Jobs Plan

[Magox]

I'm not one for promoting keynesian "stimulus" plans as a solution to our problems, because they aren't, but considering the outlook of the economy, in my view we are on the precipice of falling into a recession, and if the proper actions aren't taken it could become quite a deep one if policy makers don't prescribe the proper medicine.

 

The problem with Obama's last stimulus plan is that the vast majority of the funds were temporary stop gap measures, that had almost 0 impact on longer-term sustained growth, in other words they didn't properly address the structural issues we face today.

 

Having said that, not only do I believe that we require structural solutions, we need some temporary stimulus as well. I had been an opponent of extending the Jobless benefits, but they are set to expire soon, and putting ideology aside, speaking purely on a factual basis, if we allow those benefits to expire, 3.5 million Americans will lose these checks which undoubtedly will bring down total consumption here drastically after those benefits expire.

 

Not only do we need these benefits to be extended ONCE AGAIN, but more stimulus in the form of infrastructure for roads and bridges would be wise as well.

 

This is now Obama's economy, there is no more pointing the finger at any one. This would not be happening if they would of rolled out a proper stimulus plan, and NO that does not mean that it should of been bigger, it means that they should of attempted to solve our structural issues.

 

such as

 

1) lowering corporate taxes (we now have the highest corporate taxes in the world)

 

2) thinking outside the box such as charging 0 corporate tax rates on US companies operating outside of the US on the condition that they repatriate those funds back to the US and hire workers here.

 

3) Lowering the corporate tax rate even further for US manufacturers.

 

4) Attempt to renegotiate with Bondholders and banks regarding home loans that includes forgiving part of the equity for the homeowner to help lower the price of the home and loan, but with the possibility of the banks being included with the possibility of gaining equity along with the homeowner. With the government guaranteeing and backstopping some of the downside risk.

 

5)Repeal some of these nonsensical and destructive regulations that have been placed over the past couple years.

 

Bottom line, the economy could go either way, if we don't act properly the odds of falling back into a recession are much higher. We have to remember, the economy is operating on a much lower baseline, instead of the normal 3-5% GDP growth we are functioning in a 1-2.5% baseline, meaning that in order to enter a recession, the falloff doesn't have to be as profound to enter into a recession. The risk isn't so much just reaching that 0 or negative growth, it's that the mentality of the US consumer cuts back from a psychological perspective and consumption falls off a cliff, making it a much deeper recession. Which would mean that home prices would fall another leg down, stock prices would go down precipitously, peoples IRA's and 401k's would get hit hard, etc etc. It sort of has the possibility of becoming a self-fulfilling prophecy.

 

Unfortunately, we need more of that dreaded "stimulus", it just needs to be the proper stimulus and it needs to be targeted with much precision.

Edited August 18, 2011 by Magox

[DC Tom]

2) thinking outside the box such as charging 0 corporate tax rates on US companies operating outside of the US on the condition that they repatriate those funds back to the US and hire workers here.

 

That is an intriguing idea. Combined with #3, seems to me that it would have the effect of making US exports more attractive to the world market without weakening the dollar.

 

4) Attempt to renegotiate with Bondholders and banks regarding home loans that includes forgiving part of the equity for the homeowner to help lower the price of the home and loan, but with the possibility of the banks being included with the possibility of gaining equity along with the homeowner. With the government guaranteeing and backstopping some of the downside risk.

 

That gives me the heebie-jeebies. I can't quite figure out why, though...I can see what your basic intent is, but something about devaluing homes in a somnambulant housing market while splitting losses among the homeowner, banks, and bondholders with the government guaranteeing the risk in part seems to encompass precisely every failure point that caused the mess in the first place. Only thing missing is the ratings agencies giving it the stamp of approval.

[Joe Miner]

Out of curiosity what would you say to this economic plan? (this is not my plan just see some similarities between it and your ideas)

 

1) Reduce the size and scope of a government that is stifling job creation . This includes cutting government spending, capping future government spending, and enacted a balanced budget amendment to the Constitution.

