Monday, September 13, 2010

Obama Is About To Take The Wrong Fork In The Road

     Although people have rung in from all points of the political spectrum with complaints about President Obama, there is one big argument in his favor: he has kept his campaign promises. He promised a tax cut, and his stimulus package delivered a cut (conveniently forgotten by the opposition) of $282 billion over two years. He promised to get troops out of Iraq – only 50,000 remain. He promised to agressively advance the war in Afghanistan – he has done so. He promised to create a universal healthcare plan – there is no doubt that he has done that. And he promised to bring the parties together for peace talks in the Middle East – the talks began last week and are continuing tomorrow.
     But with all that, why has his approval rating sunk so low? As Bill Clinton said, “It's the economy, stupid.” Obama wasted a huge portion of his political capital on a stimulus that was way, way too small. I have written several times about the inadaquacy of the stimulus and the coming economic doubledip: 6/23 - Recovery or Doubledip, 7/12 - Ideology Trumps Reality and 8/4 - Brave New World(?).
     Now he is showing signs of going down another road which will not only fail to produce any new jobs, but will actually exacerbate the problem: he is proposing two tax cuts which will primarily benefit large corporations.
     First let me say that most large corporations are not short on capital – a look at the record will show that they are sitting on huge amounts of cash. And large corporations do not need cash to increase their hiring – they need customers.
     They are using their cash to buy automatic production equipment, robotics, numerically controlled machine tools, computer equipment and software, and what jobs they cannot automate they outsource to third world countries where labor is cheap. (By the way, soon you will not be able to tell where your customer service call is going – India has set up schools to teach their workers to speak with a middle-western American accent.)
     Obama's first tax proposal would permanently expand the tax credit for research and development, at a cost of $100 billion over the next ten years. I realize that we are falling woefully behind some other countries in R & D, and I know it is absolutely necessary to expand it in the longer-term, but it will do little to promote jobs now. A better idea would be use the money to teach more Americans the science and technology that would allow them to perform R & D jobs.
     His second proposal would allow companies to write off 100 per cent of their investment in new equipment from now until the end of 2011. In effect, he would pay them to continue automating jobs, and to export those jobs that cannot be automated!
     To promote jobs, he needs to promote cutomers, and the way to do that is to put money into people's pockets. Money needs to be spent on labor intensive projects: education, infrastructure, construction, etc. And a moratorium on payroll taxes would be wonderful.
     Focussing on the customer shortage would be far more beneficial than throwing more money at corporations. I know that getting another stimulus through Congress in an election year is tougher than pushing cooked spaghetti through the eye of a needle, but sooner or later it will have to happen.
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     Such was the situation when the Greek philosophers and scientists came on the scene. These unbelievably brilliant men invented language constructs that we have been locked into ever since.
     What were these constructs? There were two: the law of identity and the law of the excluded middle.
     The law of identity was a huge step forward. Simply put, it states that a dog is a dog and nothing else; likewise a tree is a tree and a river is a river. Technically, A is A and not non-A.
     The law of the excluded middle states that a proposition is either true or false; there is no middle ground.
     Constructs – The Spirit Runs Through It.

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