Why Isn’t the Stimulus Package Working?

You may have noticed that I have been away for a few weeks, traveling again throughout Southeast Asia, where I have noticed that the United States is not the only one suffering from the economic crisis.

Despite the fact that nearly a trillion dollars have been set aside, industries have been supported by the government (auto) and major financial institutions (AIG) have received multiple bailout funds, the economy continues to decline. On Election Day the Dow was at approximately 9600 and today, the Dow is approximately 6600. Despite the fact that the government has announced the largest public works projects since The New Deal, unemployment has now risen to over 8% and is expected to increase.

Why have we not seen the effects of the latest stimulus package?

The answer to that question requires much more space than allotted there but I do want to address one fundamental flaw in the approach used by the U.S. government.

The stimulus packages are reactionary and not strategic.

Large amounts of money are being used to primarily pay-off past losses with a small amount set aside for today (infrastructure projects) and basically nothing allocated for the future. In essence, most of the money is being used to pay off past debt. When all is said and done, we will have supported many companies and industries only to have a country debt that is astounding, with no strategic ability to recover.

For example, Warren Buffett seeks companies that have little or no debt because he does not want his cash to be used to pay off the past. He would rather his cash be used to take a sound company to the next level. He wants his money to be used for strategic growth, not past management mistakes.

Strategically, we should be looking for opportunities to develop new markets, products and services that will lead our economy for the next 25 to 100 years. Funds, tax breaks, and tax credits should be set aside for innovation and creativity – for research and development on concepts such as biotechnology, nanotechnology and innovative transportation systems.
Using taxpayer money to pay off bad debt and management decisions that have failed instead of strategically stimulating the future could mean that the U.S. economy may not return to its 2007 level for 25 years or more. I have long advocated that the U.S. government needs to develop a long-term strategic plan. That needs appears to be reaching an urgent state.