Is President Barack Obama�s American Recovery and Reinvestment Plan addressing auxiliary problems, significant as they may be, rather than the problem, which is long term recovery of United States industry? A lack of publicized analysis, which inexorably leads to guides of what to do and how to do it, raises doubts and questions. Since President Barack Obama emphasized he is receptive to recommendations to his plan, well, here they are.

Stimulating the economy by government intervention and deficit spending is not a unique change in policy; since the Reagan era, the U.S. economy has depended upon public and private debt for growth and salvation. Government deficits (debt increase of $1 trillion to $9 trillion in 28 years) have financed a great portion of the U.S. economy and credit outstanding ($5 trillion to $50 trillion in 28 years) has financed purchases of industrial products, imported merchandise and a service industry. In 2008, after exhausting credit to all potential debtors who might add purchasing power to an economy in which a significant number of jobs and workers� wages had been transferred to overseas laborers, the economy hit a barrier - enter the government, too late.

One of the many failures of the Bush administration was its lack of recognition that it is preferable to balance the government budget during times of prosperity so that government deficits can be used at a later date to finance the economy during downturns. Now, the Obama administration is forced to use an overly indebted government to absorb more deficits in order to sustain the economy, a process that only substitutes increased government borrowing for diminished public borrowing, albeit at lower interest rates.

Can more of the same provide a solution? The Obama Plan reveals a dubious strategy.

The first doubt arises from policy planners not explaining how they proceeded from gathering the facts to determining exact causes for the economic decline. We have an unproven assertion that the economic crisis arose from faulty mortgage loans, which stimulated additional financial problems and hastened a credit crunch. Less mentioned is the proven fact that an unsustainable rise in credit outstanding ($50 trillion) and an out of control trade deficit ($900 billion), which credit subsidized, predicted the credit crunch. Despite these facts, scarce attention has been given to decreasing the trade deficit and to restructuring an economy that can operate with reduced credit.

It is obvious that a major reason for the economic decline should consider the combination of insufficient purchasing power in the economy and a public refusal to continue financing domestic production and imports with easy credit. If this is true, won�t resolving the economic plight demand a revival of U.S. industries that increase exports, compete with imports and employ more domestic workers as wage earners? Increasing internal purchasing power diminishes credit needs for selling products. Reducing the trade deficit means more dollars are being used to purchase domestic manufacture rather than to finance imports from foreign manufacturers.

However, none of these suggestions are being contemplated. The president�s plan is focused on creating jobs by attacking other problems, such as energy shortages, global warming and environmental improvements. These are all worthwhile endeavors, but will these projects provide a route to sustained economic recovery?

President Obama�s plan contains tax benefits as a stimulation measure, without noting that a previous stimulus plan, which reimbursed American taxpayers, didn�t stimulate the economy, or perceiving that the tax system is designed to regulate the national budget and not to regulate the economy. Using the tax system for the latter purpose tends to trash the budget process. Government revenue that could directly assist those most at need will be used by those who are already employed and have minimal need. The former route will stimulate the economy as effectively, if not more, than the latter route. A government forced to seek the lost revenue from other than tax sources will sell financial instruments. Who will purchase the Treasury bills? Partial purchases will be made by banks to which the Paulson plan furnished money to stimulate consumer and commercial credit. We have a counter productive effect of tax incentives undermining the already debased Paulson plan. Besides, the Bush administration greatly lowered taxes, and what resulted after years of artificially administered growth -- a bust. The Bush tax cuts created a short-term prosperity and an appearance of increased wealth. The appearances deceived and we now have severe reductions in wealth and a damaging economic recession.

The plan considers improving schools. School improvement is always a major necessity, but will their improvement revitalize the economy and is this the time for accomplishing the task? Shouldn�t the question be asked: �Why in the year 2008, after decades of pouring money into the school systems, are the school systems still lacking?� Answers to that question should be a starting point before throwing more money into already failed initiatives.

Although adding more computers and other technologies to school systems are welcome, how will products whose labor content is greatly foreign, which have minimum short term domestic production, and will mainly profit U.S. corporations with foreign factories permanently revive any of our industries and renovate export industries?

