AMERICAN ECONOMICS

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By: Wayne Brown


President Obama has now announced yet another spending proposal which he chides as a potential solution for getting America back to work while significantly improving the infrastructure of America. Certainly, improvement in the country’s infrastructure is a noble cause and one which no one really wants to argue against. But, the question still lingers, ‘can America really afford it, especially at this time’.


There is a good reason that America has not already launched a program to do a general rebuild of the infrastructure of the country to include our highway systems and the commercial airport runways across the country. The primary reason is simple…we have not been able to afford it especially on such a grand scale. Suffice to say that our country’s ability to afford additional expense has not moved in a positive direction in the last two years due in great part to the massive spending of the federal government on other projects. Latest projections indicate that expansion is spending has grown by a factor of almost 20%.


As much as we might think that improving the infrastructure will increase the opportunities for employment and business expansion, the actual impact may fall far short of the government’s expectation. Beyond the construction and materials industries, the impact will be primarily trickle down and looked upon by most industries as short-lived. In the end, this becomes yet another effort on the part of the government to spend money with the focus on creating jobs. Once again, the government is electing to ignore the premise that jobs are not created by actions of the government but rather by instilling confidence in the private sector. On that basis, the Obama Administration is basically electing to spend an additional $50 billion dollars in the name of economic stimulus.


Of course the traditional method of paying for infrastructure is to tax the public sector through highway taxes and various transportation taxes associated with public conveyances such as the airlines. This means that taxes increase on gasoline in the name of highway improvements. This project will likely push the average per gallon price of gasoline at the pump over $3.00 per gallon on a national basis. Highway taxes will increase on the commercial trucking sector further increasing the costs of goods and services moved. Additional taxes will be assessed on airline ticket and other forms of public transportation. All in all, the consumer will pay the burden of these improvements through higher prices which in effect are driven by higher taxes imposed by the current government.


While this additional $50 billion dollars in stimulus spending moves forward further increasing the national debt load, the Obama Administration continues to basically ignore the impact of the small business sector and its importance in creating jobs and expanding the economy. At this juncture, the administration would rather let the tax cuts previously in place expire thus increasing taxes on a large portion of the small business segment of America and further stifling economic recovery in the private sector.


Certainly there is talk in Washington of offering loans to small business along with some tax credits in trade for investment in business expansion. In doing so, the government ignores the Holy Grail of small business…cash flow. In the business world, cash flow is king. A business without a reasonable cash flow can rapidly be doomed to failure. In the present economy, most small businesses are strapped for cash flow and have very limited resources to pad them through these periods. While the offering of loans as a bridge is a nice gesture, most of these businesses do not see a viable way to repay those loans out of their existing cash flow and tend to shy away from taking on the debt regardless of the attractive interest rates or tax credits. The fact of the matter is the current status of the job market and the lagging economy is having a direct impact on cash flow for small business. Until that economy can turn the corner and begin creating more jobs, consumer spending will tend to lag the cash flow needs of the private business sector.


Given that analogy, it seems logical that the Obama Administration is not going to pull the country out of this slump in the short term with their methods and approach to the market. Small business is spooked by the recent healthcare legislation which is still filled with unknowns with regard to what the law will require. Businesses are afraid to expand with the overhanging fears of the healthcare requirements and potential for increased taxes in the coming year. These factors coupled with poor cash flow leave the majority of these small businesses in limbo with very limited resources to carry them through. Many will fail if the economy does not move upward soon. This can only result in more job loss and a deepening of the economic slump. Thus far the methods employed by the Obama Administration have simply been the agent of a self-fulfilling prophecy.


The federal government must awake from this bad dream and come to the realization that the answer to improving the situation lies in the private sector. The President and the Congress needs to realize that continued spending is doing little or nothing except making the government an entity that needs money worse than the private sector. Eventually the governments need for cash flow will destroy the value of money and set off inflationary trends that can only complicate the recovery of the economy. The single most effective thing that can be done from the government sector at this time is to get the brakes on spending and impose some strong controls to keep it in place. At the same time, there needs to be an all out effort to reduce the size of government and the associated costs.


In the private sector, consumer confidence must be regained. To do this, private sector business need to hear a loud and clear message regarding taxes and the implementation of healthcare legislation. Once the correct messages are sent, businesses will be more willing to plan their future, expand their investments, and hire additional workers thereby growing the job market sector. As more jobs are created, consumer confidence improves, and cash flow to the business sector gets better. The bottom line is more money is moving in the private sector which generally leads to a rapid recovery.


