Handing out money vs. handing out work

The "economic crisis" is different now. What used to be about borrowing is now about working. The new crisis is even more profound then the former one. The good news is that the new crisis is easier to understand and easier to respond to that the former one, which was driven by estoric investment instruments. A few months ago, "economic crisis" referred to lack of credit -- the unwillingness of shell-shocked lenders to lend. Whether you were a consumer trying to buy a home or a company borrowing to meet payroll in a lean stretch or an investor borrowing to buy a hotel or a developer borrowing to build a condo high-rise, you couldn't borrow because your usual lender was afraid to lend at any price. The Federal Reserve Board cut the price of money 95% in about a year's time, yet lenders remained reluctant, afraid that you might not pay back the loan if the recession got worse. Because credit was frozen, the recession DID get worse. The consumer spending that makes up more than two thirds of all U.S. economy activity fell off sharply, and companies began cutting jobs as their sales plunged. General Motors is cutting 2,000 more jobs. Home Depot, shutting down its Expo design and decor division, is cutting 7,000. Sprint Nextel is cutting 8,000. Caterpillar is cutting more than 19,000. And that was just Monday's announcements. The previous form of the economic crisis was tricky. It grew because of sophisticated investments that were riskier than people realized including the professionals we thought were knowledgable about such stuff. Solutions were tricky, too, because most involved putting money in the hands of the very people who made the mess. But the problem now is even more fundamental -- people are being thrown out of work at an alarming rate and new work must be found by them or the jobless rate will soon top 10% nationwide. It's already over 9% in California. President Obama has the advantage of knowing, from watching what President Bush did, that in desperate times no business will "do the right thing" against its own corporate interests unless required to. Its own management and board may be grateful for the requirement, which allows it to do the right thing without fear of shareholder uprising, but absent such a requirement they may absolutely be relied upon to put their fiduciary responsibility to shareholders ahead of the mere national interest.  We saw how banks, not required to use bailout money to make loans, mostly didn't, preferring to use the money to improve their bottom line or even for acquisitions. President Obama proposes a 40% improvement of vehicle fuel efficiency by 2020. The Bush administration subverted tough fuel efficiency rules, believing it was helping Detroit and the oil industry. It did not help Detroit, as we have seen, and the effect on the oil industry has been mixed. The effect on the nation has been calamitous. The president offered, among other things, a national security argument. "It bankrolls dictators, pays for nuclear proliferation and funds both sides of our struggle against terrorism," he said of U.S. consumption of foreign oil. Sen. George Voinovich, an Ohio Republican, worried aloud that President Obama was "piling on" and his policies would hurt Detroit. I doubt it. On the evidence of Detroit's shrinking market share, and the growing market share of Japanese automakers, what has hurt Detroit has been its disinclination to make fuel efficient vehicles. It has been pretty clear from the behavior of U.S. auto executives that they need a push to reinvent their companies. This is it. Obama said the savings from his proposals would reduce U.S. oil consumption by an amount equal to what we import from the Persian Gulf. I would like to have some independent analysis of this claim, because if it's true then he's really onto something. Obama said the Bush administration "put corporate interests ahead of the public interest" and House Republican Leader John Boehner said Obama's plan would cost Detroit billions just when automakers are struggling to stay afloat. Both comments miss the point. Making gas guzzlers has been bad for the nation and bad for U.S. automakers themselves. The old policies were very good for business interests... in Japan, China and the Middle East. They weren't good for business interests in America.