Tuesday, March 24, 2009

The Disconnect

After watching Obama's press conference and subsequent analysis after on CNN, the opposition to the President's ambitious (pseudonym for expensive) budget is predicated on the idea that spending trillions of dollars on education, health care and energy is 1. hypocritical, as Obama chastised the Bush Administration for racking up huge debts, 2. will further weaken our economy, as a $15-20 trillion dollar deficit will hurt America's ability to borrow and 3. detracts from the focus on solving the banking and housing crisis. These are legitimate concerns. Here is a visual representation of what just one trillion dollars looks like. It's staggering and difficult to wrap the head around.


The growth projections are debatable. The prospects of Geithner's banking plan are debatable. Just about every proposal set forth in the administration's agenda is debatable. But what Obama reiterated throughout the presser is that 1. inaction will eventually bankrupt our country and 2. the opposition has failed to present a viable alternative. Obama is essentially doubling down on the premise that the only way to spur sustained growth in our economy is to spend massively on the front end in hopes of generating innovation, jobs and ultimately wealth on the back end.


The disconnect lies in the failure of the opposition to recognize that we are no longer in a 1990s economy or even a pre-2009 economy. In the former, the creation of wealth was largely driven by our leverage of globalization practices. American businesses either took advantage of outsourcing or the inferior economies of our trade partners. In the latter, the creation of wealth was driven by speculative markets.

With the rise of power in foreign markets and the impending overhaul of regulation, neither philsophies will work. Unfortunately for a lot of sectors, whether its energy in the case of Enron, technology in the case of the dot com bust era or banking, it's hard to imagine a scenario where vast amounts of wealth can be created by betting on what something will be worth on the future. With tighter regulation, it will be much more difficult to circumnavigate "the system" without the checks and balances to nip a speculative market gone wild in the bud before it ever gets out of hand.

So what does this mean? It means that our economy must be rebuilt on more efficient systems and more tangible, current assets. The massive overhaul of health care, energy, and education will cost big dollars, but it will generate a smarter nation, facing less obstruction and costs in medicine, with renewable forms of energy that can create jobs and be sold to the rest of the world. To assume improving the quality of the three through expensive and exhausting overhauls does not correlate with a more robust and reliable economy is an outdated mentality. It is uncomfortable, dangerous and unproven, but the alternative, laissez faire attitude will keep us stuck in 2009 while the rest of the world forges ahead.



No comments:

Post a Comment

 
Add to Technorati Favorites