The retail business sector is coming into what is normally the strongest portion of the retail selling year….the Christmas holiday season. Many businesses take in the majority of their annual sales during this short period of the year that runs the last quarter of the year. If these businesses cannot expect reasonably strong sales in this short period, they have little hope of recovering that revenue until the next yearly cycle if they can indeed hold on that long. The time to act on the part of the government is long since past and it is very doubtful that anything policy offered up at this point will have time for impact before the holiday season arrives.


The business cycle and environment in America is not a big mystery. Businesses survive by producing good reliable products and services and in turn using those to gain the necessary revenue they need to keep their doors open. The government has a primary responsibility to create and maintain a highly positive business environment that will allow this cycle to take place. Government does not create business, but it can easily destroy it. This is what those who serve us in Washington must grasp if the economic engine of this country is to survive and recover.


Our elected officials are out of touch with the American economy. Those who do possess business savvy have given up and fallen silent in their attempts to remove government interference from the private sector business function. Government has adopted an attitude of tax and spend seemingly only interested in the expansion of social programs, the growth of the government entity, and the taxation of the private sector to carry out these desires. The time for change has come…real change. It’s time to stop our tumble down the path of socialism and return to the capitalist principles that have made this country great for well over 200 years. Changes will need to be made to do that. November sounds like a good time to start.


© Copyright WBrown2010. All Rights Reserved.

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Comments 25 comments

eovery profile image

eovery 6 years ago from MIddle of the Boondocks of Iowa

The democrats ae totally lost and do not know what to do. They are grasping at straws. Wait until November and let's see what happens. I think it will be knock out drag out politics after that. The republicans will pass bills and blame the dems for not supporting them and vetoing them.

Keep on hubbing!


rkhyclak profile image

rkhyclak 6 years ago from Ohio

Will it never end??? For the sweet love of God will someone PLEASE remove this idiot from office. The money is GONE, there is nothing to spend! I have such a hard time figuring out why this is a hard concept. Hopefully this proposal won't go far. We can't afford all the price hikes this will incur. What are we supposed to do? Say, "yay! I still have a job, oh damn I can't afford to drive there..."

Rated up


breakfastpop profile image

breakfastpop 6 years ago

Terrific hub, Wayne. The Obama administration simply refuses to learn from history There really are smart people out there who may know how to get this economy back on safe ground. Go ask them, President Obama, and stop this idiotic and deliberate march to ruin.


Tom Whitworth profile image

Tom Whitworth 6 years ago from Moundsville, WV

Wayne,

This is what happens when Socilism creeps into a capitalist economy. Federal Government control stifles growth!!!!!!!!!!!


JOE BARNETT profile image

JOE BARNETT 6 years ago

hey you guys i know you all and hello! i coulndn't help but chuckle at the responses made. ya know bush was what i considered primary colors. he was unable to see a complex issue or the domino effect of anything.gov't make money from taxes. bush sunk us in the hole. we have to spend to prevent collapse. the lousiana dyke needed 700 million to repair it.the na sayers said they didn't have the money. but now they have spent 16 billion for the repair. the engineers have said americas bridges need repair and we have known this for a few years.

the country needs to increase jobs and this is definitely a way of accomplishing that and the multiplier effect from the wages will help to stimulate the economy and all this before any bridge collapses and kills a bunch of people on their way to work and then the repair costs ten to fifteen times more.saving the country tons of money. obama is a thinker and this will kill 4 birds with one stone. it would be difficult if not impossible to make a better move.


Elliott_T 6 years ago

Excellent points, Wayne. It could be argued that Obama's three-pronged approach of government bailout, increased taxation, and increased government spending are a deliberate effort to convert our republic into a socialist country.


sheila b. profile image

sheila b. 6 years ago

So now Obama is demonizing the Chamber of Commerce, and what does he think small business owners will think of that? As for roads and runways and bridges, does he have any idea about their construction? Does he think a guy who lost his job in retail can go out and 'build a road'? Probably - people like him have no idea, not a clue, about that sort of work and the skills involved.


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@eovery...I am sad to say that you are probably correct. The Republicans spend way too much time with their fingers in their butt to devise a plan. It may be a struggle of wills! WB

@rkhyclak...It is never-ending Becca! Spend, Spend, Spend...Even a fool a can figure out sooner or later that it does not work unless you have a different plan which is exactly the case...we are trying to drive in energy costs...hide and watch. WB

@breakfastpop...Get ready for an Obama-Clinton ticket in 2012 Poppy. Its is the only way Soros can keep this fool in office so he will get Hilary on board to save the day. The anger must continue! WB

