Dear Mr. President, Please Save Christmas

Before we look at ways to help the economy, let's take a quick step back and review what we know. First, consumer spending drives about two-thirds of the US economy. Second, many retailers derive as much as 60-80 percent of their entire year's profit during the holiday selling season. Third, with consumer confidence and consumer spending down, many large US retailers like Target and Best Buy have said they expect extremely poor sales during this year's holiday season. Some retailers like Circuit City are already declaring bankruptcy, closing stores, and sending more people to the unemployment lines. If the predictions hold true, more large US retailers will follow Circuit City into insolvency and the stock market will continue to spiral downward as they begin reporting their sales results in early 2009.

We Can't Wait for Obama's Presidency for an Economic Stimulus Package

That's a pretty bleak picture and it may be too late to do anything about it. What should have been done, and what still should be done with as much haste as is possible by the current administration and by the Congress, is this: Use the current remainder of the funds allocated for the bailout, a little over $300 billion, for two things and two things only. Provide the $25 billion that the automakers are requesting to keep them out of bankruptcy and take equity positions in exchange for the cash. With the remaining amount, give every red cent out to the taxpayer (including those who are too poor to owe taxes) as a further economic stimulus in time for the holiday season.

The Trickle Up Effect

If this can be done in time, much of this cash will flow back into the economy as people use a substantial portion of this windfall for holiday shopping. This will provide a big boost to some of the retailers whose future depends upon the results of this quarter. It will help the manufacturers who supply goods to those retailers, and it will help the people who work for those retailers and manufacturers who might otherwise be forced to reduce their workforce in the first quarter of 2009.

If It's Too Late to Save Christmas, then Save January

The cash for the auto companies is a lower priority and it can wait; they are strong enough to survive for a few months on just the promise that they will get the money. The stimulus package on the other hand should have been started already. At this late stage it may not be possible to get that cash into the hands of holiday shoppers before year's end. Congress, the Bush Administration, and President-Elect Obama should pull out all the stops to get the funds in this stimulus package flowing to the public as soon as possible.

Get the Economic Stimulus Package Going NOW

If we wait until President-Elect Obama takes office in January to even get a stimulus package started, checks won't be sent until March, April or even later. Do it now and even if it takes until January for the checks to come through, it will help. The longer we wait, the deeper and longer this recession will last. A new stimulus package won't end the recession immediately, but it will shorten it and lessen its severity.

The Bailout Bucks Stop Here

I'll offer one more piece of advice for President-Elect Obama. Make it abundantly clear that this country will not be allocating a new round of bailout money for companies that have demonstrated such poor fiscal management over the past few years. The automakers are a special case because of the number of jobs affected and because the amount they are requesting is relatively low for the benefit. $25 billion to save the US auto industry and its entire supply chain is a tremendous bargain considering how much we have already dumped into AIG and the other financials, but this is the last trip to the well. Once this stimulus package is sent out and the auto makers have their portion, there will be no more bailouts, no exceptions, and that includes those who have already received bailout payments. If they burn through this cash, they are done. Let the chips fall where they may. Holding out the hope for more free money doesn't help these companies find their own solutions as painful as those may be.

Returning to Surplus?

In the meantime, Mr. Obama, consider this. You may find that in two to three years, the equity positions the government has taken in all these companies are worth a substantial amount more than we have paid for them. Maximize the taxpayer's return on those investments and reduce the financial drain caused by fighting two major wars. Then, you might just find that you no longer have the huge budget problem that you inherited.