Thursday, August 27, 2009

Handyman's Plan for Stimulus

As an aspiring management major with some experience, it makes one wonder how just throwing money at a problem will solve it. A case in point was with a car our family once had. It was a 1979 Fiat Strada, a car that was frankly a pain in the rumpus, and had one ongoing problem.

The car kept going through batteries, cables and stranded me on numerous occasions. Finally, I took the alternator into a place that specialized in starters and alternators. They wanted the then princely sum of $150 for the part. I thought that was crazy and stubbornly drove this car for another year before I got another vehicle.

Fast forward 20 years to 2008, I learned that any alternator, as long as you can physically fit it into the car, can be used. This would have saved me a lot of trouble, not to mention gas money, had I knew this one trick back then. A Delco 10 SI, a very common part in GM cars and trucks back in the day, would cost about $40 rebuilt. I could have even scored a used one for about $20. A little creativity and attention to detail would have saved a car.

Another seemingly impossible task is at hand, and this is a lot tougher, but no less solvable. The good news is we don't need to throw money at this one either. The Global Financial Crisis, which I expect any day to called the next Economic Depression, has cost a lot of jobs and ruined many earthly lives. One thing I know from having financial troubles is this...

When you find yourself in hole you can't get out of, the first thing to do is stop digging.

You didn't get yourself into this mess overnight, you're not going to get out of that quick either.

Priorities should always start with the basics.

Find what is broken, then fix it.

You made your bed, you sleep in it.

There are a lot of causes to the GFC and one was that people overspent their incomes. In the 1990's, when the economy was supposed to be good, wages were stagnant and growth was only 2% a year. Yet people were selling houses that no sane person would buy and people were buying them for two or three times what the market value should have been. It was greed on the part of sellers, buyers and bankers that caused the mortgage mess that has been the downfall of the United States economy.

What the government has done is to throw money at it. They've spent nearly $1 Trillion on trying to jumpstart the economy. Everything from cash for clunkers to fixing roads to propping up banks, automakers and everything else deemed "too big to fail."

Hey, I'm not against spending money. But corporate banks and other businesses are not doing a lot of the hiring or financing that will help communities. While road repair is a good idea, higher taxes need to be the way to finance them, not more debt.

Businesses all go through life cycles, much like us. They're young, grow and mature, then degenerate and die. Larger businesses usually live longer because there are more people making decisions than small ones. However most of the big businesses in this country are not in a growth stage at this present time. Smaller businesses are more numerous, have shorter cycles and can therefore have more collective opportunity for growth. They will be the ones hiring if the climate is right. This isn't to say that small business is run better than big business is, they aren't. It's just that smaller firms are in a lot better position to restart the economy because of their higher growth potential. Ford, Apple, Microsoft and Google started as small businesses.

There are a lot of people out of work right now, myself included. Some of these people have the skills to run their own firm, create some jobs and stem the growth in unemployment. These are the people who deserve the assistance. A prerequisite should be a business plan and business management classes. This would cost much less and have a much better return on investment than bailing out firms which might be at the end of their life cycles anyway. Another thing holding back small business is the minimum wage. Raising wages drives up costs and the unemployment rate. My younger brother is having a tough time finding work because it's hard to justify paying an 18 year old over $7 an hour. If someones worth $2 an hour, pay them $2 an hour. If they're worth $20 an hour, then pay them that. It shouldn't have to take the government to help us figure out what we should or shouldn't pay.

If you have an old car with a bad alternator, you can replace all the batteries, cables and starters you want; you'll still have a bad alternator. You'll also have a car that will strand you on the highway. The best move is to replace the alternator. It might cost a bit more up front, or require a bit more creativity, but it'll be worth it. Maranatha!

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