@Tom Whitworth...as always Tom your observations are spot on! WB

@Joe Barnett...you know, Joe. You seem like a really nice guy and I do appreciate your approach to posting your views. I am going to post them but also warn you that I may be throwing to the wolves. I will also award you "Honorary Captain" position in this process as you seem bent on going down with the ship. I appreciate you comments but I must add that if indeed Obama is a "thinker", then what he is thinking has little or nothing to do with the welfare of America or the survival of democracy. It does not take a master thinker to decide to rebuild all the bridges in America. Most of his predecessors realized that America could not afford it...Clinton included. I am surprised that you would admit that trickle down economics is even a factor here as no one seem to be that it worked during the Reagan Administration. While I do believe in it, I have strong doubts that spending the money in the contruction industry will be enough for wide spread economic reocvery. You are always welcome here Joe and we will give due consideration to your opinion and maybe even a metal for your bravery. Thanks for comments and come back to see us soon! WB

@Elliott_T....Thank you sir! I have wonder if Jimmy Carter is an adviser on this team. There is no rationale that reasonably supports spending you way out of financial crisis. We are are wits end with leadership in this country.

@sheila b. ....Exactly my point, Sheila....the transposition between the job markets is not there and the trickle down is not enough for broad spread recovery. He is simply playing to his agenda of over-spending, pandering to union vote, and bankrupting America. America may need some repairs but we have to do it when we can afford it. For the present, let's take some action to get small business back on its feet and expanding...Of course we will need a small business czar to monitor those activities and report back to the ruler. This is an economy that an idiot could run yet he is failing miserably because he continually insists on inserting himself and the federal government into the mix. Lead, follow, or get the hell out of the way...the third would be perferable! WB


TimBryce 6 years ago

Wayne -

Good post. Keep on pushing. We're now less than three weeks away.

All the Best,

Tim


American Romance profile image

American Romance 6 years ago from America

Wayne,

Didn't the first Stimulus have mention of shovel ready jobs like infrastructure? These Democrats have lost their ever lovin minds!


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@TimBryce...It looks like Obama is going to do a good job of keeping folks fired up...All his ideas require more spending. Wow! And to think that someone above actually labeled him as a "Thinker". Pleaseeeeee...anything he's thinking about is not related to capitalism! Thanks Tim. WB

@American Romance...I think you might be right. I can't understand how you can dump $523 billion dollars into the economy and get little back for it then reason that spending another $50 billion is going to change anything except the debt ratio. It does not take a genius to come up with these ideas...I was thinking more along the lines of an idiot! WB


dallas93444 profile image

dallas93444 6 years ago from Bakersfield, CA

Government has run every program it has into the ground. Private enterprise is much more efficient and risk-taking. Obama is a socialist. He is out-of-step with American. Thank God for elections. NEXT...!


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@dallas93444...Right on! We need to get the brakes on this guy before he gets us too far down the road of destruction. WB


CornerStone51 profile image

CornerStone51 6 years ago from Mifflintown, PA

Thanks for another great hub Wayne. If we don't do something about the Dems in November, we will be bankrupt!

Gayle


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@CornerStone51...Thanks much, Gayle. We have to keep stirring the pot right up to the election! WB


Francine Smith 6 years ago

Wayne,

at least the man in the big white house is trying. My old economic professor said the way to stimulate the economy was to go bomb someone else. Think of the boom times of the 40's and 60's? Even that miniscule trillion$ spent on blowing up Bedouins has resulted in job security in the artificial limb industry. Maybe Obama should 'kick-it with the homeboys of the Revolutionary Gaurd.' I've been on a 'speak like Obama for business people' course you know.

At least with a network of new roads, Mexicans will be able to drive to Ohio and Montana. And then, natural born American boys and girls, now unemployed and homeless, will be able to drive to Canada to find work fixing roads.

Ask not what you can do for your country, ask how much your country is going to cost you :-)

Francine X


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@Francine Smith...Thank you so much for the read and the visit Francine. I really appreciate the comments. I am sure you remember the old adage..."when you find yourself in a hole, stop digging!". Obama apparently has never heard this reference as his continued behavior demonstrates. When #800 billion doe not do the trick, adding more is entering into the realm of complete stupidity. Yes, we need to invest in our infrastructure, but we did not need Obama to tell us. We still have about 1 in 3 voters out there who still believe that spending money is a cure-all to the sitation that we are in at the present. The hole only gets deeper and our situation more dire. This man is not a leader, he is a Socialist! WB


Francine Smith 6 years ago

The economy is rather like a game of Monolpoly as the sums of money involved have turned into monopoly money figures. A billion, a trillion, a zillion, way too many zeros beyond the means of mr and mrs minimum wage.

