Thursday, April 30, 2009

Obama - The Captain of the Economic Ship

Obama survived the first 100 days. And with record approval ratings to boot.

Hooray! Who'd have thunk, right?

Bank defaults, no problem. Obama the CEO to the rescue. GM and Chrysler going under? No sweat, Obama the Chairman of the Board is there to fire the CEO of GM, and order Chrysler to go bankrupt. Millions in the nation needing health care? No problem. Obama the healer is there to help. Bring peace and prosperity to the world? Obama the conciliator is there to bring long lost respect to the US in international arena. So, Obama the miracle worker should be able to get Americans healthy, wealthy and wise once more, and bring the good old days back, right?

I think "not so fast".

This economic ship called the US of A, captained by our own Barak H Obama, has at least three boat anchors that need to be dealt with before it can be turned around, and set sail into clear waters.

Let me elaborate.

The first boat anchor is the demographics. America is aging. There are more and more people reaching retirement age, with fewer and fewer people feeding into the social security system. If it was not for immigration, we would have gone into negative population growth. But a large portion of the immigrants barely make minimum wage. And therein lies the rub. No matter how hard we try, the math of getting more taxpayers paying into the social security trust fund is not going to work, unless they increase the retirement age, cut benefits, or both. So there goes the historical standard of living. Both the young and the old, rich or poor, will have to pay more to keep even bare bones benefits alive. This is a structural issue - which means there are no feasible solutions in sight under the current legal and economic structure, without burning a huge hole into people's wallets.

The second boat anchor is the total debt in the system. I have blogged about his before, but I strongly feel it needs to be stated again. The total debt, which is the combined debt of local, state and federal governments, individuals, and businesses, is now over 50 trillion dollars. Even with 1 trillion dollar government bailout, which is a drop in the bucket, the debt is about 3.5 times the GDP. In comparison, the total debt was about 2.5 times GDP during the height of the great depression. A healthy, self sustaining economy can handle a debt load of 1.5 times GDP. So, we have about 2.0 times GDP's worth of debt to work out. That is like saying a person's maximum tolerable weight is 220 pounds, but the current weight is 500 pounds, and he needs to lose 280 pounds pronto! Those who have lost weight know, this ain't gonna happen overnight. Maybe over years, if we are lucky. And the agony will come when the governments will tax us more just to service debt, companies will charge more for their products and services, and individuals will cut down spending just to survive.

The third boat anchor is our public education system, especially the K-12. Much has been said, correctly I might add, by Obama and his ed sec Arne Duncan, on how dire the issue is. After all, it has been proven beyond doubt that a well educated workforce is more productive, and a more productive workforce can outproduce the competition and bring prosperity and wealth back to this country. But by many accounts, the system is so stuck in its own little world, blissfully oblivious of the raging storm, that any meaningful change will take more than an act of Congress to occur. I have heard archived speeches of every president of the United States, starting in the 1960's that the US will be #1 in education in the world. I have yet to see objective data that show that the goal has been achieved. If anything, in many ways, we have fallen behind more nations in the rest of the world. The worst indictment, I think, is that we are yet to officially convert to the metric system. We are not the only one, we have a banana republic (Myanmar) and a ship licensing republic (Liberia) to keep us company. The rest of the world has moved on...

I wish President Obama the best of luck as he navigates through his next 100 days!

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