Advice for Obama: Choose Your Advice (and Advisors) Carefully

Bill Gross, chief investment officer of PIMCO, is likely correct that Obama will be our next president, given that the economy is literally crumbling around us. But his advice to Obama on how to deal with the economy is miles off the mark.

Gross’s July investment outlook letter was addressed to Obama, as if he had been elected.

“Dear President Obama,” the letter began. “You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasize tax cuts for the rich and excessive consumption for all Americans,” Gross wrote. “He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love.”

No arguments here so far. But this is where Gross’s advice goes astray.

The next president has little choice but to step up fiscal stimulus to revive the economy, Gross said.

“You’ve inherited an asset-based economy whose well has been pumped nearly dry with lower and lower interest rates and lender of last resort liquidity provisions,” he wrote. “Your administration will produce this nation’s first trillion dollar deficit.” …. “what you need now is fiscal spending and lots of it,” Gross wrote.

… “This economy will need an additional jolt of $500 billion or so of government spending real quick,” he wrote.

We can only hope that Obama sees this kind of advice and similar advice from other corporate leaders for what it is – a lot of self-serving crap from people who care nothing about the U.S. economy and are only interested in their corporations’ profits and their own outlandish compensation packages. What else would one expect from someone in the business of trading bonds? Of course he wants more deficit spending, requiring the government to crank out hundreds of billions and even trillions of dollars more in bonds! Who cares if it bankrupts the nation, as long as PIMCO gets to execute more bond fund trades?

My advice to Senator Obama? It’s just as I laid out in Five Short Blasts. First and foremost, as quickly as possible, institute trade policy reforms – specifically a population density-indexed tariff structure – that will gradually eliminate our trade deficit in manufactured goods. This will inject $500 billion into the economy not once, but year in and year out, without bankrupting the nation as Bill Gross’s plan would do. The economy will rejuvenate like a starved dog in a meat-packing plant!

Second, begin cutting legal immigration – that’s right, legal immigration – to bring the supply of labor in balance with demand, allowing for real wage growth. Third, begin a national conversation on population and challenge our nation’s government and corporate leaders to explain how any of our most critical goals – eliminating our trade deficit in oil, reducing greenhouse gas emissions, etc. – can ever be achieved if we continue pursuing policies of rampant population growth.

Choose your advisors carefully, Senator, and consider their motivations. Are they motivated by a desire to see you and the nation succeed or are they motivated by more selfish interests?

3 Responses to Advice for Obama: Choose Your Advice (and Advisors) Carefully

  1. Hello Pete,

    Who ever is elected president will have a mess that will wreck them. Perhaps they will try to be another Franklin Roosevelt, but this isn’t 1929. They will fail economically, not necessarily because they are bad leaders (although I feel that both front runners would be) but because the U.S. has, economically speaking, run its gamut. The impossibility of continuing this growth oriented economy reached the mathematical apex of sustainability some time back.

    I’m not sure that if I were an unscrupulous party leader that I wouldn’t throw the election to my opponents and let them take the blame.

  2. Pete,

    Forgot to add that I am in total agreement with you regarding gross Gross. The guy is snake oil salesman of the highest degree.

  3. Pete Murphy says:

    Thanks for the comments, Mike. You’re probably right that whoever is elected will fail economically, but only because they’re unlikely to take the only action that would turn this economy around: abandoning our free trade policy and restoring tariffs – a tariff structure on manufactured goods that is indexed to population density. Such action, within 4 years, I’d say, would drive an incredible boom in U.S. manufacturing and drive wages higher along with a rising demand for labor. They don’t have to fail. Our economy isn’t doomed – it’s just being run by idiots, including Bush, Treasury Secretary Paulson and Fed chief Ben Bernanke.

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