Letter To President Obama On The Economy

October 19, 2009 Dear President Obama, In light of the recent dismal unemployment numbers, I am writing to you again to urge you and your colleagues in the Senate and House of Representatives to adopt a stronger fiscal stimulus and cease subsidies to giant poorly run banks. There are a range of specific measures that the federal government can undertake to stimulate the economy. These include: 1. Support for state and local governments to avoid layoffs and cuts in basic services. 2.

Extension of unemployment and other emergency benefits.

3. Improvements and upgrades of federal, state, and local roads, bridges, and other infrastructure. Where appropriate new roads, bridges, train lines, and so forth can be built and will provide lasting value to the nation. 4. Upgrades of existing federal, state, and local facilities and resources such as purchase of new energy efficient vehicles, and so forth. 5. The Defense Department has a perpetual wish list of new equipment and facilities. 6. Essentially all research agencies such as DOE, NASA, NSF, and many others fund only a small fraction of grant and contract applications. The federal government can easily both increase the size and number of research grants and contracts. Many other options can be suggested by competent experts. As I have written before, I urge you and your colleagues to seek counsel from economists and other experts such as Dean Baker, Nouriel Roubini, Robert Shiller, Paul Krugman, and others who anticipated the current crisis and are generally not affiliated with the financial industry. Now is not the time to be concerned about budget deficits. In addition, most of these measures can be funded by ending the explicit and implicit subsidies from the Treasury Department and the Federal Reserve to JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, and the several other giant banks that are grossly mismanaging our economy at public expense. Instead, these banks should be chopped into smaller regional banks. Too big has failed. It is time to end the "too big to fail" doctrine and replace it with sensible polciies. The Glass-Steagall Act and other Depression era regulations designed to prevent the current fiasco should be restored. The federal government should take immediate effective measures to end the wave of foreclosures and reset mortgage principal amounts to non-bubble values. Attempting to reinflate housing prices to bubble values is futile. However, the federal government can take measures to mitigate the cost of the bubble popping and avoid a disastrous negative bubble in housing and other assets. In addition, the US Government should work with the governments of China and other nations to reduce the excessive value of the dollar in an orderly fashion. This will help restore the atrophied manufacturing and R&D sectors of the US economy with a minimum of "industrial policy", long term government subsidies, and so forth. It will also enable nations such as China to shift to the production of needed useful goods and services for their own rural populations including farming

tools and machines, power sources, and so forth. Sincerely, John F. McGowan, Ph.D.