Will the U.S. Economy Ever Recover?

   

 

For such a smart guy, it’s taken Obama a long time to realize that the only way to maintain power in the White House for the administration to focus on fixing the economy.

Unless they can jump-starting the job market, the Democrats have no shot at remaining in power, which is why we are finally seeing some real, stimulative government spending take place in the form of the $15 billion job package just approved by the Senate.

While I like the direction this bill goes in, it is way too small. That said, it’s a real step in the right direction, which explains how it was able to garner five Republican votes. One of those votes came from the rock star Republican senator from Massachusetts, Scott Brown.

The most attractive part of the bill is the provision that exempts any company that hires an unemployed worker from paying the worker’s 6.2% Social Security payroll tax in 2010. Further, if the company keeps the employee on for a year, the company receives a $1,000 tax credit. This is a fantastic start, but it doesn’t go far enough — it should be applied to the entire workforce.

Letting Business Owners Run Their Businesses

The cumulative savings throughout companies both big and small could not help but be stimulative. It would allow companies to take more risk, hire more people and pay better wages. Most importantly, it would put money directly into the hands of people who are the most skilled with it — i.e., business owners.

It would be short-sighted to think that business owners would just pocket the 6.2% difference or go on wild spending sprees with their extra money. Employees think like that; business owners don’t.

Business owners (at least the good ones) are always thinking about how to grow their business. And getting a break on payroll taxes frees up another stream of capital that would undoubtedly get put back to work into their respective companies.

Other notable provisions in the bill include new rules that allow businesses to write off depreciation of new equipment more quickly, authorization of highway and transit funding, and support for construction bond issuance by state and local governments.

This is the exact approach that we should have been taking from the very beginning.

Congress Actually Working Together

The Democrats losing that all-important 60th Senate seat could very well be the catalyst for getting our country back on its feet. Our nation was designed to have checks and balances against one-sided, concentrated power.

Whether it’s the Democrats or the Republicans, both parties have proven that they will repeatedly abuse their position if given too much power. Power-sharing forces both sides to come together and create more balanced legislation that has a better shot of being in the overall best interest of more Americans.

Bill Clinton, love him or hate him, was a fantastic consensus-builder. But he had to be; his party received a stunning defeat in the early ’90s midterm elections. He couldn’t get anything done without Republican support. The upshot was it acted as a check against the type of egregious spending that we’ve seen over the last nine years.

Keeping Some Perspective

This may in part be why we are seeing the U.S. dollar firming up here. Next to the unfolding debacle that is Europe and the euro, the greenback’s looking pretty good. But let’s not get too excited. If you put a 300-lb. guy next to a 600-lb. guy, the 300-lb. guy will look skinny!

The United States still has huge problems, job growth is non-existent, Tuesday’s consumer sentiment numbers were lousy, and the banks are still not lending.

But as a nation, we have been here before. We’re not seeing anything that we haven’t recovered from in the past. So don’t get engulfed by the negativity. Remember, as bad as the 1970s were, billions were still made in the markets.

Most of that money was made by commodity traders and equity swing traders who traded off the remarkable volatility.

The good news today is that we have exchange-traded funds (ETFs) that allow us to trade commodities with a just a fraction of the risk typically involved with direct involvement in the futures market. We have bid/offer spreads that are tiny compared to the spreads of the ’70s, ’80s and ’90s. We also have ETFs that allow us to buy and sell entire market sectors and countries in just one trade!

And we can do all of that for commission costs of just five bucks! This is an amazing edge that we have over the traders from the 1970s.

Tell us what you think here.

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Article printed from InvestorPlace Media, http://investorplace.com/2010/02/will-the-us-economy-ever-recover/.

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