What President Obama Needs to Say and Do
America is in crisis.
The new normal is not good enough. The unemployed cant find jobs, the old cant retire and those in between live in constant fear of being tapped on the shoulder and thrust into the abyss.
Property values are lower than a snakes belly, stocks are diving and gold the fear asset seems the only sound investment.
Thursday, the President addresses Congress and is expected to propose ideas that only maintain the status quo, or perhaps do worse.
Infrastructure spending, payroll tax holidays, and unemployment benefits will only replace monies now running out from the $800 billion stimulus package and subsequent initiatives. Job training is the biggest folly the economy is not creating many decent openings for trainees to fill.
New tax breaks to encourage hiring and investment wont work, because domestic sales are not growing fast enough to occupy new hires at most businesses.
Americans are spending and businesses are investing a lot more than two years ago, but too much of what they spend is going into higher-priced imported oil and more consumer goods from China.
The $600 billion trade deficit oil and China create are a tax on domestic demand too heavy for the economy to bear. Simply, dollars that go abroad for gasoline and coffee makers that dont return to buy U.S. exports destroy millions of jobs.
If the trade deficit were cut in half, the economy would grow by some $500 billion and add 5 million new jobs.
Developing U.S. oil and gas, where environmental risks can be managed better than abroad, could slash oil imports in half.
Finally labeling Chinese currency manipulation protectionism, and levying a tax on the conversion of dollars into yuan until China stops its currency market manipulation, could slice the trade deficit by some $300 billion.
However, oil and China are not the end of our problems.
The marketplace needs regulations that work, not merely that add to the costs of doing business and creating jobs.
The Dodd-Frank financial reforms add costly bureaucracy but Americans are still abused by credit card companies, and banks continue trading and have doubled CEO salaries. The only things that have really changed are banks wont lend to small businesses and savers cant earn much interest on CDs.
Obamacare has raised the cost of health to businesses and co-payments on prescriptions. Things have improved for some drug companies are earning bigger profits and paying CEOs more.General Motors (NYSE:GM) and Chrysler and the UAW are rescued but now GM will outsource the core of future hybrid and electric vehicles and all electronic accessories in its autos to Koreas LG. Chrysler is hawking Italys Fiat 500. Well get a lot of growth and jobs out of those.
The President needs to tell us he will open up American oil and gas reserves to drilling, build out the use of natural gas for vehicles in big cities and heating in rural areas, finally stand up to China, and genuinely clear out all the useless regulations that make no one better off.
Democrats get a lot of support from banks and pharmaceutical executives, unions and Americas biggest outsourcers GM, General Electric (NYSE:GE) and technology companies.
It would take Trumanesque courage to stand up to those vested interests and the counter-productive ideas of the professional left at Harvard, Princeton and among Democratic party activists.
The time is long past due for President Obama to demonstrate he has what it takes to do the job.
Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.