The idea sounded sound, sell new cars, stimulate the economy. Unfortunately it back fired and put thousands of people out of work instead. How could it be? New Car dealers were grossly overstocked on their lots, they only sold cars off from the lots, many cashed out when the lot was clear, and went out of business, so no new manufacturing. In addition Cash for clunkers put thousands of used car dealers out of business. With such great incentives to buy new, anyone buying bought new. Also Cash for clunkers called for immediate destruction of the traded in vehicles, no using them for parts, no reselling them to the people who still couldn't afford a new one. The cheap $1000 used cars that so many Americans depend upon, have been replaced by $5000 - $10,000 used cars that they can not afford. Next thousands of small independent car repair places were put out of business because the cars they fixed and the cars they used parts from to fix were crushed, no cars to work on no dinner on the table.
Profit and Investment Are Necessary For Job Creation, giving money to big corporations to bail them out, provided
neither. The economy is best stimulated in consumer market place, consumer buying will stimulate manufacturing.
The current corporate thinking is that they don't invest unless they make a profit first. Trillions of dollar were
given to large corporations, so they could stock it away, and give out six figure bonuses to CEO's who dump it into
the poker game known as the stock market.
Businesses only create jobs when they think that the total cost of employing those workers will be offset by profits.
In other words, if it's not profitable to hire workers, it's not going to happen.
The United States has become a welfare state, because we have no manufacturing, the root of a growing economy has to
be made from tangible assetts. A economy built on a foundation of intangible products is supported only by air.
It takes money to create jobs, labor can't be productive unless investors are
providing capital and labor provides products which translate into profits and thereby the accumulation of wealth
for both the investors and the workers. Truck drivers won't get jobs unless someone has invested to buy trucks,
but they still need products to ship...
Venture capitalists should be providing seed money not taxpayers, But the government can't compel them to invest. The problem is not a lack of capital. Businesses have plenty of extra cash — with the Federal Reserve reporting that in 2010, that nonfinancial firms are sitting on $1.8 trillion, twenty-five percent more cash-on-hand than when the recession started.
The key issue is whether companies have a reason to invest. In other words, if they start spending money and hiring workers, will they make money?
Unfortunately, almost everything Washington's done the last 3 years has sent the opposite message.
The "stimulus" boosted federal spending, thus draining funds from private-capital markets and diverting resources from the productive sector of the economy. The main jobs that it "saved" were employees of state and local governments — shielding the public sector from pain even as it inflicted more agony on the private sector.
The health-care law is a cornucopia of new taxes, mandates and regulations — directly increasing the cost of hiring new employees (as well as of keeping old ones on). By telling employers that the cost of hiring is set to rise sharply in the years ahead, it makes them far more cautious about hiring.
The new bailout legislation, though labeled "financial reform," raises costs for financial firms, meaning loans will be more expensive. That is, investing in that truck or computer for that new hire will cost you more. To be fair to President Obama, the problems began before his inauguration. President George W. Bush was not only responsible for two wars and the largest deficits in history to date, but also was responsible for the TARP (Troubled Asset Relief Program) bailout, which has squandered precious capital by steering it to such inefficient firms as Citigroup and General Motors, which are unlikely to create, jobs over the long run.
Of course, Obama supported these and other Bush economic policies, so the "mess he inherited" is also a mess he helped to make. All that matters from a jobs perspective, though, is that government has made it more expensive to hire workers and more expensive to provide the capital needed to make workers productive. This is a bad combination — whether politicians call themselves Democrats or Republicans.
Investors, entrepreneurs and other job creators also look into the future. If they think economic conditions will improve and that they can make money by expanding employment, they're more likely to take that risk. But what's happening in Washington gives them little reason to feel optimistic. The real answer may lie in propoganda programs, Bottom line is belief in the new economy is the only fix for the new economy.
Which brings the last item into focus. Failure to legalize Marijuana. Legalization would not only create / legitimize thousands of jobs stimulated the economy while saving a trillion dollars off the drug war books. Would likely guarentee his re-election.
Update November 2011 Obama pulls a Clinton, and upsets Christians by suggesting that a 15 cent per live christmas tree tax, would help the deficit. After realizing that it was actually just a tax on Christians, he backtracked. Too late this may be the proverbal straw that costs him re-election.more from John