TCS Daily


A Perfect Plan Tomorrow

By Bill Wilson - November 19, 2009 12:00 AM

If one studies the major initiatives underway thus far by the Obama Administration, mainly; healthcare, the economic stimulus package, and the cap-and-trade legislation, it is logical that the driving force behind these bills involve Mr. Obama's vision for the United States in the long term. However, his desire to rush ahead in giant leaps to his ultimate dream for America has distorted his current view of American businesses, taxpayers, and the overall economy.

First, the effect on the economy of the $787 billion economic stimulus package, and the approximately 15% of this amount spent to date, is fascinating when you consider the original intention of the President in selling the stimulus package to the American people. The intention, and indeed Mr. Obama's "selling point" was primarily in creating jobs, and putting people to work who will ultimately spend money on goods and services and thus stimulate the economy. We now know that the unemployment rate has moved to 10.2% and by most accounts will remain at this level well into next year. This result is not at all surprising when you abandon idealistic "theory" and focus on reality and the way in which our capitalist system currently operates.

The idea that building infrastructure in bridges, roads and similar projects will add statistically significant jobs to the economy was widely dispelled by business people; in other words, those with actual experience creating jobs. The stimulus funding has been highly successful in stimulating the U.S. Stock Market, however, since big business has been the quintessential benefactor. With an eye on cutting costs and profitability being the main goal, jobs are not being added, so much as corporations are adapting to a leaner philosophy

Numerous grants, loans, contracts and entitlements to mostly service based small and midsize companies has created mainly short-term jobs while spawning an increased demand for large corporations' products and services in the manufacturing sector. Certainly, this has to be viewed by the Obama Administration as an unintended consequence. The report just released by the Administration indicating 650,000 jobs "created or saved" as recorded by Federal agencies from the stimulus funds recipients reports to recovery.gov, is by many accounts little more than speculation.

While Mr. Obama's vision for America in the longer term is one which mirrors the French socialist-tilted system in jobs, taxes and entitlements, it is counterproductive for the administration to make present day decisions in a capitalist economy based on unrealistic assumptions and a future economic vision.

The national healthcare bill recently passed by the House of Representatives is another example of incorrectly judging the present behavior of the American people in a free market society. The vast majority of Americans agree that the present healthcare system needs reform, and most experts agree that the scaling cost in the present system is unsustainable. What is most troubling, is that the Obama plan will require all Americans to buy health insurance or face a penalty/tax, while at the same time forcing businesses who meet the criteria to offer health insurance to their employees or face a monetary fine/tax. The approximately 48 million uninsured individuals in this country will surely consist of a large number of young people, and folks who do not qualify for Medicaid, and many of whom will simply not want to pay for it, resulting in fines.

The Obama Administration and the Democrats will face a very stiff political backlash in the event the bill passes with these requirements, as most polls show that less than half of Americans support the bill. In addition, it is quite possible that many people who respond to these polls are uninformed regarding the details of the healthcare plan, and those without coverage may falsely assume that they will be furnished with "free" healthcare, particularly when the phrase "public option" is included. It should also be obvious to expect a dramatic rise in healthcare premiums in 2013 when insurers will be forced to cover those with pre-existing medical conditions.

It is interesting to note that President Obama has repeatedly emphasized the need to make small changes on the path to his ultimate vision for America, yet the current healthcare bill developed solely by Democratic leaders will contain major changes for the American people in rapid fashion.

The senate version of the Cap-and-Trade bill sponsored by John Kerry (D-MA), and Barbara Boxer (D-CA), is highly touted by Mr. Obama yet exemplifies a drastic misunderstanding of capitalism and the American economic engine as it exists today. The need to address global warming is supported by a vast majority of Americans in most polls, yet instead of measured steps to minimize the impact on families and the economy, the President is taking a hurried path to a future vision. Early estimates measuring the yearly cost increase for families with the passing of this bill, vary from $1200 to the $2,000 range, and pale in comparison to the tax levies that businesses will incur. The carbon emissions reduction to 20% below 2005 levels by 2020 is an aggressive step which could lower GDP, cost the US jobs and result in numerous price increases for working families, the same working families who supported Mr. Obama's Presidential campaign.

Interestingly, the economic impact of these three initiatives may be a significant barrier to Obama's goal of an equal distribution of wealth in America, because hefty deficits, new taxes, and price increases could simply be insurmountable for the near term and carried forward to future generations. It is apparent, and quite admirable in a certain way, for Mr. Obama to be steadfast in embarking down an "all at once" path in his first term, while almost certainly conceding the mid-term and 2012 elections to the Republicans.


Mr. Wilson is an avid investor and a Sr. Project Manager for a Fortune 500 multinational corporation.
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4 Comments

A Goal without a Plan is just a Wish / A Plan without a Goal is Insanity
What is the single, clearly articulated goal of the global climate change avoidance program? One would think the answer to that question should be obvious after all these years of hand wringing. However, if such a goal exists, it is being very effectively buried, likely because it is politically untenable.

Once the goal is agreed upon, a (perfect?) plan could be developed to achieve that goal. Then, perhaps, all of the nations of the world could agree to implement the plan; and, actually do it.

The mere existence of the Law of Unintended Consequences does not excuse the occurrence of fully anticipatable consequences.

imperfect plan
If his plan is " an equal distribution of wealth in America", it can't possibly work. He can't merely redistribute from current rich people because we know that when you tax too much revenures actually go down.

The alternative of massive foreign borrowing from foreigners can't work either because it must be paid back one way or the other.

The third way, via inflation, is also just another tax on the future.

Some equal distribution.

Making the state more perfect
Control and power are the goal not perfection. Man is to be perfected by the state. First it must grow in scope and powers. Sparta, Mao, Hitler,Stalin et al knew that to engineer men's souls they must first make the state the center of men's lives. Our founding fathers of course realized that that way would extinguish liberty as well as men's own direction.

Worth the risk
Bill Wilson ends his interesting article with a troubling question: With his personal approval ratings sinking, and the public opinion polls on his policy initatives getting worse by the day, why does Mr. Obama seem bent on marching us down this path when it could very well lead to disaster for his party and his administration? Is he so confident that he knows what's best for our country that he is willing to risk it all?

I look forward to reading more from Mr. Wilson.

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