Construction of improved infrastructure will definitely create jobs and have a multiplier effect that eventually generates more jobs. But isn�t all of this temporary? After a time, maybe a few years, the facilities will be standing and the jobs will end. What happens afterwards? The money in the system will initially be spent as usual and, due to reliance on imports, slowly gravitate out of the system and to foreign capitals.

One Senate plan contained a debatable clause that all commodities, materials and labor for construction projects must be American and for good reason -- it�s entirely possible the construction of improved infrastructure will assist China in its stimulus plans more than assisting American citizens. Free traders have rebelled against this recommendation. They cite the Smoot Hawley tariffs as a contributing cause to the Great Depression and arouse fear that any constraints on free trade are counterproductive. Where are the tariffs and where is the restraint of trade? The government often regulates its own internal contracts for security and other reasons and these contracts don�t interfere in world trade by private corporations. The construction stimulus is worthwhile, but without protection for U.S. industries, its implementation will return the U.S. economy back to square one and to a need for another trillion dollar stimulus plan.

Increased benefits and health care for the unemployed, a national computer base for health care records, upgrading of federal buildings for energy efficiency, improving the electrical grid and direct investment in a variety of infrastructure projects are worthwhile projects. They will reduce unemployment, and start to solve some ecological and environmental problems. However, none of these projects are related to reasons for the economic decline. Will resolution of non-causal effects solve a crisis that demands a sustained revival of U.S. industry?

Another proposal, doubling clean energy seems like much, but doubling barely nothing, actually isn�t much. Besides clean energy is a solution to carbon emissions rather than economic decline. Sure, it will establish new industries, but these industries (solar, wind power, geothermal) must be heavily subsidized and still are not accepted as being economically viable. We want clean energy and investment in alternative energy sources, but is it advisable to do this now? Do we want investment in industries not recognized as being economically viable when the entire economic system has a doubtful viability?

The repeated assertions that investing in alternative energy will reduce reliance on foreign imports of petroleum, make automobiles more efficient, and create jobs are baffling, if not dishonest. The alternative energy sources (solar, wind, geothermal) can only be used to generate electricity and will not replace significant petroleum usage. According to U.S. Department of Energy statistics, petroleum usage accounts for less than 2 percent of electrical generation. The alternative energy sources will only replace coal power, which the U.S. has in great supply, and won�t be able to replace gasoline to drive automobiles. Dependence on foreign oil sources will not decrease by much. Replacing the output of the coal industry by a new energy industry only transfers jobs from the coal industry to the newer industries. This might increase newer but not more jobs, nor will it prevent job losses.

Unless U.S. industry increases its domestic production and stimulates exports, which will significantly lower the trade deficit, it�s doubtful a sustained recovery will occur. The solution to the economic crisis needs more than a stimulus plan. It needs a true recovery plan and that plan will be a slow and painful process.

Relieving the pain is best done by sharing the pain. Shouldn�t those who profited most in past years help those who will suffer in succeeding years? This means spreading the wealth and taxing the wealthier. It also behooves cash rich corporations, such as Intel, to use their cash to maintain and not lay off workers. If Intel can sustain lower profits or even some losses for a few years, won�t that be preferable to a complete breakdown of the U.S. economy, which will eventually drag Intel down? And how about corporations, such as Boeing, returning some of their production to the United States? Better here than in China or eventually nowhere.

All we know for sure about the proposed American Recovery and Reinvestment Plan is that the national deficit will increase by a one or two trillion dollars. There is no analysis that proves that it can work. Eyes and minds, which should observe the failures in a global economic system and its needs for renovation, have been closed. Installing new rooms in a failing structure is not productive. Returning to the same conditions leads to the same ultimate failures. The future of President Obama�s recovery plan is predictable -- some short term benefits and no ultimate recovery. It might relieve the pain but the patient will perish.