But hold on there Wayne, O.B. a socialist? Not by European standards. The Greeks spent so much money on social stuff, they had no idea how much they spent. Niether did the Spanish, the Italians or the Irish. The result was the Euro currency nearly exploded like a giant 4th of July firework. The Germans stepped in to save the Euro, but got a nasty rash from Europe's toxic-socialist-debt. Meanwhile France grinds to a halt with strikes and riots - to reduce their pension costs, the retirement age will rise from 60 to 62. Go figure? As for the Brits, they keep pouring good money down a bad drain in the hope their economy will stop falling off the socialist spending cliff that it already fell off.

I really do think that with all of our money being poured into black holes, somewhere it must be coming out. I suggest it's China, where my computer was made. And my clothes. And my car. And my shoes... And then at the end of the day, China gets to lend us back our money at a higher rate of interest.

When you find yourself in a hole, call in the Peruvians. If it was only that simple.

Francine X

PS I hear the US Federal Reserve is going to print a ONE TRILLION DOLLAR dollar bill. And whose face will be on that bill? Lincon? Lennin? Doctor Evil? Nominations on Facebook please.


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@Francine Smith...I fear the dollar is headed for the same fate with this run away spending that is going on at the present. We have not seen such potential for rabid inflation since the days of Jimmy Carter. Obama very much wants to immulate the Euro style in his charge toward national bankruptcy. As we saw in Greece and other European countries, you have to break the back of the country and the spirit of the people before they are desperate enough to accept whatever is offered. Oh, he is very much on his socialist agenda. WB


LRCBlogger profile image

LRCBlogger 6 years ago

Wayne, solid hub. I agree with you that we do not need more stimulus, especially seeing that the first stimulus is not entirely spent. I'm happy to say my Dem House member agrees with me and has pledged to vote against additional stimulus.

I do agree that uncertainty is one of the factors holding back our economy but I see things a little different in this area. I think the GOP could do wonders for the economy by simply putting out reassurances rather than misleading rhetoric. Businesses under 50 employees are the largest employer of people in America. All of these businesses are exempt from HCR as long as they have less than 50 people. I think if the GOP reiterated that message, you would see more consumer confidence.

I do agree overall that the impact of HCR has not been entirely spelled out and I think it does create uncertainty for many of the non small businesses out there. (especially with health care costs shooting up sharply every year due to lack of cost control)

I think the Dems stumble and bumble like they always do and after reading the GOP pledge to America, it is clear they have no idea what to do. I find November tough because I don't think either party has their act together.


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@LRCBlogger...I think you make some solid points and that gives me hope that there might still be opportunity for both sides of the aisle to come together on some of these issues. I think it is a shame that we have past a healthcare initiative that is so large and so complex that no one could honestly explain it to the American people and American business. Certainly we needed to make some changes but I am afraid this bill goes way too far and makes the government the primary entity in shaping healthcare. I don't see that as progress as I have serious doubts that the government could run a lemonade stand without losing money regardless of who was in power. One thing is for sure, sooner or later, there will be someone held accountable for the healthcare legislation. The situation will have to change drastically to create a positive mindset in that arena. For me, I see it as a step to far that extends outside the common sense boundaries of democracy. Those in government are back to the "chicken in every pot" scenario as they struggle to buy votes. At the very least, I think we are doomed to repeat the inflationary days of Jimmy Carter before we get through this...that is at the very least. Thanks for some good comments. I appreciate the visit. WB


uncorrectedvision profile image

uncorrectedvision 6 years ago from Indiana

Sadly it is ignorance, again, that is the greatest threat to liberty and prosperity. This is not the first time we have faced an economic crisis created, deepened and extended by government policies. The Great Depression was made great by FDR's policies. The Carter years were another exceptional disaster and now we have Obama.

Republicans deserve some blame in that they have practiced fast and loose, themselves, coming in second only to Democrats when it comes to miss managing their authority and screwing up the economy.


Wayne Brown profile image

Wayne Brown 6 years ago from Texas Author

@uncorrectedvision...How true the words you speak. I have given up on describing myself as a "Republican" and opted for the reference of "Conservative". Mismanagement in our government follows no party line. There are some good elected officials but they are overshadowed and outshouted far too often by the career politicians and thieves that we, the public, keep sending back to Washington to mismanage our affairs. These folks have long since sold their souls and ours for their own personal gain. That is about as low as one human being can stoop. WB


erorantes profile image

erorantes 3 years ago from Miami Florida

I like your work Mr. Wayne Brown.


Wayne Brown profile image

Wayne Brown 3 years ago from Texas Author

@erorantes....Thank you. I hope you will partake of much it! LOL! ~WB

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