 

2) Create a tax structure that encourages innovative and entrepreneurship. Cut individual taxes, while slashing the corporate tax rate in half. For manufacturers, the corporate tax rate should be reduced to zero to keep jobs in America. Permanently extend current capital gains and dividend tax rates, repealing the death tax and repatriating taxable in come outside the United States at a rate of 5 percent to encourage job creation in America rather than abroad. The tax code should encourage innovation and research and development.

 

3) Remove regulatory burdens that hold back the nation’s economic engine. The nation’s regulatory structure is untenable. Immediately repeal the “regulatory alphabet soup”. Government agencies should stay within their intended framework. Streamline the patent process, reform the transparency of the Food and Drug Administration’s approval process, and limit the ability of federal agencies to expand laws through regulations.

 

4) Encourage global capital and credit markets. Repeal Sarbanes-Oxley. Repeal the Dodd-Frank Wall Street Reform and Consumer Protect Act.

 

5) Tap America’s vast domestic energy resources to power the 21st Century economy. Put aside naïve ideas of creating “green jobs” and focus on an energy policy that utilizes oil, natural gas, coal, and nuclear energy to power the economy. Eliminate the Obama administration’s roadblocks to oil exploration in the Gulf of Mexico, along the Outer Continental Shelf, and onshore, including the Artic National Wildlife Refuge. No new natural gas regulations, such as those being debated by Congress, should be enacted. States are regulating the natural gas industry and there is no reason for government involvement.

[/dev/null]

That gives me the heebie-jeebies. I can't quite figure out why, though...I can see what your basic intent is, but something about devaluing homes in a somnambulant housing market while splitting losses among the homeowner, banks, and bondholders with the government guaranteeing the risk in part seems to encompass precisely every failure point that caused the mess in the first place. Only thing missing is the ratings agencies giving it the stamp of approval.

 

I've never been a fan of the reduce principal idea.

Back when I was living in an apartment I saw it as rewarding bad behavior of both irresponsible lenders and irresponsible homeowners.

Now that I have joined the enslaved class of homeowners, I still feel the same way. Plus now what about people like me? Will they cut my principal? How much will this devalue the value of my neighbors home, and subsequently the value of mine? Why should I be punished for doing things the responsible way while the irresponsible are rewarded?

[Magox]

That is an intriguing idea. Combined with #3, seems to me that it would have the effect of making US exports more attractive to the world market without weakening the dollar.

 

 

 

That gives me the heebie-jeebies. I can't quite figure out why, though...I can see what your basic intent is, but something about devaluing homes in a somnambulant housing market while splitting losses among the homeowner, banks, and bondholders with the government guaranteeing the risk in part seems to encompass precisely every failure point that caused the mess in the first place. Only thing missing is the ratings agencies giving it the stamp of approval.

I share those "heebie-jeebies" along with you, but I believe we can't have a real "recovery" without the housing market coming along for the ride. I knew that Obama's housing plan was destined to fail because the problem wasn't the interest rate from the perspective of the homeowner nearly as much as it was a matter of the equity and being upside down on the loan. Taking this dark cloud over the head of the homeowner increases the odds of them staying in that home, meaning that short-sales and foreclosures would go down exponentially which in my estimations would stem the slide in housing prices.

 

I hate to quote an old quote but sometimes extraordinary situations sometimes calls for extraordinary measures. I believe we are in one of those extraordinary situations.

 

Out of curiosity what would you say to this economic plan? (this is not my plan just see some similarities between it and your ideas)

 

1) Reduce the size and scope of a government that is stifling job creation . This includes cutting government spending, capping future government spending, and enacted a balanced budget amendment to the Constitution.

 

2) Create a tax structure that encourages innovative and entrepreneurship. Cut individual taxes, while slashing the corporate tax rate in half. For manufacturers, the corporate tax rate should be reduced to zero to keep jobs in America. Permanently extend current capital gains and dividend tax rates, repealing the death tax and repatriating taxable in come outside the United States at a rate of 5 percent to encourage job creation in America rather than abroad. The tax code should encourage innovation and research and development.

 

3) Remove regulatory burdens that hold back the nation’s economic engine. The nation’s regulatory structure is untenable. Immediately repeal the “regulatory alphabet soup”. Government agencies should stay within their intended framework. Streamline the patent process, reform the transparency of the Food and Drug Administration’s approval process, and limit the ability of federal agencies to expand laws through regulations.

