McNay on Money

What Does the "Recovery" that Washington envisions look like?

By: Don McNay
By: Don McNay

Since the collapse of the economy in 2008, economists and politicians keep talking in term of "recovery." One television commentator kept bleating about "mustard shoots". He was inventing positive signs in his head.

There is no "there" there.

Gertrude Stein

I went back to Ohio but my city was gone

-The Pretenders

Since the collapse of the economy in 2008, economists and politicians keep talking in term of "recovery."  One television commentator kept bleating about "mustard shoots".  He was inventing positive signs in his head.

He wasn't commentating, he was cheerleading.  So far, the team he is rooting for has not been winning.

Washington has been throwing out gimmicks right and left.  It's been hard for Main Street businesses to make long term plans since we have no idea where Washington is going.

McNay Settlement Group, the structured settlement company that I founded, recently made a major investment in technology.  We met with computer consultants for nearly a year and installed the system on September 1.   
 
The next week, President Obama announced a major tax proposal for businesses to buy equipment.   You can get it if you purchase after September 8.
 
Any of my competitors who waited at least 8 days longer than we did can get a huge tax break. We can't.  That's the second time something like that has happened this year.  We also lost out on a tax credit for hiring new employees.  We hired someone a week before that tax gimmick was announced.

Normally, tax breaks start some significant period of time after the initial legislation.  That gives businesses a chance to do long term planning and develop a strategy.

Not now.  You never know what kind of new gimmick they are going to throw out there.

It's not just crying about missing a potential break.  It's that it makes the playing field un-level.  

It rewards people who failed to plan over those who do.

Suddenly, we have two competitors.  One is the other people in my industry that I have always competed with.  The new competitor is the United States government.  Using my tax dollars, it is rewarding my competitors for not being as proactive as I have been.

Businesses need to make changes on a well thought-out basis, rather than getting "the deal of the week."

This knee jerk, grab bag, immediate reaction style of economic planning is the result of no one in Washington thinking past the next news cycle.  Everyone is looking for "quick fix" to get us back to "normal."

My question is: What will "normal" look like?"   When we were in our mid-decade "economic boom" that Alan Greenspan, Ben Bernanke and the Federal Reserve Board were touting, individuals were living on borrowed money they didn't have.  

Now the government is running on borrowed money it doesn't have.  It's also pushing interest rates low and hurting senior citizens.  People who were encouraged to be savers are getting almost nothing in return.  People who bought homes they shouldn't have qualified for are getting bailed out. 


So what is the "recovery" that Washington envisions going to look like?  Are we going to have a new wave of people getting low down payment and no down payment mortgages?  Are there going to be more floods of people running up their credit cards, buying stuff they really don't need and can't afford?   Is unemployment going to go away?  If so, how?  Are we going to stop the flow of jobs to other countries?  Are we all of a sudden going to start manufacturing goods again, after years and years of shipping those jobs overseas?

Too many in Washington pretend we are going to go back to the good old days.  We won't.  Those days are gone.  A number of new concepts, designed to create wealth without relying on Wall Street are materializing.  The idea that Arianna Huffington started, Move Your Money, (see more here) is catching on. 

People are learning to dine at home, cut up their credit cards and avoid going back to the out-of-control behaviors that got us in this mess to begin with.

Washington needs to be looking at hard economic realities instead of gimmicks.  We have too many debts, too many people with their hands in the pies and too many wars.  We have looming problems, like social security and health care, which need to be addressed and paid for.

To paraphrase Gertrude Stein, we need to have an idea of what "there" is going to be like when the recovery begins.

We won't get "there" by using short term gimmicks.

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