My Rule by Fiat: Jobs

I had a long and great discussion with my elder cousin an experienced banker about what I’ve been writing here and finally he asked me the question that ultimately comes up if like me you’ve spent a good amount of time criticizing the status quo. “Well if you were in charge how would you go about solving our nations problems?” Lets be clear anyone in charge of this nation has a million things that he needs to deal with, so in no way is this meant to be a comprehensive list of the solution to all our woes this is strictly a look at some of the things we could do to fix our employment problems.

1) Take advantage of our ludicrous borrowing rate.
Let me ask you something if someone came up to you on the street and said I will give you $100 and all I ask in return is that in 5 years you give me back $98 would you take the money? The interest rate for 5 year bonds is currently negative meaning this is the exact situation the federal government is in. To put it simply America can literally make money by borrowing in the short term. Most of my ideas for fixing the job problem work in conjunction with this, all can be done regardless, with some tweaks, but keep this in mind as you read the rest of the solutions.

2) A Short term National Bank
The first thing I would do is take Freddie Mac and Fannie Mae and turn them into official National Banks run explicitly by the government for a short period of time. One of Biggest problems we are seeing is banks can’t or won’t lend. Either due to the fact that they themselves are de-leveraging to get their financial balance sheet back to the point they claim they’re at now, or they are once bitten and twice shy of lending to anyone right now. The other problem is many Americans are in debt to their eyeballs and have decided to themselves de-leverage to get back to more manageable debt levels. This leaves a huge hole in our economy that would come from spending and borrowing. Borrowing allows small businesses to float payrolls, make capital purchases, and the things necessary to build and grow a successful business. The spending on our consumer side increases demand and feeds into the growth of business. Allow Fannie and Freddie to issue 5 year ultra low interest loans to small businesses and struggling Americans. Obviously the recipients of these loans would need to be able to prove they could pay the loans back, but a substantial decrease in American debt would create a substantial amount of economic activity.

3) Build the dang fence, or road, or train, whatever it is build it.
It’s such a worn record I doubt I even have to explain why we need to put money into infrastructure. What most people need to realize is shovel ready still takes months and sometimes over a year to actually effect the economy. In addition a lot of projects that have been sitting on the shelf waiting for funding still need to be reviewed to take advantage of changes in manufacturing, and design. Regardless rebuilding American infrastructure is central to any broader economy boosting plan.

4) State recovery funds
If you look at the problems taking place in Europe what needs to be acknowledged is in a lot of ways it is similar to what is happening on a state level. Greece, Italy, Ireland and the like constrained by the Euro and have no control over their currency, and as a result are limited in the ways they can deal with their deficits. This has lead to an increase scrutiny over their debt levels, so to quell the anxiety they are stripping their governmental services to the core, resulting in massive civil unrest. In America states are not allowed to run deficits, as a result they too must strip governmental services. I’ve mentioned before how we are entering a stage of austerity, it occurs to me though the states have been implementing austerity for the last 2 years, and the effects have been a real drag on our economy. We could implement something similar to the Euro recovery fund that is meant to help prevent the default of the smaller euro nations. The fund would allow states to borrow from the federal government at lower rates then they currently receive for their own municipal bonds, and could use the funds to fund essential services, until revenues largely depressed by the ongoing foreclosure gridlock return.

I believe anyone of these programs would have a largely positive effect on the economy. Some of the big banks could have objections to my proposals since they largely involve cutting them out of the equation. Honestly I don’t care, many of the top bankers in this country should be in prison for the distortions they created in the credit system. Seeing as jail time, or even really harsh regulations are off the table they should at least be force to the back of the line in terms of profiting off of all the hard working people rebuilding and recovering the system they wrecked.

Lastly,I wanted to give a few thoughts on my last post about the intransigence in Washington. I titled this piece rule by fiat sarcastically, because I don’t believe democracy is about one person, or even one group getting everything they want. I think in a democracy the group in charge should get more of what they want then the group out of power, but only at most in proportion to the actual balance of power. During the last republican presidential debates the candidates were asked if they could support a 10 to 1 proposal of spending cuts to tax increases as a debt reduction plan. None of the candidates could would support it. Sure to a large extent it’s showmanship to hold a firm line like this, but think about it this way; most democrats believe that you can’t seriously talk about debt reduction without looking at revenues, at the same time most republicans believe cutting spending is essential. If one of these candidates becomes president, chances are there will still be some democrats in congress, based on the simple fact that some of them won’t be up for re-election. Regardless these candidates are committed to preventing these elected officials having even 10% say in the way the country is run.

This is the reason I frankly find it laughable when people claim there is little difference between the two parties. Cap and trade, the individual health care mandate, and now the infrastructure bank, were all republican ideas and democrats in an effort to bend over backwards to find someone on the other isle to work with have accepted them as the starting points of negotiations, and still they find it nearly impossible to find willing partners. If we imagine that any piece of major legislation is a pizza pie and the differing ideas as toppings on this pie then each party should in theory be able to order a certain number of topping depending on how many members it has, unless of course one topping ruins another topping. There are ways to have different ideas and still work together, and that I feel is what is painfully lacking in congress right now.