Obama's False Recovery

Despite the early signs of a mild recovery as in the stock market run up and one good month of rebounding indicators, the economy has a long forward stroll before reaching full recovery. There are too many hurdles in the way. The small signs are creating a false recovery.

First, a SIDEBAR: Contrary to #39 Jimmy "the Cracker" Carter's view, as an American I am free to criticize our President without being viewed as a hater. I happen to like President Obama and when feeling a touch of spirituality, I pray for him and that of his wonderful family's good health and prosperity. I do not like his policies. The problem with old #39 is that he not only has lust in his heart, he suffers from an embarrassing malady known as athlete's tongue.

Now back to #44's false recovery. While the economic prognosticators are singing to the tune of "Happy days are here again", there are a number of things churning underneath the economic surface which tell us that all is not well. Consider the following economic items:

1. With most banks paying only 1.5% on savings there is a big shortage of income.
2. From all news accounts the job outlook is still dismal.
3. While inventories have dwindled down, thereby increasing industrial production, factories are only operating at 60% capacity.
4. The huge run up in spending by both the borrow and spend Republicans and the tax and spend Obamacrats is unsustainable without an increase of growth and income, including from point one above.
5. Commercial real estate is a problem with many construction and mortgage loans coming up for re-finance in 2010 and 2011. With vacancies up and very little absorption in the near future, this poses a severe economic problem.
6. More Bank failures are on the horizon due to non-preforming loans across all asset classes.
7. Credit markets have not thoroughly thawed.
8. In a number of states home values are still declining, including Illinois which has seen an 11.8% decline.
9. There is still a large number of homeowners seeking to downsize and that number will continue to rise as the baby boomers age towards retirement.
10. The current government stats indicate that the economy grew at a modest 3% last month, but we need more than twice that to pay for all the bailouts, stimuli and earmarks that have been rolled-out over the last nine months.

Without the removal of all of these hurdles, we will have a terrible false recovery. There are a five things that President Obama can do to enable the economy to move towards a full recovery. The first two will have, dare I say it, a stimulative effect.

1. Make permanent the Bush tax cuts. Take a step further, widen the income level for lower tax bracket and lower the rate of the top bracket to 30%. More funds in Americans pockets will trigger savings and investment as well as consumer spending.
2. Reduce the capital gains tax to 10%. This will create greater velocity in the investment markets.

The last three items are a little outside the box.

3. Recalibrate our immigration process. Despite what the America haters suggest, people from every corner of the earth still desire to come to the United States. Let them. Especially if they are hard working and seek to assimilate to the richly American way of life.

4. Remember the Reagan policy of constructive engagement? Engage Cuba to move towards democratic capitalism. Soon the Castro brothers will be taking a dirt bath and there will be a leadership vacuum which will create an opportunity for our country to export products to that island nation 90 miles from Miami.

5. Create an Allianza de Progresso with Mexico, Central and South America. Generate strong economic growth in our Western Hemisphere. These countries are our neighbors, we should be doing more unfettered trade with them.

Obama's false recovery could be turned into a robust recovery following the ideas above.