My Fellow Americans
Over the past two to three years we have endured some of the most acrimonious and counter productive debates Americans have ever heard.
Today I want to talk about our economy. Let’s get a few things straight at the outset. The major problems we now face are man made; and some of them are clearly manufactured to achieve narrow political ends. Over the past two to three years, or really since I was elected President, the national debate, driven by the Republicans, has been predominantly about politics, not economics. What they have been concentrating on, despite their cynical call for jobs at every opportunity, is not how to save the American working class, or to create employment, or to stimulate growth and productivity - the economic concerns- but rather how to frustrate your Government and guarantee that it is ineffective.
The reason for this is made clear by the numerous declarations from my opposition that I should be what they gleefully refer to as a “one term President.” This would not be of any great concern to me except that it has resulted in positions and policies from the opposition that have clearly not advanced the economic interests of the majority of our citizens, but on the contrary have frustrated our progress on all fronts. And it is getting worse.
I believe that the Keynesian prescription of stimulating growth is the right and reasonable prescription for our present impasse. Keynesian economic policy and prescription for growth are based on the idea that there are idle resources (productive capacity) in the country, and development or growth can be stimulated by putting these resources back to work.
The two most important components of
’s wealth are its people (educated, intelligent, productive and creative), and the vast capital stock in which we as workers and entrepreneurs have invested over the decades. America
What causes our present dilemma is the fact that so many of these people and so much of that stock, are now idle.
If we get our people productively engaged by using our capital stock to produce wealth we will put the economic ship back afloat and on the right course.
I have given an example of how this works that has been deliberately ignored or minimized by my opponents. The proud automobile industry of
, our flagship, was taking a serious dive into oblivion. The tremendous capital of that industry was, with the loud approval of the opposition, going to the dogs along with all the hard working and productive Americans that the industry employed. We provided them with the hand up they needed to bring their work force and capital stock back into production. Should I dare say it? The rest is history. In normal circumstances that should be enough of a demonstration of how things can be done to get the country out of the doldrums. Not so in the present hostile political climate. These are anything but normal times. America
Among the false debates that have lulled us away from our economic goal is the recent debt or deficit crisis. I know, like every one else, that as a country we cannot continue indefinitely to live beyond our means and increase our indebtedness to the rest of the world. That is self-evident and could have been a reasonable and balanced debate.
What is wrong with the turn the debate took is that the argument was presented as a choice between debt and economic growth. This is patently absurd. A false choice if there ever was one.
In its absurdity the choice is similar to a mother whose child is taken with a severe illness, enabling her child to die so that her problem could be solved.
The deficit problem is a long term problem that must be addressed and resolved by reasonable long term measures. But it requires first and foremost addressing and resolving the employment problem, which is urgent and immediate. (I recognize that just as troubling as unemployment is the problem of underemployment which denies our people the opportunity to fully employ their skills, abilities and training for the benefit of themselves, their families and the country and to live productive and successful lives.)
Focussing on paying down the deficit rather than on job creation in an economy at a near standstill through lack of private and public sector investment and staggering under a 9% unemployment rate, is economic suicide. It is irresponsible, despite the persistence and the noise volume of the advocates of such a regressive policy.
It is by getting the nation back to work (that is, gainfully and productively employed), that we can successfully and reasonably resolve the deficit problem. It is by getting our workers back to the factory floor, producing goods and services, that the economy can generate the incomes and wages that will enable them to:
§ Pay their rent and mortgages
§ Buy groceries, clothing and appliances from the stores
§ Pay down their credit cards
§ Invest in their children’s education
§ Pay their monthly bills
§ Travel on a vacation, etc.
On all or most of their household expenditure the people would be paying indirect taxes; these funds would go into the Government coffers, enabling Government at the local, state and national levels to meet their obligations and employ workers, and the Federal Government to, among other things, pay down the national debt, that is, solve the deficit problem long term.
There would also be more people paying direct taxes, like income tax, to finance the Government’s projects and operations. A wider tax base is more important to paying down the debt, than cutting current levels of Government expenditure.
All this is as much common sense as economic theory. But we have not been too concerned about common sense in this hostile political season.
What we have done is strangle the flow of the needed investment in our capital stock and people to get them back to work. It has become so counterproductive that last month the whole of this wealthy economy produced not a single new job. Unbelievable!
This is particularly amazing as we know that Wall Street tycoons or the “job creators” class have at least two trillion dollars in cash “under the mattress” which they are not investing in American growth. This is the class which we are told needs incentives and certainty in order to invest. What they need is concern for others less fortunate than themselves, the working class of
in search of productive employment. Certainty would flow to these hoarders of capital from the incomes of a solid working population purchasing the goods and services they provide. These “investors” or “job creators” as they are euphemistically referred to, in their selfishness are (deliberately) creating the uncertainty they rail incessantly against and seem to seek protection from through Government action, while at the same time curiously denying the need for any Government "interference." America
Against this background I am today proposing a plan of action which will get us out of our dilemma. I know it will be opposed because this has become the new reality of our Governmental machinery. But it has to be implemented for the sake of our country’s survival as a strong economic power, but most importantly to put our people back to work, and earning the livelihood they deserve.
I am going to ignore the naysayers and all the names I will be called. There is little worse that can be said than what has already been said.
