Investments in Science and Technology

It sounds that all you what to do is through money at the problem. . . . .and hope the problem goes away. . . . The problem is a lot deeper than that. . . . .right down to ethics of the colleges are teaching and are that are putting out these MBA's

Another misguided approach to solving the world problem. The reason this is misguided is because it ignores what the market wants and attempts to tell the market what they want.

This didn't work for the auto industry in the 1970s and it won't work for the economy now.

I really don't intend to sound mean, but so many people are clueless on what makes an economy run. You are not alone. It seems blatant that neither does our government understand.

The scary thing is that our government is trying to run businesses in an effort to make things better, yet I can't think of an entity less qualified than government to hold the tiller.

Government isn't the solution, it's the problem.

The smartest way to work the stimulus is to pick projects and programs with both short and long term payoffs. Investing in R&D does just that. It puts scientists and engineers and technicians to work right now. They build and buy equipment right now. They pay their mortgages and buy cars and clothes right now. If any of the research pays off, then we have new products to produce, creating future jobs. If not, it at least serves the first purpose of pumping money into the economy right now.

It is still fashionable in some circles to insist that government is the problem, that 'they' can't do anything right - that only the private sector can be trusted to get the job done. In my experience there are enormously bright, talented, motivated, and competent people in government as well as in private industry. Both sectors are also home to vast numbers of fools, time-clock-polishers, dinosaurs, and crooks both great and small.

But having just watched the financial industry implode, and watched these captains of the private sector line up for their government hand-outs, I just can't quite understand why this old private sector vs public sector snobbery is still with us. We have just watched as hundreds of billions in tax breaks were dealt out to the wealthy and well connected, money that was (as per supply side theory) supposed to be invested in creating new businesses to provide jobs. It appears that too much of this money went somewhere else:

• It went into bidding up the price of real estate, which raises the cost of living - which means that our already high cost labor gets even more expensive, making it harder for our products to compete on the world market.
• It went into bidding up the stock market.
• When the real estate and stock market bubbles popped much of it went up in smoke.
• It went into the hands of criminals at Enron, and dozens of other naughty bits of the business world. It went into tax free off-shore banks.
  

I have no plans to cut back on R&D right now, and it seems at least so far (knock on wood) that neither do many of my clients. But I would guess that in many sectors that this is not true, and many potentially worthy programs will be killed or at least delayed.

The government, even in the best of times has a role to play in funding research that is beyond the means of the private sector. Spin offs from NASA and DOD have been the bedrock of many of our most important industries. But these are not the best of times, and for now government research funding may be the biggest and sometimes the only game in town.

One of the problems we have here is that any program which doesn't pan out in the short term will be considered by those who worship at the altar of the free market, to be a 'failure', and proof positive that these programs are a complete waste of money. But even in these cases the money will have been pumped into the economy, and since most of the equipment and supplies purchased with the money are not available at Wal Mart, a lot of this money will stay in the country and significantly increase the 'multiplier effect' of those dollars as they circulate through the community.

I am an optimist and I think that at some point, maybe even in my lifetime, we will work our way out of this economic collapse. We will need new or improved products in the pipeline ready to go into production. And I also believe that some of the research will pan out. Maybe some new method for fabricating flexible solar panels. Maybe cheaper ways to make energy efficient LED lighting, or better architectural insulation.

I also believe that the path our of our economic woes will not be found in a new 'super-derivative-hedge-fund-money-market-interest-bearing-investment-instrument'. I think the real way out is to make lots of really cool stuff that helps real people live their lives better, stuff that everybody in the world wants, needs, and can afford. And we need to make it smartly, without making a big mess for somebody else to clean up. Financial markets are necessary to a modern economy, but they are not THE ECONOMY. The economy is the real stuff - haircuts and shoes, solar panels and beer.

"The CRA was passed as you are probably aware, because those honest, decent and rational businessmen who ran the banking industry got together and drew up 'red line' maps to exclude black people as a group from the mortgage market.There was no attempt to discriminate between the credit-worthy middle class blacks and the casual laborer. "

You're absolutely correct! The facts have shown that the government insisting on allowing people with fico scores of 500 to have the exact same access to credit as those of us with scores above 750 and to use it to purchasethings beyond their income is and was the government provding for the general welfare. (Please forgive my sarcasm.) The banks then created pools of "mortgage backed securities" based on these and other more secure loans. The attempt was to tie riskier notes to higher interest and more secure notes to lower interest, thus allowing market to be paid for risk... unfortunately, all of these 'tranches' were corrrellated to the same thing- the increase in the price of housing. when that went bust, it all came screeching to a halt.

