The USA needs a bold “New Deal” for the twenty-first century.
One of the root causes to our current economic problems is the low birth rate in the USA from 1970 to 1985. Because of it, the percent of people between the ages of 40 and 55 is declining. And so is the demand for real goods.
People between 40 and 55 drive the economy. They are at their maximum earning years and at their maximum consumption years. They consume for children going to college, buy larger homes, buy expensive play toys, purchase additional cars, and add more furniture. And consumption of real goods drives the economy….not consumption of services.
The decrease to the percent of people between the ages of 40 and 55 caused a decrease in demand for real products like houses, furniture, cars, boats, etc.
Some politicians tried to solve this problem with increased immigration, but extensive immigration causes more problems than it solves…especially if the immigrants have no jobs, no families, don’t assimilate, and aren’t between 40 and 55.
The federal government used financial bailouts to try to stimulate the economy. It invested in the auto industry, gave money to home lenders, gave bailout money to teachers, etc. And none of it worked because none of it solves the problem of decreased demand for products.
Since the number of people between 40 and 55 does not increase again until 2022, we have a huge problem that cannot be solved by these financial bailouts.
Using taxpayer money for financial bailouts is a loser. It just redistributes money without increasing consumption. It does not replace the missing consumers between 40 and 55.
Oh, some think that the USA can just increase exports to sell more real goods. But increasing exports requires that the USA become more competitive at manufacturing products. And as long as unions will not help decrease manufacturing costs, educators do not produce enough engineers, and the government does not reduce the high taxes on manufacturing companies; most companies will continue to outsource manufacturing and the USA will not be competitive at exporting products.
So here is another idea. This is a short term fix that will help for a while as the USA tackles those problems that are chasing manufacturing out of the USA:
Our federal government should buy $100 billion of finished goods that are made in the United States by U.S. corporations with American made components and throw them away.
FDR spent lots of money on infrastructure, increased taxes, and used financial bailouts with no impact on the Depression. The Depression finally ended in 1940 when the United States purchased finished goods as part of the “New Deal,” stored them, and eventually threw them away…and when it bought goods for WWII. Consumption of goods ended the Depression. Spending on goods for WWII and domestic needs created jobs by creating demand throughout the entire manufacturing supply chain. The manufacturing multiplier effect increased the economy and increased tax revenues because of increased consumption of finished goods.
This $100 billion purchase will create a million new jobs throughout the manufacturing supply chain. If a multiplier effect of 15 times happens, then this could add $1.5 trillion to the economy which is much more significant than an $860 billion stimulus package…without increasing taxes, inflation, and government nationalization of industries. And it will be done without increasing government regulatory powers over private industry. The government will simply be a consumer.
Where will the $100 billion come from? Well, $18 billion per year will come from eliminating earmarks. The remainder will come from eliminating government service projects that have no multiplier effect…like bailouts for teachers and union pension funds. $100 Billion is less than 3 percent of our federal budget and does not add any additional government employees as compared to the $860 billion bailout that increased the government by almost a third.
But here is the kicker. The government will need to destroy these goods that it buys with this $100 Billion. The government needs to consume products just like firing bullets or dropping bombs. The government cannot give these goods away and it cannot sell these goods. These goods need to be destroyed so they cannot be used to satisfy other existing demand. This program needs to add to demand…not satisfy existing demand…for it to be successful at replacing the missing demand of people between 40 and 55.
Is this administration listening? Probably not. While this idea actually attacks the problem of decreased demand for goods, this administration is only interested in spending money to help its political base of teachers, unions, insurance companies, Freddie Mac, Fannie Mae, etc. And there is no amount of spending on services that will increase jobs…only increased consumption of goods will save the economy.
Michael Master is the author of “Save America Now!” It can be ordered at http://www.amazon.com/gp/product/1616235756
