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Dealing with unemployment

I'm certainly not alone, here on Seeking Alpha, in criticizing the measures that have been enacted to revive our economy, and the way they're being implemented. Over the months, I've read a great many of the articles written addressing the topic, as well as the comments that follow. One of the things that has struck me, is that every so often, a comment will be posted suggesting that, while the critical comments are long on,... well...criticism, little has been written in the way of concrete proposals that might provide a way forward. The people who've pointed that out are quite correct. Its very easy to sit at a computer and fire off broadsides of criticism; easier still if one is doing it under a pseudonym, without offering some constructive input. In the spirit of providing more than yet another diatribe against this program, or the way that one is being handled, I'd like to throw three specific ideas out that deal with the unemployment situation, arguably the largest single problem currently facing the US economy.

1) Its practically written in stone that SMEs (small/medium enterprises) are the largest drivers of job creation in the US economy. Yet the bulk of the stimulus provided thus far has gone to large and mega-sized firms. I suspect the main reason is that its a lot easier to garner headlines if it can be argued that a given proposal kept an auto plant from shutting down, or prevented further job cuts at a steel maker. The fact that some fraction of that sum might have meant that "Acme Tool and Die" hired 2 more machinists, and "Ajax Plumbing and Heating Supply" hired 3 warehouse workers, another delivery driver, and another clerical worker is NOT going to make the 10 pm network news.

What if the government was to offer either a tax credit, or a withholding waiver for low/middle income hires by SMEs? Keep in mind that the definitions of "small" and "medium" vary widely from industry to industry. A proposal like this could be "fine-tuned", if so desired, to target either specific industries, job classifications, or state/regional areas, or any combination thereof.  I recognize that such a plan, it implemented, would have an adverse effect on government revenues, but the short term pain might well be worth it. I recently ran across an article that mentioned that in Sweden, the "forbearance" of withholding is treated like a loan, in that there's a fixed time limit, as well as a modest interest payment, which would provide another avenue to recoup tax revenue losses, down the road.

2) Keeping in line with the premise that SMEs are a, if not the key, driver of jobs, is a suggestion that the SBA's (Small Business Administration) mandate by expanded. I would like to suggest it would be worthwhile to take a serious look at bringing back the direct loan program. Once upon a time, it was possible to get a direct loan from the SBA, rather than a SBA "guaranteed" loan from a bank. Even then, the preferred format was to go for the guaranteed loan, but there was a process in place for getting money directly from the government. I'm not certain why, but that process was eliminated quite a few years ago. The problem with the guaranteed loan process, is that the paperwork needed to process and administer such a loan is basically the same whether the loan amount is $5000, $15,000, $50, 000, or $150,000, so there's effectively a floor on the amount a lender is willing to lend. If, for whatever reason, the SBA would decide to not reinstitute the direct loan program, perhaps some sort of "processing/servicing fee" could be given to the private lenders to make such loans more attractive to them.
3) My final suggestion deals less directly with unemployment, and involves the infrastructure stimulus program that was passed. There's no question that the US is in SERIOUS need of an infrastructure "make-over", and during the debate over the bill, much was made of "shovel ready" projects that would effectively "jumpstart" the economy. Unfortunately, the final bill included "Made in the US" restrictions. Leaving aside the broad macro ramifications of protectionism, there were some more immediately deleterious effects that resulted from that restriction. Back on June 1st, I wrote an article on the possibility of a trade war in which I mentioned the experience of a small Texas town that had a "shovel ready" water/sewage project that was in limbo, because of the "Made In The US" provisions. It seems that the valves needed for this project are ONLY made in Canada. Edward Harrison, a well regarded and prolific contributor to SA made the same point in an article that appeared on Nov. 8th, except in that instance, it was a town in California. I don't know for certain, but wouldn't be surprised if the Canadian company was the same in both cases. After all, how many mfgs. of brass valves suitable for municipal water projects can there be in Canada?

My suggestion, in this regard, is that the bill be amended to include NAFTA members. This would mend fences with both of our neighbors, allow any such projects as mentioned above to proceed, while still making sure the stimulus gets spent close to "home". The thought also crossed my mind that such an amendment might have some small positive effect in stemming illegal immigration, given that the primary reason for such immigration from Mexico is economic. Arguably, any "spill-over" effect south of the border might persuade some potential illegals to stay at home.

I understand that these are broad stroke suggestions, and as they say, "The devil is in the details...".