Thursday, February 18, 2010

Successful stimulus ... chaotic finances for lower government entities

Dear Colleagues

The community is where people live ... and where people need to have economic opportunity ... and in the main, this is jobs. There are several reasons for having a job including: (1) paying the bills (2) getting ready for the future and (3) having some fun. The first priority ... paying the bills ... starts off with the essentials of living, food, shelter, clothing. Other matter can be put off. The stimulus was a strategy to head off a disastrous period of unemployment. It has worked.

But in the United States at the beginning of 2010 the unemployment rates are still obscenely high. In the view of this writer, they would have been very much worse if the Obama administration had not been quite aggressive with a stimulus package in February 2009. Sadly, the system of pushing stimulus resources from the Federal Treasury into a job in the community where people live is far from efficient ... there is a level of "stickiness" that takes some understanding. For people seeking jobs, the system seems to be dysfunctional, and I have likened the system to be somewhat like pushing on a piece of string ... at the end ... nothing of significance. Part of this is graft ... part is the complexities of the system, and little of no transparency or effective accountability

Some of this is explained by the multi-layer government system ... with a Federal Government with the power to tax and to spend and to print money ... and lower levels of government, many with a legal requirement to balance the budget with large responsibilities and little tax base to fund what must be done. The whole of the government structure of the USA is financially out of control, and the crisis of the banking and finance sector with the sub-prime mortgages and the housing bust and then the imploding derivatives fiasco may well get repeated with the state and local government sector ... and then another level of crisis with jobs.

Communities ... and all levels of government below the Federal Government, have a crisis on their hands ... yet the daily flood of economic metrics do not make this clear. Decisions are being made very day that make matters worse at these levels below the Federal Government mainly forced by laws that do damage rather than do protection. If the "balance sheet" of all the entities involved in these lower levels of government were on the record and available for analysis, it would be seen how much the political and economic leaders of the society have gutted the country ... while reporting profits and collecting bonuses. It is a financial scandal that could have worse implications than the financial implosion of 2007/2008.

I would be interested to know what contingency plans are in place. My guess is that rather little has been done yet to address this area of concern. I hope I am wrong.

Peter Burgess