What's UP - (Weekly, Hot, Applicable Topic Summary - Unbiased Perspective) August 9, 2009

What’s UP (Weekly, Hot, Applicable Topic Summary - Unbiased Perspective)

The U.S. Government Financial Stimulus Package : A 90-day Review

During the first quarter of 2009, the U.S. Government’s approach to reviving the American economy was arguably the most pressing issue in our country. My initial blog entry on May 17th provided an unbiased perspective on the stimulus package initiative. I wrote of a “three-pronged approach” that the government was using to fix our economic woes: assistance to multi-billion corporations who asked for assistance; b) state and local municipalities that needed financial assistance in repairing, roads, bridges, and other aging infrastructure components; and c) providing financial assistance directly to American citizens. This blog entry will review the progress of the stimulus package during the past 90 days.

Financial Assistance to Multi-Billion Corporations

On May 17th, I reported that some of our most prestigious and profitable multi-billion dollar corporations requested (and received) financial assistance from the U.S. government. Since that time, some of these same corporations have returned to Washington D.C. and asked for more financial assistance. Further, some of these same companies have also reported quarterly profits for the 1st quarter of 2009.

There is still a “mixed bag” of reaction from the investment community. Some of the companies have seen their stock price remain flat, while other companies have seen their stock price return to levels prior to the Summer/Fall of 2008. Thus far, the U.S. Government’s desired outcome from providing financial assistance to multi-billion corporations has not materialized. There appears to still be room for significant improvement.

Financial Assistance to State and Local Municipalities

Financial assistance to state and local governments for repairing the country’s roads, highways, and bridges appears to be working. In the past 90 days, I have only traveled through 10 states. However, I did observe significant construction repairs in all 10 states. I have not found any reports of inoperable roads, highways, or bridges that have been recently repaired. With the amount of attention given to the economic stimulus plan, any failure (or rumors or speculation of failure) would be front-page news across the country.

In addition, this part of the economic stimulus initiative is also helping to keep construction workers employed. As a result, there are signs that providing, financial assistance to state and local governments is delivering the desired results of improved roads, highways, and bridges as intended. Further evidence of success in this initiative will be available during the winter months when changes in the weather have the potential to impact travel. Removing snow and dumping salt on icy interstates will give a better indication of success in repairing roads and highways.

Financial Assistance Directly to American Citizens

The final portion of the economic stimulus initiative was to devise a way of giving financial assistance directly to the “average American citizen”. There have been government checks sent to citizens; there have been tax cuts built into citizens’ paychecks; there have been multiple avenues and opportunities for small to mid-size businesses to apply for – and receive – financial assistance. All of these attempts have produced marginal results. However, the one activity which has proven to be successful is the “Cash for clunkers” program. Automobile buyers have the opportunity to receive up to $4500 when trading in a “qualified clunker” for a new car. The U.S. Government subsidized this program with $1 billion. Within four days, American citizens had traded in their clunkers for new autos and fully exhausted the $1 billion. The program was viewed as such a success the U.S. Congress approved an additional subsidy to continue to support this effort in stimulating the economy.

As a result of the auto sales, and the government’s willingness to support the program, financial assistance directly to U.S. citizens is providing the desired outcome envisioned. It will be extremely interesting to see the impact to the U.S. economy if the same fervor applied to the automobile industry is applied to the U.S. job market and the unemployment rate.

More information on corporate leadership can be found in Corporate Leadership Selection: Impact on American Business, Employees, and Society (Authorhouse Publishing). Feedback to the bi-monthly blog entry is always welcome.