Dan Lieberman is the editor of Alternative Insight, a monthly web based newsletter. Dan has written many articles on foreign and domestic affairs, which have circulated on websites and media throughout the world. He can be reached at Can the Obama Plan Revive the U.S. Economy?
by Dan Lieberman

Alternative insight

Is President Barack Obama�s American Recovery and Reinvestment Plan addressing auxiliary problems, significant as they may be, rather than the problem, which is long term recovery of United States industry? A lack of publicized analysis, which inexorably leads to guides of what to do and how to do it, raises doubts and questions. Since President Barack Obama emphasized he is receptive to recommendations to his plan, well, here they are.

Stimulating the economy by government intervention and deficit spending is not a unique change in policy; since the Reagan era, the U.S. economy has depended upon public and private debt for growth and salvation. Government deficits (debt increase of $1 trillion to $9 trillion in 28 years) have financed a great portion of the U.S. economy and credit outstanding ($5 trillion to $50 trillion in 28 years) has financed purchases of industrial products, imported merchandise and a service industry. In 2008, after exhausting credit to all potential debtors who might add purchasing power to an economy in which a significant number of jobs and workers� wages had been transferred to overseas laborers, the economy hit a barrier - enter the government, too late.

One of the many failures of the Bush administration was its lack of recognition that it is preferable to balance the government budget during times of prosperity so that government deficits can be used at a later date to finance the economy during downturns. Now, the Obama administration is forced to use an overly indebted government to absorb more deficits in order to sustain the economy, a process that only substitutes increased government borrowing for diminished public borrowing, albeit at lower interest rates.

Can more of the same provide a solution? The Obama Plan reveals a dubious strategy.

The first doubt arises from policy planners not explaining how they proceeded from gathering the facts to determining exact causes for the economic decline. We have an unproven assertion that the economic crisis arose from faulty mortgage loans, which stimulated additional financial problems and hastened a credit crunch. Less mentioned is the proven fact that an unsustainable rise in credit outstanding ($50 trillion) and an out of control trade deficit ($900 billion), which credit subsidized, predicted the credit crunch. Despite these facts, scarce attention has been given to decreasing the trade deficit and to restructuring an economy that can operate with reduced credit.

It is obvious that a major reason for the economic decline should consider the combination of insufficient purchasing power in the economy and a public refusal to continue financing domestic production and imports with easy credit. If this is true, won�t resolving the economic plight demand a revival of U.S. industries that increase exports, compete with imports and employ more domestic workers as wage earners? Increasing internal purchasing power diminishes credit needs for selling products. Reducing the trade deficit means more dollars are being used to purchase domestic manufacture rather than to finance imports from foreign manufacturers.

However, none of these suggestions are being contemplated. The president�s plan is focused on creating jobs by attacking other problems, such as energy shortages, global warming and environmental improvements. These are all worthwhile endeavors, but will these projects provide a route to sustained economic recovery?

President Obama�s plan contains tax benefits as a stimulation measure, without noting that a previous stimulus plan, which reimbursed American taxpayers, didn�t stimulate the economy, or perceiving that the tax system is designed to regulate the national budget and not to regulate the economy. Using the tax system for the latter purpose tends to trash the budget process. Government revenue that could directly assist those most at need will be used by those who are already employed and have minimal need. The former route will stimulate the economy as effectively, if not more, than the latter route. A government forced to seek the lost revenue from other than tax sources will sell financial instruments. Who will purchase the Treasury bills? Partial purchases will be made by banks to which the Paulson plan furnished money to stimulate consumer and commercial credit. We have a counter productive effect of tax incentives undermining the already debased Paulson plan. Besides, the Bush administration greatly lowered taxes, and what resulted after years of artificially administered growth -- a bust. The Bush tax cuts created a short-term prosperity and an appearance of increased wealth. The appearances deceived and we now have severe reductions in wealth and a damaging economic recession.

The plan considers improving schools. School improvement is always a major necessity, but will their improvement revitalize the economy and is this the time for accomplishing the task? Shouldn�t the question be asked: �Why in the year 2008, after decades of pouring money into the school systems, are the school systems still lacking?� Answers to that question should be a starting point before throwing more money into already failed initiatives.

