Wednesday, February 18, 2009

How One Ought to Think of the Economic Stimulus Plan

Now that the economic stimulus plan is the law of the land and ordinary citizens like me are learning about it's various provisions partly through the salesmanship of its supporters, it's time to consider carefully whether or not it's going to work.  It's not going to work and here's why.  In the most simplest terms possible, the absolute best way to summarize what is wrong with the plan is to simply concede to the other side that the vast majority of provisions in it are going to work.  Healthcare, science, education, state/local govts, ie, lump it all together with everything except energy provisions. Assume that every bit of what I consider to be "the other stuff" may come off flawlessly, achieving it's most exact goals to a high level of success.  But before we go congratulating ourselves on successes in those areas, ask yourself a fundamental question:  will whatever we do in those areas matter at all if we're back to $5/gal gasoline in 18 months?  More fundamentally, can our way of life as Americans, complete with our freedoms and comforts survive in any significant way if the price of oil returns to and exceeds the prices that preceded our rapid downfall?  It cannot.  Paint your utopia any color but try to situate expensive oil into it and you've just made it a complete pipe dream. Smoke up. 

 The problem is that the American people are confused about the sources and causes of our economic downturn. They see chaos in the real estate markets, the financial markets, the automotive industry and don't have a grasp on cause and effect. Everything seems to be going at once and no one on TV can put their finger on what the economic dependencies were that drove us to where we are.   I can help in this case.  Mr or Mrs Citizen of the USA, the price of energy is the single biggest determinate of whether or not our country enjoys prosperity.  There are no good 'ole days during times when energy was expensive. Energy is fundamental to our way of life...unless you feel that perhaps things like TVs, Phones, Cars, refrigerators, ovens,  heaters and air conditioners are over rated.   The real issue with energy though is its impact on businesses: when energy prices are high, manufacturing and transportation of goods becomes expensive causing the prices of things we need to skyrocket.  When this happens, we buy less. Demand goes down and businesses go out of business. It's as simple as that. It doesn't take a PHD in Economics to say what I am saying. It's a fundamental thing that you too can arrive at  if you turn off the TV for 15 minutes and think about it.  For the politically blind please note: I'm neither a Republican nor a Democrat--and I don't identify with many independents either. I'm independently independent, a party of one but always enjoying consensus as a result. I digress. 

Let's get to the histrionics part of this article now.  How should our political leaders be conducting themselves given our state of affairs?  Let me make analogy.  Suppose North Korea started shooting 2 or 3 nuclear armed missiles per day at San Francisco at the same time that Iran started sinking US cargo ships & US Navy ships around the world.  We would be at war with foes we know we can defeat but we would be paying a heavy price especially if the other side had any luck.  Our leaders should be treating the economic situation as though the country were at war. (oh wait, I forgot we are at war)  We are experiencing a devastation to our country that is like 50 Hurricane Katrinas occurring simultaneously. It cannot be exaggerated...its worse than any damage any war has caused us in the last 150years.   4mil homes may go into foreclosure this year---yours may be one of them.  The bottom is falling out of this whole thing and you and I may get swept into it....because you refuse to educate your political leaders about what should be a priority. 

What is the answer?  3 Issues need to be addressed ASAP. 

1) Truly invest in energy indepedence.  We have to build out the grid's transmission capacity. If we dont do this, we can't add renewable energy sources to it,  allowing wind in North Dakota to produce energy for New York City or solar in Arizona to produce energy for Los Angeles.  A smart grid would move electricity to places where it is needed in a way similar to the Internet.  The funding in the stimulus plan to make this happen is a tiny fraction of what is needed. Building out the grid would create numerous jobs, an industry skill-set that would be exportable as other countries follow our lead.   The plan does not create enough energy jobs because it treats energy as though it were a nice to have in our economic recovery.  The price of energy is the same thing as that nuclear tipped missile zeroing in on San Francisco...or Menlo Park.  

2) Businesses that can create jobs should be worshipped by the tax code.  Nothing else in the code should take priority except the ability of small businesses to create jobs.  Related to this, every dollar of the stimulus package should be earmarked for companies who have less than 100 employees. Large firms should be required to partner with smaller firms to get a piece of the pie.  Every dollar!!!  Do you hear me Mr. Citizen!!!??? Every dollar!!!!! There are federal procurement laws in place that do this routinely with DoD contracts and it works well.  If it didnt, the United States would have only 5 stars on it's flag, one each for:  Lockheed Martin, Northrop Grumman, Boeing, Raytheon, & General Dynamics. 

