Stimulate the Economy

Obama stimulus plan faces changes in Senate – Yahoo! News:

“WASHINGTON – A top Republican called for more mortgage relief and additional tax cuts in President Barack Obama’s massive economic stimulus package as Democrats conceded privately they will drop items that have drawn bipartisan criticism.”

(Via Yahoo! News.)

Finally, some sense from the Congress. I’ve been suspicious of them since the TARP fiasco. Whatever happened to good governance? Apparently, once you are in power, it fades into the background. I’ve seen tortured logic trying to justify “pork” projects that don’t stimulate the economy. These projects are to vary degrees laudable and worthy of legislation all on their own, but let’s get real here. Tax cuts and government spending that creates jobs is what is needed. Condoms are not stimulative in the proper sense!

Increasing the Minimum Wage Doesn’t Kill Jobs

Minimum Wage Impacts on Employment: A Look at Indiana, Illinois, and Surrounding Midwestern States:

“These patterns in job growth between 2003 and 2005 indicate that Illinois’ increasing minimum wage rates did not reduce overall employment growth for private employers and preliminary statistical analyses confirm this lack of an impact”

(Via Indiana University.)

Once again we see how ideology is soft-think. This is has been proven over and over, yet we see no public discussion on this at the pragmatic level. Just ideological back and forth. “Fairness” vs. “Jobs.” Whatever. Try “reality.”

Fixing the Debt Crisis

Obama has come of the points I would include, equity stakes, tax cuts to middle class spenders. But I would also:

  1. Punish CEO’s and other executives. They failed. They get the boot. That’s how the market does it. We should do that here. Take a flat payout of say $2M and not a penny more and walk out the door scott free. Or they can take door #2: a shareholder lawsuit and/or a criminal investigation from the SEC and/or FBI on gross negligence of their fiduciary duty.
  2. Push board reform. These people were asleep at the wheel to get us in this position. Take the bailout and all board members associated with the CEO are out the door pending the work of a Search Committee’s efforts to replace them. Put a time clock on that. Demand that the CEO is never Chairman of the Board nor does he/she have connections to the Chairman.
  3. Push for pension and insurance reform. These speculative assets have no place in people retirement portfolios or backing insurance policies. They require prudence not greed. Period.
  4. Get rid of social engineering around mortgages. To increase home ownership of the indigent, the government should subsidize mortgage payments for the indigent, but that has to be in conjunction with other initiatives like job training to earn a better wage, etc. No more tax entitlements–I mean deductions. People should pay what they can afford. Period. Let the debt markets work as normal.
  5. Focus on how to properly price MBS’s/CDO’s/CMO’s. The government should use all the academic horsepower available in our higher ed institutions to solve this problem. Modern portfolio theory revolutionized the pension industry by redefining the “prudent man.” Theory around these financial instruments, which aren’t inherently bad, can solve this problem as well. If the theory is sound enough, we might consider them for conservative portfolios e.g. pension endowments

What would you do?

msnbc.com video: Obama on the economy

msnbc.com video: Obama on the economy:

(Via MSNBC.com.)

Wages and incomes for middle class America have been flat for far longer than Obama intimated. In real dollar terms, they’ve been stagnant for decades where the top earners’ incomes shares of national income have quintupled. So in terms of basic fairness and even sound long term economics, you’ve got to pay the piper. Rich folk: do you want to be pigs who get fat or hogs who get slaughtered?