Proximate cause/ causa sina qua non was indeed the community reinvestment act. the other things you mention were involved or enablers, but not the cause itself.

I don't let undisciplined children into my gun (or tool locker) and I wouldn't give large amounts of cash to undisciplined people, regardless of ethnicity, who have not demonstrated the ability to keep their obligations current. To do it by force of law is wrong and we have a terrible harvest to show for this governmental enforced altruism.

As for the "practical impossibility" to get two businessmen alone together without them hatching a plot to screw their customers, I'll just say that the few instances of businesses that seem to be covered by that statement have indeed failed spectacularly and been thoroughly paraded around the town square in the press.

But for each of those there are a thousand others that are doing their best to protect their customers, serve their customers, do something that noone else is doing a little bit better, and give employment to their neighbors while they try to eke out a marginal return on their investment, usually bankrolled by a second mortgage on their house.

I am hopeful for you that your optimism in the role of govt is correct despite my misgivings. I suspect when the bill for all the expenditures comes home to rest that the medicine will be seen to be worse than the disease.

http://seekingalpha.com/article/115525-the-scariest-chart-ever

milo

One of the problems we have here is that any program which doesn't pan out in the short term will be considered by those who worship at the altar of the free market, to be a 'failure', and proof positive that these programs are a complete waste of money.

very true, back in the 90's with budget cuts in the military due to Reaganomics long term upgrade in the military. Clinton was able to balance the budget

It is still fashionable in some circles to insist that government is the problem, that 'they' can't do anything right -

We are becoming more and more dependent of the government. The Peoples Government . . . .sound familiar?

phoenix911

The stimulus funds should stay in the pockets of the citizens. To date, the stimulus money has essentially disappeared into the pockets of the Bankers that have used it for purchasing other banks and consolidation their assets and hoarding the monies.

Declare a two year tax holiday where business and taxpayers can earn an unlimited income and watch how fast the economy recovers. Deport all illegal aliens that are burdening our Healthcare System. Put the money into education, authorize vouchers to allow people to choose the school they want to send their children to, slowly cut welfare benefits to able-bodied men and women and provide technical education.

Jobs have left the United States, not only because labor is cheaper overseas but because we cannot properly educate people to do the jobs that have moved.

Not that he'll listen...he thinks government is the solution to everything... just look at how well they did with Fannie Mae & Freddie Mac, Social Security, Welfare, the Post Office, etcetera, etcetera, etcetera...

Just wait; That money is being withheld by the banks as "reserves" until all of our businesses are at the brink of failure; then the bankers will be using those funds to snap up our businesses either for themselves or their buddies for pennies on the dollar. this may be a larger transfer of wealth than the intergenerational one between the parents of baby boomers and their children...

However, I disagree that the major cause of job loss is cheaper labor overseas. It is technology which has destroyed jobs, (lower skill requiring jobs) far more than free trade; and the jobs that are being done by illegals are jobs that few of us care to do or can afford to do given our idea of what constitutes a livable lifestyle.

The shade tree mechanic is out of work because he can't afford all the analyzers, training and specialized equipment to work on todays "gov't mandated high tech" engines.

Cheap labor overseas isn't responsible for those kinds of jobs going away.

http://www.commerce.gov/s/groups/public/@doc/@os/@opa/documents/content/prod01_007686.pdf

milo

I agree with the first paragraph, but strongly disagree with the second.

"the jobs that are being done by illegals are jobs that few of us care to do or can afford to do given our idea of what constitutes a livable lifestyle."

Employers hire illegals to maximise their profits. In other words, they cheat. If these jobs payed enough, most Americans would be glad to do them. Yes, that box of strawberries costs less because of what amounts to slave labor. However, we all pay on the other end. These illegals cost us billions in welfare and medical costs.

Employers that hire illegal aliens are immoral, and should be thrown in jail.

We're screwed though, the Republicans want cheap labor to increase their profits. The Democrats what them so they can vote illegally for Democrats.

It's ironic really, company's hire illegals, and outsource jobs overseas, then wonder why nobody is buying their product. Talk about shooting yourself in the foot....

Like that summation Bricktop.

In the wide world of science and engineering, and trying to keep in mind, what roles actually are legitimate for big government, I'd recommend focusing attention on the Grid first. Over and over I have read here and in other places that the National Grid is in need of repair, overhaul and improvement. It is part of our shared infrastructure, and represents to me a legitimate area for government to exert influence as a practical matter, regardless of political theories.