I have to agree with the opponents of President Obama’s stimulus package. If there is one thing we should have learned from past recessions and depressions, it is that throwing cash at the problem is not the cure all that proponents claim it to be. If Mr. Obama, and his advisors, would simply look back at the great depression of the late 20’s and 30’s, they would realize that even with the tens of thousands of jobs created by Franklin Roosevelt’s New Deal, with all the money that was pumped into the system, it took World War II to finally end the economic plunge taken by this nation and the rest of the world.

Now, I do not want to see another war used as a solution to our economic problems. The truth of the matter is that in any major recession or depression, there are multiple factors, all occurring at the same time, which account for the event, and intervening at one point in the ongoing cycle does not make good economic sense, nor has it proven beneficial in the past.

For example, if a business has fallen onto hard times, and by that I mean that its product is not selling, and it cannot borrow money to stay afloat, because of tight credit and the risk to a lender the business presents, what does it do? Well, it cuts back. It lays off workers, it cuts hours, it closes plants or departments – anything possible to at least remain a viable entity. However, by doing all of these things, it creates an economic climate which will not allow it to return to healthy economic times.

Its laid off workers can no longer afford to shop for non essential products. They have no money with which to invest or even deposit in a savings account. The local banking industry thus suffers from lack of funds and cannot make loans for both lack of on- hand funds and because both the depressed business and its laid off worker are bad credit risks. The cycle continues.

Add to that the overall gloom and doom stressed by the media, which tends to exaggerate the bad and downplay the good, and you have an environment in which fear takes the upper hand. No one wants to risk what little they have, and the end result is stagnation and paralysis.

Along comes the government, pumping cash into and purchasing toxic assets from the banking system. What have the banks done with this stimulus, at least in the last several months? Nothing. Their fear of a further decline, and the wake up call brought on by the mortgage crisis, has paralyzed the banking system into doing nothing. Their response is a pure example of overkill. Those major industries, which have been propped up by loans and stock purchases, instead of keeping plants and departments open for business, still have no markets for their products, mainly because of the banking systems failure to extend credit, and because of the high unemployment rate, which limits the number of potential customers for that product. The cycle continues.

As one can see, it is a predictable cycle where one problem initiates the next and the next and so on. So far, the government’s economic advisors have stressed a solution of attacking the cycle at one point, a solution which does not necessarily mean that the entire cycle will suddenly disappear.

The depression of the 1930’s proved that it takes a long time to recover from a major economic downturn, as its initiating factors were years in the making. The key to recovery is both emotional and factual. When there is more money available, it does no one any good just sitting in a bank vault. It has to prop up industry which in turn provides jobs which in turn provides salaries which in turn provides discretionary income with which to buy goods and services which in turn provides hope for the future which in turn expresses itself in confidence and a feeling of wellness.

The stimulus package of the past and current administration is similar to a medical mood elevator or antidepressant. Telling the patient that it will help does not make it so. The recovery takes time, as the body begins to acclimate to the new drug. The mood begins to rise as the patient understands that recovery is on the way and that there is hope for the future. The combination of fact and hope begin to merge and the patient begins to see light at the end of the tunnel.

That is exactly how it will be with this recession. There is obviously light at the end of the tunnel. Recessions do not go on forever. The issue is just how long that dark tunnel has to be. The public needs information. They need to be reassured by their President that he understands the problems and is working on efforts to correct the problem. They need to find hope in the media. They need to hear less gloom and doom and more of tales of success. At the same time, the banking industry needs to make that first initial step to recovery by “believing” that the economy will improve and thus, expand the credit markets. Simultaneously, those industries, which have laid off workers, need to begin to hire laid off workers back, even if it is part time, to provide confidence in those who are hurting the worst. When workers work, products are purchased, albeit not at the rate needed for full recovery, but at least to begin the process. When products are purchased, industry hires more workers and banks lend because the fear of risky loans has begun to evaporate.

Our economy is not lacking of cash. The government can print, borrow or steal that stuff every minute of every day of week. Our economy lacks the confidence which will allow it to bounce back quickly. If we wait for these government supported stimulus packages to work, the tunnel is going to be long and dark and, as demonstrated by the Carter Administration, an obstruction called inflation will block our recovery midway through the darkness. If we wait for “make work” efforts to provide the confidence needed, we might as well wait forever. When a man realizes that his job is not real, but is rather synthetic, created to solve a problem which will, given time, disappear through no efforts of his own, he will lose confidence in both his future or that of his nation.

The government needs to sit down with the banking industry, with the auto industry, with all major industrial powers and work in a cooperative fashion to attack this economic cycle all at once. President Obama needs to have “fireside chats” with the nation, explaining, step by step, what is being accomplished. He needs to instill the confidence in this recovery that he instilled with his campaign rhetoric. He needs to realize that his rhetoric got him elected but will not solve his real problems. The man needs to walk the walk now that he has talked the talk. This cash intervention is merely a pebble thrown into a large body of water. The ripple effect will not last. We just don’t seem to learn from our own history, and thus, are again repeating it.

JLK