Stimulus Part Deux

This Wednesday we are going to hear the President talking about stimulating the economy in a new a six-year plan and the price tag for the US taxpayer will be $50 billion. But it will be deja vu for many people when they hear it. The proposal is eerily similar to the first stimulus plan: to improve the nation’s highways, airports and railways. One administration official told The Wall Street Journal the package might begin to boost hiring in 2011.

Republican Whip Eric Cantor sent me his concerns on the proposal, “The President’s proposal leaves little doubt that not only has last year’s stimulus bill failed to deliver on the promises made by the Administration, but that the President himself still doesn’t get it – our government simply cannot keep spending money that it doesn’t have. Job creators, small business owners, and investors don’t know which burdensome tax hike, regulation or mandate will come next, and therefore are reluctant to hire new employees, assume risk and make investments—all crucial components of any economic recovery. More government stimulus does nothing to end this cloud of uncertainty.”

The uncertainty to the effectiveness of the first stimulus has been debated by economic minds for months. Its one of the reasons why businesses aren’t hiring. Companies can brace for bad times but when it comes to a policy and economic question mark they can’t. Companies will not hire if the future is full of uncertainty.

When it comes to showing the effectiveness of something, I love to use charts. Charts tell an amazing story. Now I know charts can be skewed based on the information plugged in but one of the nation’s leading business minds, Larry Lindsey release a compelling op-ed in August showing statistics on the first stimulus’ impact saying, “…. the stimulus itself has been ineffective at lowering it .” His charts tell a good story
(unemployment). \"Did the Stimulus Stimulate?\"

Many democrats dismiss Larry, but the O-ministration at one point must have believed and trusted his economic outlook when they had him review the original $800 billion stimulus and Larry told them it was not enough. This revelation came out in my book, “Thriving in the New Economy” and it was breaking news when my book was released in January. Lindsey advises, Slams Stimulus

If Larry is sounding the horn now as he did back then can anyone on Capitol Hill hear him?

According to the Congressional Budget Office the majority of the original stimulus have been already spent. Out Of the $787 billion approved last year, the breakdown is this: $223 billion went to tax relief, $144 billion went to the states and $145 billion has gone toward contracts, grants and loans. But with the real unemployment rate in the mid to high teens many would argue the stimulus did not help as much as many thought it would.

Greg Valliere, Chief Policy Analyst at Soleil Securites tells me this extra taxpayer infusion is too little to late, “All of these desperate new Obama proposals avoid the elephant in the room — extension of the Bush tax cuts. If Obama embraced a deal in the next week that extended the cuts for everyone, the impact on markets and employers would be electrifying — they want a sense of predictability, a sense of certainty, on taxes. The Bush tax cuts could produce a huge stock rally and lead businesses to begin hiring. Does the President have the guts to anger his liberal base and do the right thing? That’s the key economic issue this fall.”

Cantor adds the Administration is “Blindly throwing darts at the board and hoping for a bullseye is not economic leadership. There is a better way. Washington has a spending problem, and the policies of the Obama Administration and the Pelosi/Reid Congress have caused the size and reach of the government to explode. What the President touted as the ‘Recovery Summer’ is built upon the misguided notion that government expansion creates prosperity, when in reality it has continued to drive debt and deficits. America stands at a crossroads, and the decisions we make today will determine the type of country we pass on to our children tomorrow. We need to cut spending immediately and end the environment of uncertainty that continues to impede real private sector job creation and growth.” Experts in the transportation industry on the other hand say for every billion in transportation construction investment spent, 35,OOO jobs are created.

Now from a capitalist point of view, there is opportunity here for investors. The rebuilding of 150,000 miles of roads; the 4,000 miles of rail; and the rebuilding or reconstruction of 150 miles of runway will help transportation and engineering companies. As I alway urge investors, do your own due diligence an research the companies before you put your money to work. After all you work hard for it.

It will be great to have improved infrastructure in our nation, but jump-starting the construction industry is only a part of the U.S. Economy. I sure wish some of this money was going to our “Smart Grid” initiative. That would benefit every American. But that’s a whole other topic I guess. I just wish infrastructure would be more than bridges and roads.

So in the end, we’ll have better roads and bridges but there will still be many unemployed people driving on them to use their WIC (Women, Infants and Children) checks and going on job interviews. Hopefully tax relief will be part of this economic stimulus picture.

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Filed under Business, cnbc, congressional spending, deficit, Jobs, Leadership, Main Street, money, politics, Uncategorized

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