great thinking by our policymakers.

Anybody ever thought of focusing to improve our declining productivity that really impacts our economy? Improving productivity can actually move more money into our economy through true productivity and job growth - but in comparison to other world economies. Stimuli packages that simply move money from one U.S. pocket to another doesn't do this.

It's time for clear thinking and a focus on productivity in the United States - no more gimmicks and election year gamesmanship.

Wednesday, January 16, 2008

Fed: Economy Lost Momentum....

"The Federal Reserve's new snapshot of business conditions around the country, released Wednesday, suggested that the strains from a persistent housing slump and harder-to-get credit are affecting the behavior of individuals and businesses alike -- making them more cautious."

Our economic signals continue to point our economy towards a recession, if not worse. Last night (I hope that it was a dream), I heard a pundit on Fox or CNN (I switch back and forth) mention signals similar to 1929. Of course, that is very much an exaggeration, but isn't it just as much of a fairy tale to assume that no serious correction actions need to be put forth for our economy? Do we really believe that a short-term stimuli such as tax cuts, interest rate reductions, and/or spending measures will make a difference?

More trouble - the CPI rose .3% in December, which means that inflation concerns are rising - even with this being the case, the Fed will move forward with interest rate cuts to spur the economy. Doesn't anyone see that really serious measures need to be enacted.

My book, "An Easy Out" predicted this, and pointed to what America really needs - productivity and competitiveness. That's the only true solution.

Tuesday, January 15, 2008

2008 US Economy - Recession or Recovery?

Are we heading towards a recession in the U.S.?

Economic signs are troubling: 5% unemployment (two year high) potentially rising to 6.5% by 2009, a horribly weak dollar, consumer lending woes, and a declining trade competitiveness leading to a rising current account deficit.

How will our politicians respond to these problems? So far, they believe that short-term, temporary stimuli will work, even though efforts from the past (low interest rates) did nothing but potentially make the problem worse. Tax cuts, spending packages, and lower interest rates simply mask the true problems. Our corporations will continue to try "addition through subtraction" by their band-aids (eg, outsourcing) versus true productivity efforts. Our schools will ask for more funding instead of seeking reform. Nobody will address solutions from our past that have worked before.

Productivity is a "lost art" in America today. Rarely is this term used as a solution today within our businesses (outsourcing instead is proposed), schools (more spending proposed), government programs (cuts/more spending), and labor unions (win-lose propositions).

What would you think if you heard of a solution that wasn't the same packaged solution that hasn't worked before? Would you as a manager, worker, student, teacher, politician, and consumer be willing to sacrifice and work for it, or are you only willing to pretend to seek new solutions? Would you be willing to sacrifice and work hard for productivity, or do you simply want the "easy out" for whatever you do?

Our nation's ability to compete rests with all individuals and institutions. Are you willing to change to make it happen, or will you buy the same "easy out" solutions as before?