Although adding more computers and other technologies to school systems are welcome, how will products whose labor content is greatly foreign, which have minimum short term domestic production, and will mainly profit U.S. corporations with foreign factories permanently revive any of our industries and renovate export industries?

Construction of improved infrastructure will definitely create jobs and have a multiplier effect that eventually generates more jobs. But isn�t all of this temporary? After a time, maybe a few years, the facilities will be standing and the jobs will end. What happens afterwards? The money in the system will initially be spent as usual and, due to reliance on imports, slowly gravitate out of the system and to foreign capitals.

One Senate plan contained a debatable clause that all commodities, materials and labor for construction projects must be American and for good reason -- it�s entirely possible the construction of improved infrastructure will assist China in its stimulus plans more than assisting American citizens. Free traders have rebelled against this recommendation. They cite the Smoot Hawley tariffs as a contributing cause to the Great Depression and arouse fear that any constraints on free trade are counterproductive. Where are the tariffs and where is the restraint of trade? The government often regulates its own internal contracts for security and other reasons and these contracts don�t interfere in world trade by private corporations. The construction stimulus is worthwhile, but without protection for U.S. industries, its implementation will return the U.S. economy back to square one and to a need for another trillion dollar stimulus plan.

Increased benefits and health care for the unemployed, a national computer base for health care records, upgrading of federal buildings for energy efficiency, improving the electrical grid and direct investment in a variety of infrastructure projects are worthwhile projects. They will reduce unemployment, and start to solve some ecological and environmental problems. However, none of these projects are related to reasons for the economic decline. Will resolution of non-causal effects solve a crisis that demands a sustained revival of U.S. industry?

Another proposal, doubling clean energy seems like much, but doubling barely nothing, actually isn�t much. Besides clean energy is a solution to carbon emissions rather than economic decline. Sure, it will establish new industries, but these industries (solar, wind power, geothermal) must be heavily subsidized and still are not accepted as being economically viable. We want clean energy and investment in alternative energy sources, but is it advisable to do this now? Do we want investment in industries not recognized as being economically viable when the entire economic system has a doubtful viability?

The repeated assertions that investing in alternative energy will reduce reliance on foreign imports of petroleum, make automobiles more efficient, and create jobs are baffling, if not dishonest. The alternative energy sources (solar, wind, geothermal) can only be used to generate electricity and will not replace significant petroleum usage. According to U.S. Department of Energy statistics, petroleum usage accounts for less than 2 percent of electrical generation. The alternative energy sources will only replace coal power, which the U.S. has in great supply, and won�t be able to replace gasoline to drive automobiles. Dependence on foreign oil sources will not decrease by much. Replacing the output of the coal industry by a new energy industry only transfers jobs from the coal industry to the newer industries. This might increase newer but not more jobs, nor will it prevent job losses.

Unless U.S. industry increases its domestic production and stimulates exports, which will significantly lower the trade deficit, it�s doubtful a sustained recovery will occur. The solution to the economic crisis needs more than a stimulus plan. It needs a true recovery plan and that plan will be a slow and painful process.

Relieving the pain is best done by sharing the pain. Shouldn�t those who profited most in past years help those who will suffer in succeeding years? This means spreading the wealth and taxing the wealthier. It also behooves cash rich corporations, such as Intel, to use their cash to maintain and not lay off workers. If Intel can sustain lower profits or even some losses for a few years, won�t that be preferable to a complete breakdown of the U.S. economy, which will eventually drag Intel down? And how about corporations, such as Boeing, returning some of their production to the United States? Better here than in China or eventually nowhere.

All we know for sure about the proposed American Recovery and Reinvestment Plan is that the national deficit will increase by a one or two trillion dollars. There is no analysis that proves that it can work. Eyes and minds, which should observe the failures in a global economic system and its needs for renovation, have been closed. Installing new rooms in a failing structure is not productive. Returning to the same conditions leads to the same ultimate failures. The future of President Obama�s recovery plan is predictable -- some short term benefits and no ultimate recovery. It might relieve the pain but the patient will perish.