First of all let me apologize for the Wall St. and Main St. references. The Weakonomist couldn’t help himself. We all know Barack Obama is our newly elected Savior president. Hopefully by now the people that actually cried with joy over the news have gotten over it. Maybe someone told them electing a black president isn’t a big deal, or better, explained that he’s just a man and there isn’t a single thing he can do that will personally improve your life. Disagree? Please leave in the comments something a past president has done that has immediately improved your life.
Yes I endorsed the guy but not based on his fiscal experience or I believe in his quest for “change.” Unless he actually puts change in my pocket without increasing the tax burden on taxpayers I’m not drinking from the Obama keg.
Here’s a brief outline of what Obama and his band of merry man will inherit come January:
The financial crisis:
Largely associated with the $700 billion fiasco we’ve spoken about at length, the financial turmoil associated with our economic slump is the hot button issue going into the last year of this decade. During his presidency we’ll learn whether or not this plan worked, and it will be his Treasury that has to sort it out. If it works, he’ll get the credit. If it fails, he’ll get the credit.
How to guarantee survival:
Do whatever he can to improve the attitude of the consumer and get people loaning again. Stimulate the economy naturally and the banks will do well, making the bailout profitable.
How to guarantee failure:
Allow for more artificial stilts to hold up the banks and pass legislation that pumps more fake money into the economy.
The Iraq war:
This was the reason I voted for the guy. All the economic issues are 2nd rate to people needlessly dying, not just American soldiers. However we spend $10 billion a month over there using borrowed money. This money has to be paid back, and the only way we can do that is raise taxes. Why is this true? We’re already operating at a budget deficit, and it is unlikely Obama will be able to cut enough programs to fix that while at the same time propping up the country with all his proposed programs. The money will come from increased taxes. I eagerly await to see how he’ll handle this.
How to guarantee survival:
Pull out ASAP and ask the Iraqi government to help pay for some of the mess.
How to guarantee failure:
Move the troops to Afghanistan or stay involved in any way with the middle east outside of mild diplomatic support of Israel.
Housing:
One thing everyone seems to agree upon is our economic recovery will be based on stabilization of the housing market. Prices are down 40% in some areas and 10% everywhere. This has left many people owing more on their mortgages than their house is worth. The Federal Reserve has done all it can to keep these mortgages from ruining the economy further, but they can only do so much.
How to guarantee survival:
There’s little he can do for housing except somehow encourage the banks to re-write the terms of mortgages. The trend was to encourage mortgages to stimulate the economy. It worked for a while but became an epic fail. If Obama can move the mortgage industry into more public service instead of for-profit (think hospitals), then perhaps we’ll see long-term sustainability.
How to guarantee failure:
One of his ideas is to let judges re-write mortgages for bankrupt homeowners. If this is done, every for-profit institution will cease issuing mortgages.
Taxes:
The only constants in life is the fear of death and the payment of taxes. There are many Bush era tax cuts that Obama will likely let expire, like the reduced capital gains tax. If you aren’t aware the capital gains tax is an income tax on money you make from investing. This stimulates the economy because investment is the backbone of our economy. People invest more if their potential returns are greater. Generally only the wealthy have money to invest. If it is no longer advantageous for the wealthy to invest their money in the stock market, they’ll invest it elsewhere. Not so great for the economy. Think you’ll make up for it with your middle-class tax cut? No, you’ll use it to pay off your credit card bill. I’m so stimulated.
How to guarantee survival:
Do not use tax breaks as a means to put more money in my pocket. Use tax breaks as an incentive to do things that reduce the expense on the government. Give me a break for buying American goods which keeps jobs at home and reduces unemployment. Give me a break for living closer to work, which reduces the need to build new roads and repave existing ones. Give me a break for investing my money instead of burying it in the backyard (oh wait that one he’s going to kill).
How to guarantee failure:
Give me a tax break simply because I’m American. Cut taxes and increase government programs at the same time.
I believe Barack Obama has tremendous potential. But those that achieve greatness do so without knowing they are great. When you grow up knowing how much potential you have, you often disappoint those around you by underachieving. Obama will not be able to follow-through on his many promises. However I think he will succeed in uniting the country. The ultimate success will come once he distracts us from the economy with something else, but that conversation is for another day.
Bellow CNN Money has an article that mentions other topics like health care and energy.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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