Thursday, 18 December 2008

Open letter to President-elect Obama: Your $850 billion proposed lifeline is still thrown from a sinking ship.

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Dear President-elect Obama,

I just read about your proposed $850 billion dollar stimulus package and at first look it appears to be a boon for our country and its ailing economy. While I applaud your attempt to help the country, I believe this will only further erode the confidence of consumer and business alike. Its not enough to give us a short term morale boost with the prospect of a little cash in hand when all around us we see foreclosures, business closing and in general a tanked economy. I present you with the following multiple and varied reasons for this line of thought and I hope this incomplete list will help you in some small way with regard to your final decision and direction.

It's a stimulus using "borrowed" money.

You would have to borrow the $850 billion which would in the future have to be paid back, with interest.
A new $850 billion expenditure will add to the national debt, which will require issuing more bonds, which might be bought by the Chinese, exacerbating that problem.

It will not cause the lost value of houses to return.

Evaporating home values: More than $2 trillion of value — that’s a lot of zeroes — will likely be lost this year alone.

It will not put people back to work in high paying jobs.

It's a widely seen fact that the infusion of cash into the banks did not stop them from releasing people from high paying jobs.
we will not pull this economy out of its hole with a bunch of government public works projects. I'm reminded of the bridge to nowhere in alaska and the new york tunnel which had its construction costs spiral out of control.

It will not reduce our trade deficits and in fact will probably make it worse.

We have been importing a lot of cheap goods from China and abroad, causing a balance of trade deficit.
This has led to a decline in the value of the dollar, making the billions of dollars of imported goods more expensive.

It will not stop banks from foreclosing nor will it help people avoid foreclosure.

Even $1000 is not enough to help out the folks whose mortgages are in default. They typically need $10,000 or more to bring their mortgages current, and then another $500 or $1,000 a month to maintain their mortgages. A quick buck will not solve their problems.

It will not stimulate a long term consumer buying spree. Its a one off deal.

$1000 spent on consumer goods will not help much -- a good part of that money will go back to China, exacerbating the problem.
If used to retire debt or put into an IRA or other investment this also will have no short-term or long-term affect that economists want.

It will most certainly be miss-spent thru cronyism.

Keep in mind that the above is a short list. If your interested in a comprehensive analysis of the affects your proposed stimulus will have I'm open to a contract. I promise not to let partisan politics flavor my judgement because I'm not affiliated with any party, beholden to any PAC and I don't have any campaign contributors to make happy. My only hope would be to help my country. With that in mind and always one to profer a solution when I've considered the downside I present you with an alternative plan which we can call (since you folks in D.C. love your acronyms) the Government Reduction And Precise Economic Stimulus (GRAPES).

No person or business will pay taxes for fiscal year 2009.

This would provide an immediate benefit to every working american and would be more substanstial in most cases than any stimulus rebate you could give them. It would allow for ease of mortgage payments or at the very least go a long way toward reducing consumer debt and its horrendous interest rates and it would encourage the purchase of high ticket consumer items.
It would give businesses the funds to buy new capitol equipment and prevent layoffs that would have happened had the money been paid toward taxes.
Perhaps a special credit or incentive if individuals and businesses bought true american made products with this tax savings.

Congress shall cut government spending by 50% for fiscal year 2009. So if last years budget was 1 trillion they only get to spend half that this year. No exceptions.

This means that only Social Security, Medicare, Medicaid and critical governmental infrastructure get funding first, with non critical funding paid secondarily out of what is left. I realize this will hurt but congressional spending is out of control and the buck does stop with you.

The Federal Reserve shall reduce the interest rate to 0% for the entire fiscal year of 2009 to coincide with the no taxes proposal and reduced government spending.

They have sucked at the national tit for the last 70 years. They can go for a year without any milk while their biggest client gets back on its feet.

Send Congress home after they pass the budget.

They would only be wasting electricity, water, gas and the air we breathe by occupying their offices and more often than not create more havoc and hot air.
We might even give them an incentive bonus to not pass more laws that basically do nothing or are not enforced anyway.

Reduce military spending by 50% percent.

Do not reduce the soldiers pay. They have earned every cent.
Do reduce high ticket item purchases, like jets, bombers, vessels, munitions.
Suspend for one year all military purchase contracts, except for those necessary to sustain the soldiers (like food) and current overseas operations.

