Thoughts for McCain, Obama and the Congress

In these tumultuous times when a "conservative" White House continues to bail out hundreds of millions of dollars to save a once sound U.S. economy lets take a moment to pause and reflect on recent occurrences.

The U.S. housing market, a key part of the Bush Administration's "Ownership Society" tumbled last year due to predatory lending practices that put American consumers at risk. This occurred because in free markets we tend to let individuals be guided by their own intelligence or lack thereof. Lenders delved out a massive amount of interest-only mortgages which switched-over from introductory rates of around 1% to long-term rates that are much higher. Citizens seeking the American dream did not plan for this switch resulting in massive foreclosures in sub-prime mortgages with U.S. home foreclosures in May jumping 90% from a year earlier as a small example.

This lending instability rattled our leading financial institutions and created great instability in the financial market (an underpinning of our new economy) resulting in the fall of Bear Stearns, a firm which survived the stock market crash of 1929 without laying off any employees. Then came the crash of Merril Lynch, Lehman Brothers, Fannie Mae and Freddie Mac and now AIG, phew (sweating, shortness of breath). Meanwhile, as a result of the subprime crises, the dollar has hit historic lows and has been significantly devalued. If the birth of credit was in the 1920's its re-birth will be seen in 2009 and 2010 as a jittery government will likely pass reactive policies that will far outreach the regulatory measures that would have kept this all in-check in the first place.

So what has our government done to safeguard the American people and ensure the stability of our sound economy. Well, hmm, umm the Congress (Democratically controlled) passed the Economic Stimulus Package of 2008. This package qualified low and middle income tax payers for a $600 tax rebate check. The law also offered businesses a one-time depreciation tax deduction equal to 50% of the cost of specified kinds of new investment during 2008. Finally, it increased the limits imposed on mortgages eligible for purchase by government sponsored enterprises (read bailout). All these actions in my view serve the purpose of applying a band-aid to a gaping flesh wound.

The Executive Branch led by a "conservative President" has also shelled out billions of dollars to keep the economy on "solid" footing. In fact, in the past month and a half the government has provided nearly $314 billion, yes billion, to help bail out Bear Stearns ($29 billion), Fannie and Freddie ($200 billion) and AIG ($85 billion). Oh and lets not forget we are already running a $500 billion deficit for fiscal year 2008 alone. The saying comes to mind that an ounce of prevention is worth a pound of cure.

In these troubling times we need a strong leader, Republican or Democrat, a leader who can provide some certainty to the American people during these times of instability. An individual who can provide a little comfort, and assure us that bright minds are developing a plan that will lead to a brighter future. Unfortunately we have George W. Bush. He decided that the best way to ease these jitters on Wall Street and Main Street would be a 2 minute press conference, yes a 2 minute press conference. The content of this conference was telling us the government has done the aforementioned items. No future vision, no future plan, no assurance, nothing. We were lucky to get "The American people are concerned about the situation in our financial markets and our economy, and I share their concerns".

So where do we go from here? Well, we could invest in infrastructure which would have two beneficial results. One immediate result would be the creation of tens of thousand of jobs in communities across the nation (think CCC in the 30's and the highway system in the 50's for two such examples). This would also improve our decaying infrastructure which would provide long-term economic benefits as goods movement would increase in speed, congestion would lessen and the cost of transporting goods would decrease significantly, thus resulting in great savings to the consumer. For as bad as the current situation is, it will be much worse if we don't have a reliable transportation and infrastructure network that can support the transportation of goods from port to port, by road, rail and air.

We should also keep in mind that this nation has always faced difficult times by employing its strongest assets, those are our intellect and can-do spirit. The world has begun to realize it is growing to large for its current infrastructure. That reliance on fossil fuels alone will no longer be adequate in the next 35-50 years. We should put our entrepreneurial spirit to work in developing and leading the charge on the development and distribution of renewable fuels and increased efficiency technologies. Both actions would create jobs and reduce the costs of energy production and distribution, all the while reducing the costs of business. Oh and sorry environmentalists, but if we want to be serious and responsible about this we will likely have to drill for increased resources in the interim. Believe it or not, this can be accomplished in a responsible and limited manner, supplying just enough petroleum and/or LNG to get us to the next generation of energy supply. I say we start with ANWR, if everyone in Alaska wants it, it cant be all that bad.

Keep these thoughts in mind as we elect the next President. One should think who will really tackle all the above in a comprehensive way. Regardless of the promises being offered on the campaign trail, the 44th President will have a serious reality to face. That reality is that Federal coffers are going to be tight to say the least, and as such, we need to take care of the underpinnings that will allow us to address additional concerns in the future while remaining competitive in a global marketplace.