 

4) Encourage global capital and credit markets. Repeal Sarbanes-Oxley. Repeal the Dodd-Frank Wall Street Reform and Consumer Protect Act.

 

5) Tap America’s vast domestic energy resources to power the 21st Century economy. Put aside naïve ideas of creating “green jobs” and focus on an energy policy that utilizes oil, natural gas, coal, and nuclear energy to power the economy. Eliminate the Obama administration’s roadblocks to oil exploration in the Gulf of Mexico, along the Outer Continental Shelf, and onshore, including the Artic National Wildlife Refuge. No new natural gas regulations, such as those being debated by Congress, should be enacted. States are regulating the natural gas industry and there is no reason for government involvement.

In the short-term you HAVE to rule out #1. The same goes with not repealing the Bush tax cuts, they both would have a severe effect on the economy during this vulnerable period. So #1 is out of the question for now.

 

I like #2, #3 and #4

 

#5 is good, but we have to invest in alternative energies, without a doubt, it is the future (maybe way out in the future) but none the less it is the future of our countries energy solutions.

[/dev/null]

#5 is good, but we have to invest in alternative energies, without a doubt, it is the future (maybe way out in the future) but none the less it is the future of our countries energy solutions.

 

Agree on the need to invest in the development of alternative energies. But we can't afford to put cash into the future while ignoring the energy needs of the present, near future, not so near future, and until the alternative energies are feasible.

[Magox]

Agree on the need to invest in the development of alternative energies. But we can't afford to put cash into the future while ignoring the energy needs of the present, near future, not so near future, and until the alternative energies are feasible.

I agree, and didn't suggest otherwise.

[DC Tom]

I share those "heebie-jeebies" along with you, but I believe we can't have a real "recovery" without the housing market coming along for the ride. I knew that Obama's housing plan was destined to fail because the problem wasn't the interest rate from the perspective of the homeowner nearly as much as it was a matter of the equity and being upside down on the loan. Taking this dark cloud over the head of the homeowner increases the odds of them staying in that home, meaning that short-sales and foreclosures would go down exponentially which in my estimations would stem the slide in housing prices.

 

I hate to quote an old quote but sometimes extraordinary situations sometimes calls for extraordinary measures. I believe we are in one of those extraordinary situations.

 

I see where you're going with it. I guess two of my problems with the idea are 1) government guarantees with Fannie and Freddie in the state they are - basically, that's a government program to encourage homeowners to stay in homes they can't afford, not unlike the government programs that contributed to this mess in the first place (and yes, I understand that lenders and bondholders wouldn't get on board with this without SOME sort of indemnification against loss). And 2) unless you can retroactively apply it to already-foreclosed property, it's going to do nothing to relieve the glut of supply pressuring the markets. Hell, one could argue that some of this process is already taking place through foreclosures - banks are taking losses on foreclosures, and turning around and passing the "principal reduction" on to the new buyers, where such buyers exists, and where they can get mortages. Biggest difference in your plan is people get to stay in their homes - it almost amounts to a homeowner "short selling" their home to themselves, but with the banks, bondholders, and government sharing the losses.

 

And also...negotiating with the bondholders with mortgages as sliced-and-diced and packaged into different CMO's as they are? Two different people might be holding my principal and interest? Who's the servicer negotiating with? You'd almost have to buy them back en masse and unwind them to their original state.

 

Plus, I'm not sure that devaluing equity is going to solve the problem of underwater homes. I'm not sure...I'm trying to think it through. I know my home value's depressed by a good $100k, in no small part because of the foreclosures around is. I'm trying to think if the neighbors having their equity devalued would have done to my home value instead of them walking away...I'm just not sure. Have to ask the wifey.

 

The bottom line, I think, is that your plan (and others) are trying to cushion the blow of an oversold market shaking out the "weak money". And that's tough to do. I think people (like me) are just going to have to take their lumps while this shakes out on its own. Given that we'll probably start to see an upswing later in 2013 (my original estimate was 2012, before the banks started screwing up their foreclosure processes), it may be too late for any plan to have any meaningful impact before the market starts to un-!@#$ itself.

