Monday, January 26, 2009

If Obama gets these measures wrong the world economy will be screwed

There were many things that Congress put in place during the Clinton presidency, and it was 8 years later that there was a giant sneeze - much more than a hiccup - when the excesses from the Bush and Clinton periods came to a sudden halt. There is no doubt in my mind that the rot was put in place during the Clinton years.

All the same, now that Umbama is president of the United States, he is the one that has to face the
rapid slowing of the USA economy as well as a rapidly slowing world economy. If he gets the ecomonic measures wrong - and looking at the proposed packages I do fear that the measures being suggested will make matters worse, not better.

More and more people are being thrown out of work now than a few years ago, although many who lost their jobs early last year are still unable to find new ones. The pressure is there to give these people a welfare package. However there is a cost involved in handing out this money without getting something in return.

Amongst the measures being considered by the Umbama administration are:
  • cutting the working week to try and avoid retrenchments;
  • paying companies to cut working hours (this is a bad idea)
  • a tax cut to all taxpayers including low income earners who do not already pay tax;
  • spending on alternative energy (a waste of money);
  • money to build an extended energy grid;
  • make federal buildings more energy efficient;
  • money to weatherproof homes;
  • protection of health insurance cover for 8 million at risk of losing their cover;
On top of this there is concern about the health of the banking sector. Throwing funds at this sector is not going to bring about reform which is needed - reform is necessary because of the excessive salary packages in that sector which means the shareholders and other stakeholders were losing out.

Policies on the fly, which will probably be the hallmark of this presidency could be very harmful to the US economy and since when America sneezes, the world sneezes too, it could be worse for the rest of the world. Socialist policies do not always work, if anything they tend to entrench the unemployed, taking away their incentive to want to work. It is a very fine line to get this right.

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