Saving the Economy

Two administrations and I think we still missed it on saving the economy. While everyone is focused on doling out billions, even a trillion or more to banks, financial institutions, car companies and any other organizations that are big, boisterous and failing, I think we are handing checks to the wrong sort of people.

To illustrate my point, think about what makes our economy run. The numbers vary by pundit, but something like 80 percent of new jobs are created by small businesses, well over half of all Americans are employed by small companies and 70 percent of our economy is consumer driven.

As human beings, we tend to be in a rush to put a bandage where we see bleeding without looking at what caused the bleeding in the first place or what consequences could occur from our treatments. We focus on the symptoms and try to stop them. If credit has dried up and credit is necessary for the economy to move, we throw billions of band-aids at those institutions that supply credit. If people stop buying cars, we throw billions more band-aids so that car companies can do … well whatever it is they plan to do to get people to buy cars again. What are the Big 3 auto makers doing with all that money, anyway?

President Obama is proposing a trillion dollars be spent on rescuing the economy and former-President Bush got Congress to appropriate 700 billion dollars to do the same thing. So that’s $1.7 trillion worth of band-aids being thrown in all kinds of different directions from infrastructure to big businesses to schools to green energy companies.

Sounds interesting, except that very little of that money is going to any of the large job creating and spending sectors of our economy – small businesses and individuals.

So here is what I think should have happened:

$700 billion from the Bush administration’s plan should have been made available to small businesses across the country in the form of low and no interest loans and in some cases outright grants. The portion served up as low and no interest loans would have ensured that a big part of that stimulus package got paid back to the Treasury instead of ending up as nothing more than give-aways to banks. The part that would have been available as grants could have been used for companies planning to embark on green energy businesses, school repairs and infrastructure repairs, thereby placing a high emphasis on the new direction we want to take the country.

A caveat to obtaining the funding would have been that new jobs had to be created or layoffs avoided. Instead of money given away to financial firms that have yet to thaw a frozen credit system and instead spent the billions they were given on buying up weaker banks (a la Bank of America’s purchase of Merrill Lynch), or simply hoarding the money for future use of what we are not certain, the money would have immediately hit the economy, spent to drive GDP and to create jobs. Instead of waiting to see whether banks would ever loan again, we would be seeing unemployment dropping and goods and services being purchased.

$1 trillion proposed by the Obama administration should be placed where it would do the most good to drive an economy that is 70 percent consumer driven – with the consumers themselves.

Consider if you will that $1 trillion and around 300 million Americans amounts to about $3,300 per citizen. Imagine handing a tax-free check to each American in the amount of $3,300. A family of four would get $13,200. A family of ten, $33,000. Tax free.

More progressive businesses have learned to give employees the resources they need to get their jobs done, then stay out of their way while they do it. This is the same train of thought. Now, will all 300 million Americans do the right thing with all that cash? Certainly not. But neither are all of the banks and car companies that were trusted with huge checks.

A few people, no doubt, would save some of their new found cash. Some would catch up bills and others would make purchases for themselves and their families. Probably buy a few things they really do not need but always wanted. And a lot of people would go out and just blow the whole wad.

But think what that means. Savers and bill payers are placing money back into the financial sector. Banks, lenders and credit card companies get a cash infusion. If only ten percent of the money goes into savings or paying off credit card bills, $100 billion reaches financial institutions almost as soon as the ink dries on those printed checks.

Whether to buy a few necessities, pick up some items that were once out of reach or simply blow the whole three grand, that’s instant money spent in the economy on goods and services. Companies sell, consumers buy, profits go up.

The study of economics teaches that consumers “vote” with their dollars by purchasing from organizations they favor and avoiding ones they do not. Purchases, then, are the most democratic way to honor trusted companies and let the poorer ones die off.

If we are going to spend this volume of tax payer dollars anyway, should we not spend it where we get the biggest bang? And, at the same time, have an opportunity to recover some of that money and place it back into the U.S. Treasury as loan payments are made by small businesses?

And, here’s another plus: state and local governments stand to benefit as well. The $3,300 checks would have to be given out free from state and federal income taxes. But sales taxes will be collected when purchases are made. If we assume the average state sales tax is five percent, just to make my math easier, and we assume that 90 percent of the $1 trillion stimulus money described here would be spent rather than saved, that’s $45 billion into state coffers in the form of sales tax revenues. Close to a billion dollars average per state.

We are living in economic times that are unprecedented since the Great Depression. It is time to think outside the box of band-aids and inject capital deeper into the economy than where we first see symptoms. To heal the problem, we need to do something bold and dramatic. Something that has never been tried before.

Christmas Eve 1959

In the days before
America lost its innocence,
And before Blackberry, PC, PS2 and Wii,
When the world seemed young and fresh
War a fading memory
Post war prosperity a reality.

We gathered all at grandma's house
Parents, cousins, uncles, aunts,
For fish and peirogis, homemade bread and pies,
Laughter, broken English, singing and presents.
Oh, so many presents -
More than my imagination could ever conjure.

Cheesy aluminum tree,
Gaudy ornaments, rotating color wheel.
Now so commercialized,
Then simply advertising
The stack of packages beneath
Holding inside what only Santa knew.