Find the 2 trillion plus dollars that Ex-Secretary of Defense Rumsfield said was missing.

Get it back (with interest) and pay off some of the national debt.
This will have the immediate affect of showing us you are fiscally responsible.

Stop the manipulation of oil prices. Freeze oil prices at current rates for fiscal year 2009.

Oil prices have soared the last 2 years, and research (by Federal Reserver Chairman Bernanke and others) shows that every incidence of stagflation has been caused in large part by a rise in energy prices. I blame our current crisis on OPEC and other nations. Their excessive greed and avarice contributed to the unfounded rise in oil prices and they should be accountable for causing this global cash crisis. Your call, pick a punishment.
I don't consider oil to be a protected capitalistic commodity when it comes to national security or economic factoring, neither should you. Its importance to this nation in every sector of life and business is too crucial. Its also obvious that big oil cannot manage this national resource with wisdom and confidence when people are freezing in their homes or dying from heat exhaustion during the dog days of summer.
As of Dec. 17th the Saudi's cut production by 2 million barrels per day in an effort to stem the plunge in the price of oil. I believe this action on the part of OPEC should be viewed as an attack upon our financial system and be responded to with harsh tariffs which they shall not be able to pass on to the consumer.

Get out of Iraq, and stop spending $200 billion a year on this war of attrition.

Focus instead on stopping global terror leaders and funders.
Find Osama Bin Laden, there are only so many caves, and Use our finely trained special ops troops to do surgical strikes on the other worst offenders and starve out the rest with embargoes and UN sanctions.

Develop true alternative energy sources to cut our oil payments to terrorist states.

I recommend you look at some of the incredible research done by ordinary americans on the PESwiki site.

Put a federally mandated freeze on all foreclosures with necessary caveates and a time limit.

I have mixed feelings on this one, my advisors tell me we shouldn't reward bad consumer purchasing habits. But then we shouldn't have allowed mortgage brokers and bankers to give seedy loans in the first place. Nonetheless, we can't allow this greatest of consumer and industry assets to totally collapse when they are worth a cumulative 12 trillion dollars. And do keep in mind that the inflated values of recent pushed the value to a ficticious 15 trillion.
Allocate money for credit counseling services to help consumers and mortgage seekers get better deals (55% of those with subprime mortgages could have qualified for a regular mortgage; they didn't because of unscrupulous mortgage brokers)
The time limit is in place such that it gives current home owners who are invested in a home they should have never bought, time to trade-down to a home they can afford with realistic payments and no ARMs. This trade-down by a consumer should be mandated upon the banks and consumer. The consumer will have to prove financial capability via non banking 3rd party counsel (see above counseling provision) after which the bank shall have to perfect the transaction and redo the loan. You work out the further details.

Embark on a program to rebuild our infrastructure -- roads, bridges, etc.

While I hate the idea of congress spending more money, our country does need to upgrade because our bridges and roads are literally falling apart.
You could probably use some of the missing 2 trillion for this.

Amend the bankruptcy statutes enacted under President Bush to make it easier for debtors.

These changes benefit no one but Bush cronies. There is a reason we had good bankruptcy laws, you can do the history review at your leisure with regard to how debtors were treated in the distant past.

Keep in mind that the above is a short list and you can hash out the details. If your interested in a comprehensive national investment initiative and plan I'm open to a contract.

I realize this is a lot to take in, you are after all only a street lawyer and prone to thinking in those terms relevant to your profession. I also realize President-elect Obama that only one percent of the people in the world can conceptualize the term trillion and they don't even have to, but you do because your trying to tackle this problem and your wanting to throw trillions of dollars of our money at it like that will correct it and make it undone. However, No one can be made to pay 1 million for a home only worth half a million. Or hire an employee with tax money.

In closing, I would encourage you to get fresh blood on your staff and cabinet and not make use of advisors from the normal pool of bureaucrats. Your saddling yourself with cronies and good ole boys from the Clintonista clan and the normal big business crowd. Be honest with yourself and realize that you cannot solve problems with the same mentality that created the problems. You promised change, you alone have the chance to really bring it. And we expect it.

Sincerely,
Acta Non Verba

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