[Magox]

I see where you're going with it. I guess two of my problems with the idea are 1) government guarantees with Fannie and Freddie in the state they are - basically, that's a government program to encourage homeowners to stay in homes they can't afford, not unlike the government programs that contributed to this mess in the first place (and yes, I understand that lenders and bondholders wouldn't get on board with this without SOME sort of indemnification against loss). And 2) unless you can retroactively apply it to already-foreclosed property, it's going to do nothing to relieve the glut of supply pressuring the markets. Hell, one could argue that some of this process is already taking place through foreclosures - banks are taking losses on foreclosures, and turning around and passing the "principal reduction" on to the new buyers, where such buyers exists, and where they can get mortages. Biggest difference in your plan is people get to stay in their homes - it almost amounts to a homeowner "short selling" their home to themselves, but with the banks, bondholders, and government sharing the losses.

 

And also...negotiating with the bondholders with mortgages as sliced-and-diced and packaged into different CMO's as they are? Two different people might be holding my principal and interest? Who's the servicer negotiating with? You'd almost have to buy them back en masse and unwind them to their original state.

 

Plus, I'm not sure that devaluing equity is going to solve the problem of underwater homes. I'm not sure...I'm trying to think it through. I know my home value's depressed by a good $100k, in no small part because of the foreclosures around is. I'm trying to think if the neighbors having their equity devalued would have done to my home value instead of them walking away...I'm just not sure. Have to ask the wifey.

 

The bottom line, I think, is that your plan (and others) are trying to cushion the blow of an oversold market shaking out the "weak money". And that's tough to do. I think people (like me) are just going to have to take their lumps while this shakes out on its own. Given that we'll probably start to see an upswing later in 2013 (my original estimate was 2012, before the banks started screwing up their foreclosure processes), it may be too late for any plan to have any meaningful impact before the market starts to un-!@#$ itself.

It would be tremendously complicated to go with a plan such as the one I suggested, I fear there could be many unintended consequences with this idea and the moral hazard meter would go off the charts. There is no doubt that a plan like this does reward bad decisions and does punish some people that practiced prudence. Putting that aside, I'm just trying to look at it from a very macro perspective.

[....lybob]

1. 0% interest 30 year loans for home and business energy efficiency measures

 

2. 0% interest 10 year loans to convert heavy trucks and fleet vehicles to natural gas

 

3. 0% interest 20 year loans to build natural gas refueling infrastructure

 

4. Close the majority of foreign bases and get out of Iraq and Afghanistan build bases along the Mexican boarder- buy up foreclosed housing to give to soldiers who have done multiple tours of duty, give them a five year moratorium on property taxes and interest free student loans above and beyond what's provide from the GI Bill.

 

5. End the Cuban embargo

 

6. Universal health care- tying health care to jobs decreases employment mobility and hurts small business.

 

7. We need to build about 200+ modern safer nuclear plants to replace all the nuclear plants running 20-30 years past their design life - plus replace many coal fired plants

 

8. Coal to liquid fuel

 

9. desalination plants probably 100+- whether you believe climate change is man-made, or natural cycles or an act of God it's here and here to stay.

 

10. legalization of drugs and prostitution

 

11. Cut the corporate tax to 12% end overseas tax deferments.

 

12. Replace unemployment with government fake jobs and job training- starting at around 6 months and completed around 18 months people go from unemployed to unemployable, basically the longer people are unemployed the more they become unemployable - So my program replaces unemployment with Job training/retraining a small amount of community work, but most important fake job history and references.

 

13. A 0.3% financial transaction tax- high frequency computer trading is a curse and anything that would encourage investment in productive ventures as opposed to gaming the system would be a blessing.

 

14. eliminate the penny.

[DC Tom]

1. 0% interest 30 year loans for home and business energy efficiency measures

 

2. 0% interest 10 year loans to convert heavy trucks and fleet vehicles to natural gas

 

3. 0% interest 20 year loans to build natural gas refueling infrastructure

 

4. Close the majority of foreign bases and get out of Iraq and Afghanistan build bases along the Mexican boarder- buy up foreclosed housing to give to soldiers who have done multiple tours of duty, give them a five year moratorium on property taxes and interest free student loans above and beyond what's provide from the GI Bill.