And the old guy showed up
In spite of his hectic night.
My cousins in fear,
But I wasn't afraid of the red suit and beard
The laughing eyes, the shiny boots.
He had a watch just like my Dad's.

In the eternity between
Dinner clean up and passing of presents,
We busied ourselves guessing
And watching TV,
Everything then in black and white
Three channels and rabbit ears.

But the next year
Grandma bedridden and ill
Could only smile and have each one of us sing
"Rudolph the Red Nosed Reindeer"
As she closed her eyes
Savoring the song, the moments, the passing.

And the moment did pass
Into another time, another era.
My own children, now their children.
But Christmas Eve, 1959
Will always live in my memory
And be played back like a DVD.

I Resolve

I'm usually not much of one for New Year's resolutions and here is my only one for 2009: I plan to write more. Throughout last year, all my writing appeared only on my Ozarks outdoors website, freshare.net, and on a few article sites. But I have missed blogging and resolve to do more of that in 2009. Here, on Amblin Cafe and for a soon to be developed outdoors blog on freshare.

If you check this blog and Abbozzare, I'll save you a trip today because the same post you are reading appears on Abbozzare, too.

Price Fixing Frustration

I read recently that Canadian and U.S. officials are investigating chocolate manufacturers on charges of price fixing. All the big guys are involved: Hershey, Nestle, Cadbury, Mars. And it seems the firms are admitting that, "Yeah, you caught us with our hands in the chocolate chip cookie jar all right. We discussed pricing together for years."

Which explains why candy bars are all pretty much the same price. Sure, Wal-Mart will sell some cheaper as a loss leader or just to make a few more pennies at the impulse aisle, but for the most part candy bars are all priced about the same. Check it out next time you indulge at the vending machine.

Price fixing is bad. It's collusion. A few big companies command the lion's share of a market so they quickly figure out that working together to set prices beats price wars anytime. Why beat each other up when there is money enough to be made for all?

Doesn't it seem strange then that gasoline prices all move at the same time at all stations and in just about the same amount? I don't think this is because we have such a tight grasp on inventory levels or oil prices, refining costs and delivery fees that we know, right down to the penny, how much a gallon of gasoline will cost consumers.

Adding to the frustration is that all the convenience stores, self-serve stations and anybody else selling gas in a given area raise (occasionally lower) gasoline prices at the same time and for the same amount consistently no matter which oil company they represent. But then, this is an industry dominated by a few large companies who probably figured out a long time ago what chocolatiers have only recently discovered: it's better to play together in the sandbox rather than compete for the toys.

Curious, though, that neither Washington nor Ottawa nor anyone else has sought to investigate this little phenomenon. It seems an obvious place to look.

I concede I may be wrong about all this. Manufacturing and distribution costs may be exactly the same for everyone who produces gasoline from crude oil, and those who set pump prices are so skilled at the task that it is by sheer coincidence alone that prices move all at once, in the same direction and at the same rate.

I was born at night. But it wasn't last night.

So Long Houston Nutt

As a Razorback, I can't help but comment on what I suppose happened between the University and Houston Nutt, former football coach. After months of saying he was staying at Arkansas and enduring fan and media criticism, Nutt abruptly resigned as head coach then, less than four hours later, accepted a new job with rival Mississippi.

Not having been privy to any communications between the U of A and Nutt, and not knowing the man personally, I can only speculate what may have transpired. So here's my take on the whole thing.

Let's go back to last year, the epicenter of all the disruption. Nutt had recruited a top rated quarterback, Mitch Mustain, from a local high school. Along with Mustain came his high school coach, Gus Malzahn, who became the offensive coordinator. It looked like Arkansas was gearing up for a strong pass oriented offense.

Then along came Darren McFadden. This guy could run like nobody's business, was a passing threat himself when in the Wild Hog formation and became a pass receiver, too. In short, he could do it all. When Nutt decided to build the offense around McFadden instead of Mustain, egos were bruised. Mustain asked for a transfer and ended up at Southern Cal. Malzahn booked it for Tulsa. And both men left a wake of media frenzy behind.

But think about it. Didn't Coach Nutt do exactly what he was paid to do by the University? He saw a good thing and wanted to build an offensive scheme with that good thing, McFadden, at the center. That's what coaches are supposed to do. Find talent and go with it. Neither Mustain nor Malzahn were going to be left out, it's just that their roles were going to change.

So the M&M boys depart and the media whips up story after story, emails are scrutinized and cell phone records are publicized. The fans react to the controversy and two camps emerge - those that want Nutt to stay and those that demand he leave. Nutt and the rest of the team have to put up with constant attention to the developing mess off the field. Quite a distraction for a team poised to do well in 2007.

We knock off the number one team in the country - LSU - but we lose four games during the regular season, two of those by a total of only five points. Planes fly over Razorback Stadium with banners calling for Nutt's dismissal, bleachers are peppered with the same message. Everyone, it seems, has joined the second camp and want his head on a platter. And the team has to try to ignore all that controversy and play ball in one of the toughest divisions in the NCAA.

