Can Obama Balance America's Checkbook?

Can Obama deliver on the hope and change?Obama is in New Hampshire right now pitching his new take on how we can get people employed and get the economy gong again. We’ll see how that goes.

What I think is the best part of his whole planned speech and of the entire new plan for the economy is that $30 billion from the Wall Street bailout program is going to be redirected to create small business loans. Now, I know that the headlines are all about the gloom and doom. And I know that $30 billion is small potatoes, and that throwing that much money out there for loans divided by the entire country is a bit like skimming the local wishing well and taking it down to hand out for Christmas, but why isn’t this a bigger headline? While it isn’t as large as the bailouts for the banks, Wall Street, or the car companies, it is a significant amount of money on the scale that it is meant to be operating.

That’s around $600 million per state, and if I’m right, there are some states with very few small businesses, so it could be closer to $1 billion in a state like California or New York. This is important money. Money that will allow small business owners to hire people, pay for health insurance, or just buy the supplies they need for that month. It’s a hard time to own a small business right now, not just because the economy is rough but because the banks aren’t making loans. Hopefully these loans will make it out while the interest rates are still low- hopefully for the small business owners, that is. It may be good policy for the Fed to raise interest rates on all loans that start this year with stimulus money by a 0.25% even. It may be time.

As some Democrats in Washington are pointing out about Obama’s newest budget, there is no “pivot point” this year, where we move from handing out money to help people deal with the economic crisis to starting to save some of that money and deal with the ever-rising deficits and the colossal national debt we have built for ourselves. Just take a moment and remember when we had $200 million budget surpluses in the Clinton years…

Back to reality. Republicans are slamming the move to use the $30 billion as loans, claiming that it should be put toward the deficit rather than loaned out to add to the deficit. Imagine that- Republicans are upset about loans to small businesses. Where were the calls for a balanced budget when Wall Street was struggling to make ends meet? 

In the end, though, it’s a good point. Our deficit is over 10% of our GDP, which is incredibly unsustainable and the highest percentage since WWII. Ideally our deficit should be about 3% of GDP. Yeah.

If things continue as they are going, even under the best plan, the U.S. debt is forecasted by the White House to rise to over 70% of the GDP by 2013. It was at just 53% in 2009.  You don’t need a n economics degree to know that that is not a good thing.

Photo Credit: ~C4Chaos (via Flickr under CCL)