Dear Mr. President,
I heard Ben Stein last evening on AC360 on the CNN channel saying that we have to give tax breaks and open the lending to small businesses so that they can produce goods and services and make jobs available to John Q. Public. He says that will stimulate the economy.
It is my experience that what will stimulate the economy is the demand for goods and services. This will generate secure well-paying jobs. (The demand for goods and services has fallen off because the workers of America don't know what the financial future holds for them.) When workers have secure, well-paying jobs, they will buy the products (inventories) which they can afford. Then businesses of all sizes will buy supplies and hire workers to produce goods and services to replace their depleted inventories. As long as the products, which are currently in their inventories, don't sell, businesses have no incentive to produce more inventory even though credit is available. GM is in such dire straights because their products are in inventory. Their huge inventory of unsold cars and trucks is the reason that GM has to close plants and cut back production. When GM's inventories are reduced to levels that demand is again present, GM will reopen their plants, if they live through this trying time, and begin again to buy raw materials and hire workers.
As to lending, borrowed money is available to those people who have good credit, continued good prospects of well-paying jobs and are willing to buy the products that industry is poroducing. The problem, especially with GM, is that the products that are available to the buying public aren't what the public wants to buy now. So, GM and any other business that produced what the public isn 't willing to buy, are in big trouble. The bail-out to the automotive industry needs to emphasize to that industry, "It is time to produce what the public wants to buy. You can't dictate to the public. Your job is to respond to the public's needs, wants and desires. Get with it!"
The problem also is that a great portion of the working public either has been laid off or expects to be laid off or are otherwise unsure of the prospects of continued employment. This is mostly because the CEOs, CFOs and COOs of our great national companies have been greedy and hogged the major portion of the bounty generated on the backs of the laboring public. Also, the Wall Street gamblers have so inflated the value of the shares of stocks and other financial instruments that the true value behind these documents are considerably less than what they have been trading at since about a year ago.
Mr. Ben Stein, do you really believe that businesses will hire workers and produce goods and services simply because they can borrow the money to do that? It is my experience, for more that 30 years working in busines, that business produces only what they believe will sell. Sometimes, of course, (witness GM) busines makes errors regarding what they believe will sell.
Don Cleven, CPA
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