All that leads up to Nutt finally deciding he had had enough and it is time for him to go. No matter what you think about the man, you have to realize he is a shrewed businessman. He timed the resignation when his stock was higher than it had been for over a year - after beating arch rival LSU. Although it was officially a resignation, the University dropped the repayments Nutt would had to have made under his contract. And the coach took a job at Ole Miss hours later, which means he had to have been talking to that school for a while, which also means the U of A had to have given Mississippi permission to court their man.

I think Nutt knew for a long time that this would be his final season at Arkansas. So he talked with University officials and made his plans clear some time ago. After beating LSU, he goes out on top despite the controversy and he has enough leverage to work out a sweet deal with Arkansas while negotiating an even sweeter deal with Mississippi.

Plus, if Arkansas wins its bowl game this year, part of the glory goes to the departed coach because he recruited and taught this team. If they lose, he shoulders none of the blame as he is no longer coaching. Smart man.

Too bad so much of the Arkansas press and so many of the Arkansas fans were down on this guy. Looks to me like he is the smart one and came out on top of the entire heap. And good for Houston Nutt.

A lot will be said about Nutt's style not fitting at the U of A and his coaching will be criticized, maybe even vilified. But he still had one of the best winning records at Arkansas, led the team to numerous bowl games in the decade he coached there and raised some fine football players in the process.

The poor start of the 2007 team has to be borne in part by the team itself and by the coaching staff. But I think it is in larger part due to the maelstrom of rumors and busted egos that set the fans and press about the business of tearing apart a good coach that really ended up costing Arkansas the season.

Al Quixote

The world is getting warmer. Probably. It's difficult to verify that empirically since we are talking about fractions of a degree and measuring the very accurate information we can assimilate today against a set of data that was eyeballed and closely estimated in decades past. But the world probably is getting warmer.

And we as a race are trying to stop that from happening. With an Emmy and a Nobel Prize to his credit, Al Gore has become the personification of the world's efforts to educate everyone and push for changes aimed at stopping global warming.

But let's stop to consider something for a moment. This is not the first time in the history of the Earth that the globe has warmed. In the days before factories and pollution, in the days of the dinosaurs, the world was warm. Very warm. Then it cooled - severely - then warmed again. In fact, I can recall many scientists in the 70's predicting the world was headed for another Ice Age. And that prediction came from the same sets of data comparisons we use today that tell us the climate is becoming hotter, not colder.

The chart at right from www.scotese.com shows the cycle of heating and cooling the Earth has routinely followed throughout its history. It places us near the bottom of a cool trough that was preceded by a warm spell and shows our climate taking another upturn in temperatures as the cycle continues.

So the world does seem to be getting warmer and the climate does appear to be changing. Did pollution, carbon gasses and a hole in the ozone layer cause all this warming? For certain, none of that helped. Tons of gasses and particles spewed into the atmosphere just can't be a good thing. But the world was warming before all that happened and it will continue to warm even if we stop all pollution from now on.

It's just the way the Earth works.

Climate change, global warming, whatever moniker we want to put on it, I'm not sure we can stop it any more than we can stop the rain from falling. As humans, we tend to rush in and fix what we perceive is wrong without stopping to consider that there may be worse consequences to our actions and more terrible outcomes if we make the repair.

For example, a recent suggestion by some scientists was to fill the upper layers of the atmosphere with sulfur dioxide to simulate conditions caused by massive volcanic eruptions. At times in the past, major volcanic eruptions produced clouds of sulfur dioxide that acted as an insulator and cooled the Earth. But one can imagine all the things that could go wrong if we try to do the same thing, not to mention filling the air with toxic chemicals. Isn't that what we are trying to avoid?

Another example is a rush to build an automobile powered by hydrogen. Sounds like a good idea since we could avoid burning fossil fuels. Problem is, it takes so much energy to separate water molecules into hydrogen and oxygen that we actually burn more fossil fuels (coal fired generators to make the electricity to separate out hydrogen) than the gasoline engine we are trying to replace.

Should we cut back on carbon emissions and all the monoxides, dioxides, acid and junk we pour into the air we count on to survive? Absolutely. But we may just be jousting at windmills if we think we have the ability to stop the Earth from going about its business.

Would it not be more prudent for us to put our energies into discovering how we as a race will adapt to a warmer world than in how we can stop it from happening in the first place? That might be a better use of time, resources, and Mr. Gore's sizable clout than trying to stop the rain.

Web Design Replaced Wordsmithing ... Just for a While

Oh no! It's been over a month since my last post to Amblin Cafe. But if you think I've been loafing all this time, well, I guess you're mistaken. Once again, I've let my creative writing slip while pursuing writing of a different kind - web design.

It was time for a complete makeover of our flagship product and the task of doing that fell to me.

Slow and deliberate in my web site design skills, I try, tweak, try again and tweak once more before I get the page to look on the screen the way it appears in my mind. Sometimes I never get the two to meet, but the design process is fun anyway. And frustrating sometimes, too. But I think we ended up with a pretty good looking result. See if you agree: freshare.net.

That said, I am ready for my life to return to normal and go back to writing prose once more.