We Havin' Fun Yet?

I missed Mr. O's big speech tonight. Not because I wanted to but I had work obligations. So I do not know what he said. Seriously, I do not. I am guessing from leading up reports it will be something like spending hundreds of billions of dollars in stimulus to create jobs. Now I have read articles claiming that the first stimulus cost over $225K per job. Okay, I did read it on Fox and we all know they are not the best friends of Obama, but they claim to have it from the CBO. Either way, I tend to doubt it is much off.

http://nation.foxnews.com/stimulus-money/2011/02/24/cbo-jobs-created-or-saved-stimulus-cost-228055-each

So spending $225K+ per job for jobs that I assume are paying less than $50K does not seem to me to be smart math, at least in the way I understand math. What me thinks the problem here is is a lack of understanding on what the problem here is. More specifically, building government deficits to throw money at problems can work in certain situations and can work on certain problems, but it is not working here. Certainly not the way we are doing it.

What we have is a debt problem. Sponsored by the US government, many folks got their collective arses in over their eyeballs in debt. We incentivized banks to give money to anyone who could fog a mirror. We allowed them to have bogus appraisals to justify such lending. We allowed credit agencies to give bogus ratings to securitize these loans. We just sat back and let it happen. And now we have a debt problem. Go figure!

While financial institutions do have somewhat of a financial problem (which they are not yet admitting), or at least a lot of them do - especially in Europe - most companies in the US are okay. They have capital, have reduced their work forces to an efficient level, etc. They simply have no customers or sales as their customers are heavily in debt, in other words, their customers are broke.

Now I read at the WSJ that companies simply want the government to get out of the way and strip out some regulations so companies can prosper and start hiring. Now I do agree with this to some degree as there are a lot of regulations on the books that only the bad players ignore and the good players spend tons on compliance (like SOX), but I do not see this needed step as necessarily what is in the way of economic growth at the moment. Removing the regulations does nothing to remove the debt of those we need to have start spending.

Perhaps we need to take the stimulus dollars and pay off some debt. I agree US debt needs to be paid off but if we are hell bent on spending tax dollars to stimulate, perhaps we should spend them by having Freddie and Fannie do loan mods that relieve debt and thinking of other ways to relieve individual debt. Perhaps we can allow consumers refinance high interest rate credit cards at lower interest rates through government programs. Perhaps we can assist loan mods at financial institutions other than Fannie and Freddie. The name of the game here is deleveraging and until we come up with a plan that does this in a serious fashion, the economy will not get back on track. No mistake here, a multi-year process, but we need to treat the cause, not the symptom.

Disclosures: None