3)  Across the board, the mortgage rates should be lowered for everyone by at least a full percentage point.   Rules should be put in place making write downs of foreclosure properties less lucrative than reworking a mortgage with the owner.  This would encourage people to look for ways to get into foreclosure?  No, put an up front fee on it. $10K--$15K...whatever makes the most sense for the property in question. That money has to be raised by the borrower to get the reworked mortgage and it has to be paid up front.  Bingo, more lending. 

Ok, I admit I don't really know whether or not #3 will improve our economy but every plan needs 3 prongs so I took a stab at it nonetheless.  But I'm telling you #1 and #2 are go-to-the-bank ideas. ...if only going to the bank meant what it used to mean.  Oh sure, of course, Dick Weir and EEStor should receive a grant of about $500Mil from Uncle Sam. That's a given since it would accelerate our energy independence unlike anything else.  Speaking of several hundred million for advanced batteries, what the hell happened to John McCain's battery contest with $300Mil going to the winner?   Resurrect it ASAP! I vote that the winning entry be hand delivered by Mr. John Doerr of Kleiner Perkins to McCain and a group of scraggly scientists from some large lab who verified the capabilities.   By the way, mark my words:  Doerr knows the potential & status of EEStor and since he's on the economic stimulus advisory council, history should judge him EXTREMELY HARSHLY if his actions  go towards filling his pockets more than giving this country what it needs in these HARSH times.  We should all ask 5 years from now, did Doerr use his insights to help this country by using his influence to accelerate the delivery of the key energy intitiatives that have the most positive impact on our country or did he act like an oil executive.   


Richard said...

You mention building out the grid and I agree. Yet how much do we need to build out if we were also to improve home electrical generation, storage and use.
Throwing money at problems seems less effective than throwing money at solutions but clearly the challenge is getting the players in the same room and talking. I have doubts that those with investments on the line can be impartial to ideas that renders their investment worthless. So finding corporations, large or small, and funneling money to them is like throwing red meat into a room of pitbulls; you can't expect a bunch of healthy pit bulls at the end of it all.
Clearly standards and the mix is the basis for a solution deserving funding.

Robw said...


Couldn't agree more with the energy independence part of your post.

This country's economy will never truly be stable until we find a reliable, cheap, and consistent source of energy within our own borders.


Marc said...

Very interesting read and for the most part I agree with your statements, thoughts and suggestions. However, I do have a few comments:

!. I think it is highly unlikely any of the current pols in DC would do any or even part of any of the suggestions you mentioned. For the most part they are a bunch of self centered power hungy morally deprived and bankrupt individuals. The majority of them have shown they have no concept of the basis or history of our country, what we the people feel or really want and they do not care. I feel that they are for the most part bought and paid for before they even cross into the BeltWay. They run for election or reelection use fat cat money and run ads and give speeches lying out of both sides of their mouth. The real crime is that way to many Americans either do not care, do not care to know or know but are to dumb or corrupt themselves to do anything about it.

What we need is to rise up and vote every single one of them out of office without an exception. I am tired of hearing how we need their experience and if we got somebody in their with an eduction from a mid west college and not an ivy league one or a Gov from a state way out in the north west then we would be getting a dummy for a politican. Somebody who does not know how govt work!! Thats the problem they all know how govt works and that is that we the people work for them instead of it being the other way around.

In my opinion thats what we currently have and it is getting worse. New blood untainted other then with the scars of battle for the rights of mankind and liberty is what we need.

2. When it comes to Eestor I am surprised that you would say lets throw 500 million at them. When will Eestor show us something worthwhile. We are given promise after promise or hint after hint and nothing happens. I know all about what LM is supposedly doing but considering the economy and the fact that we need to become energy independent fast I have to believe if there was really something there there that a biggy would have swooped in by now and if nothing else offered tens of millions for a piece of the Eestor pie.

Aren't you tired of looking toward govt to fund everything? Now I am not saying that Eestor should turn down govt money but if that is the only place they can get "real funding and big money" for their revolutionary battery then what is this saying.

I am quickly reaching the point that Eestor should s--t or get off the pot and I bet I am not alone.

Once again for the most part you put together a great post.