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Obama’s Economic Stimulus Plan: Big Dig Deja Vu??

Posted by Larry Doyle on December 7, 2008 8:00 PM |

In the midst of the current economic turmoil, virtually every economist worth his salt can make valid cases for the necessity of both fiscal and monetary stimulus. I appreciate the use of PEBO’s use of the term “investment” rather than “spending” in proposing an economic stimulus program not seen in this country since the New Deal.

Read more here as to Obama’s Stimulus proposal, “Obama Outlines Stimulus Plan.”

I hope, though, that in proposing an “investment” program, that he is mindful of certain parameters that any qualified private or public investor would utilize prior to making his investment. What are those parameters?

1. With whom am I doing business?

2. As the investor (lender), what is the credit rating of the investment and of the borrower?

3. What is the “time to maturity” … that is when can I expect to generate a return on my investment dollars?

4. What checks and balances are in place to make sure that the borrower performs? Including making sure there are no conflicts of interest.

5. Will my investment perform through stress tests … both physical and financial?

6. Are there support mechanisms in place to mitigate risk or distribute the risk?

7. Will the investment benefit from a “truly competitive bid process” in the marketplace?

Remember, that, as taxpayers these are our investment dollars that are being invested and like any relationship with a financial planner we need confidence that our “capital” is being managed judiciously. If not, we will most assuredly “underperform”.

If this stimulus plan is truly an investment, let me remind you of the type of investment that we do not need.

“The Big Dig” in Boston was Tip O’Neill’s farewell gift to his constituents in the city of Boston and the Commonwealth of Massachusetts.

That project is the single largest Federal “investment” ever undertaken. What was initially targeted as a $6bln “investment” over an 8yr time frame ended up being “$16bln” over budget and 7yrs overdue. The level of crime, graft, corruption, and fraud was rampant.

Read more here from the overview of this project.

Yes, some of the same individuals who were on the “investment committee” for “The Big Dig” are still on “our investment committee” today. Feeling a little queasy?? Yep, me too.

If you are nervous about the wise use of your capital for these investments then join the crowd. I am all for making wise investments with a fair return on capital for dollars invested but I am not one who likes to “waste” money on investments that don’t have strict budgets and guidelines managed by qualified individuals.

Those “investments” strike me as risky and imprudent ventures. If I want that kind of thrill, I can do it on my own.

***Join us tonight to discuss this and much more on “No Quarter’s Dollars and Sense with LD” at 8pm****






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