 

5. End the Cuban embargo

 

6. Universal health care- tying health care to jobs decreases employment mobility and hurts small business.

 

7. We need to build about 200+ modern safer nuclear plants to replace all the nuclear plants running 20-30 years past their design life - plus replace many coal fired plants

 

8. Coal to liquid fuel

 

9. desalination plants probably 100+- whether you believe climate change is man-made, or natural cycles or an act of God it's here and here to stay.

 

10. legalization of drugs and prostitution

 

11. Cut the corporate tax to 12% end overseas tax deferments.

 

12. Replace unemployment with government fake jobs and job training- starting at around 6 months and completed around 18 months people go from unemployed to unemployable, basically the longer people are unemployed the more they become unemployable - So my program replaces unemployment with Job training/retraining a small amount of community work, but most important fake job history and references.

 

13. A 0.3% financial transaction tax- high frequency computer trading is a curse and anything that would encourage investment in productive ventures as opposed to gaming the system would be a blessing.

 

14. eliminate the penny.

 

And lots of magical gumdrop trees. Don't forget the magical gumdrop trees.

[....lybob]

And lots of magical gumdrop trees. Don't forget the magical gumdrop trees.

Who needs magical gumdrop trees when you have industrial hemp

[DC Tom]

Who needs magical gumdrop trees when you have industrial hemp

 

That certainly goes a long way towards explaining how you think #4 is part of a good JOBS PLAN.

 

At least with magical gumdrop trees, you can hire people to collect the gumdrops.

[....lybob]

That certainly goes a long way towards explaining how you think #4 is part of a good JOBS PLAN.

 

At least with magical gumdrop trees, you can hire people to collect the gumdrops.

#4 is part of a jobs plan because domestic building of bases helps construction and because underwater mortgages stops employment mobility so anything that can reduce surplus of housing can help employment.

[TPS]

While we're at it, eliminate the payroll tax on businesses too. The payroll tax penalizes companies for hiring workers. Instead, charge businesses a VAT. Lump any tax paid by businesses into a single VAT--10%?

[....lybob]

While we're at it, eliminate the payroll tax on businesses too. The payroll tax penalizes companies for hiring workers. Instead, charge businesses a VAT. Lump any tax paid by businesses into a single VAT--10%?

That's a good idea

[/dev/null]

#4 is part of a jobs plan because domestic building of bases helps construction and because underwater mortgages stops employment mobility so anything that can reduce surplus of housing can help employment.

So instead of maintaining military bases to occupy foreign countries you want to build bases to occupy the US.

 

Yeah, because no politician would ever abuse having such a large standing army within their own territory

[....lybob]

So instead of maintaining military bases to occupy foreign countries you want to build bases to occupy the US.

 

Yeah, because no politician would ever abuse having such a large standing army within their own territory

Mexico is becoming a total Narco State - you need both to legalize drugs to take away the revenue stream from the cartels but also a strong presence to take on the gangs as they switch out of drugs to other forms of crime.

[TPS]

That's a good idea

While I'm sure most here would agree to that idea, on the other side of the coin I'd suggest we do what the Europeans are doing and add a financial transactions tax. Finance is currently doing more to hinder the economy than help.

[Joe Miner]

In the short-term you HAVE to rule out #1. The same goes with not repealing the Bush tax cuts, they both would have a severe effect on the economy during this vulnerable period. So #1 is out of the question for now.

 

I like #2, #3 and #4

 

#5 is good, but we have to invest in alternative energies, without a doubt, it is the future (maybe way out in the future) but none the less it is the future of our countries energy solutions.

 

Just asking, thanks for the reply.

 

I heard Santorum basically say this, and thought he had some decent ideas.

 

#1 I agree with the principle, but people tend to want to make giant cuts all at once. I would be much more in favor of some gradual cuts and caps over a specified length of time to get us to the point we need to be. We didn't get in this situation in short time period, why do we think we can pull the plug on spending and get out immediately.

 

I thought he had some decent thoughts on 2, 3, & 4 as well. At least they seemed like ideas that had some promise.

 

#5 is a lot like #1. While good in principle, it's too politically driven to not invest in alternative energy. To me we need to be doing both. Utilize our own resources better while at the same time being innovative with alternative forms of energy.