First we are going to ensure that every development project in the pipeline all across
has the infusion of funding it needs for full implementation. That includes every school, every road, every bridge, every train station, every public amusement park, every museum, every Government building. These are the main things we mean when we refer to our infrastructure. It is our past investment in the facilities that enable us to move, and to work, and to produce wealth in America . Every bit of infrastructure in which we already have invested billions has to be maintained in good working condition, and expanded and improved with advanced technology, if it is to continue to serve us. Now is a good time to invest in this when rates of interest are low and borrowing is cheaper. We are putting people together with our idle capital stock to generate income and national wealth. We are solving the unemployment and the deficit problems at the same time. America
Through the Infrastructure Bank I have proposed, one trillion dollars annually over the next five years will be provided for this initiative. My concern is not about the cost of doing this, but the opportunity cost of not doing it. The jobs and incomes that will be created, the economic activity that will be stimulated through the multiplier effect, and the Government revenue that will be raised annually from this will more than compensate for the expenditure.
I attach high priority to implementing plans for a high speed rail system that will enable trains to cross our country at speeds of 250 miles per hour, bringing us into the 21st century. This would be the greatest boost to our economy, and in particular employment for the construction workers of
, over the next 5 years and would cost an estimated $60 billion if we get started immediately. The immediate contribution of this project to resolving the unemployment problem and increasing national productivity would be immense, while we greatly enhance our long term global economic competitiveness. America
Another big stalling factor in economic growth is the stagnancy of our housing sector. The homes that have been in foreclosure or under threat of foreclosure, represent the past investments of our people in their “American dream”. It is a large part of the American capital stock. In addition to losing their incomes through loss of jobs, people also have had to be concerned about the additional burden of losing the homes in which they have invested so much. I am going to ensure that every deserving home-owner has access to the resources he or she needs to continue to live in their homes, while trying to dig their way out of a personal financial crisis. Repayment on the loans given by Fannie Mae and Freddie Mac to deserving home owners will be deferred for a period of 5 years. In extreme hardship cases mortgages will be forgiven. I define “deserving home owners” as people who have a history of repaying their mortgages, but who by virtue of being laid off, have had to discontinue these payments. Payment of interest on these loans will recommence when the owner is back on his feet. Under the terms of a renewed repayment contract signed with the mortgage institutions, payments of capital will resume after the 5 year grace period. This measure will increase the purchasing power of home owners to enable them to buy the products and services they need, and thus stimulate production in the durable goods industries of
, and more incomes and more jobs. America
I am particularly concerned about the importance of facilitating the development of small and medium scale enterprise in
. Small enterprise development has been the focus of policy in developing countries, to good effect. The transformation of America for instance, one of the fastest growing “emergent” economies, along with India and China , has been predicated on small enterprise and manufacturing development, at the same time that we in Brazil have been losing our manufacturing capacity and output. It is time for us to renew and expand our small business sector. The most important input needed by this sector is finance. Our banks have been baled out and have re-established themselves, thanks to generous tax-payer assistance and support, which was a policy priority during the downturn, but they have not, after recovery, in turn poured back into the economy by expanding lending to the small businesses in need of financing to take advantage of market opportunities. We will provide $100 billion to local banks and financial intermediaries like credit unions for targeted lending for working capital and expansion to small enterprises over the next three years. America
Small and medium sized businesses will also be given a tax incentive for every additional worker they employ over the next two years. I have already announced the special package of incentives for those businesses that employ veterans of our two wars.
We will also initiate a new business starts programme for fast track financing of new business ventures, with emphasis on the fields of technology and energy. A replenishable fund of an initial $50 billion will be set up for that purpose.
I draw attention to the particular needs and challenges of African American and Hispanic members of our population who are experiencing unemployment levels far above the national average at 15% and 11% respectively. I expect these groups to take fullest possible advantage of the employment and self-employment programs we propose.
I will introduce a $25 Billion package of incentives for investment by both business owners and private citizens in capital improvements in derelict neighbourhoods in
. These improvements will include both generous tax exemptions and community development grants, as well as infrastructural improvements. America
I have repeatedly emphasized the necessity for exploiting our renewable energy potential to reduce our dependence on foreign oil and the threat to both our economy and security. We have made strides in this area as we have seen critical energy saving innovations in the automobile industry as well as impressive developments in wind and solar industry. We need to speed up progress and innovation in this sector. In the next 5 to 10 years every public building in
must be retrofitted with solar panels to increase their energy efficiency. We will expect every Government agency to submit within the next two years detailed plans for these innovations and funding will come on stream immediately to enable them to be completed. New Energy sector enterprises will be allowed an innovation incentive tax credit of 20% on their taxable income. America
We cannot ignore the two trillion dollars now held by businesses in safe havens overseas; not when this money can generate millions of jobs in
. I propose a tax holiday of up to 5 years, for businesses which agree to repatriate their overseas cash balances for use in investment in the American public works already identified. They will in addition attract a minimum guaranteed rate of 3% on these funds invested here. America
As an incentive to relocate their operations to the US, Corporations which have shipped jobs overseas by relocating their businesses to take advantage of the lower wages, will be given tax benefits equivalent to the estimated difference between their total payroll if they were located in America and their total current payroll overseas. In effect we will be subsidizing their wage bill to the extent of the wage disparity between the
enterprise and the overseas enterprise. US
On the subject of American wealth held overseas, it is important to deal with the situation of our trade with
. China owns a high percentage of our debt; they have been able over the years to export far greater quantities of products to us than we have provided goods and services to them; thus creating an unfavourable China balance of trade. This has been an escalating problem, largely the result of unfair trading practices and the manipulation of their currency. Their goal has been full employment and building a modern economy at home, and this has been regrettably at the expense of American productivity and jobs. They have acted in their own best interest and this is to their advantage; now we must act in ours. An excise tax of 5% will be applied to all goods imported from US with effect from January 2012. That will serve to make Chinese goods sold in China more expensive relative to goods produced in America and discourage imports of “cheap” Chinese goods, thus allowing our manufacturers a chance to meet our own needs. This will enable us to reduce our indebtedness to America and gradually equalize the balance of trade. We will at the same time enter serious trade practice negotiations with the Chinese government to ensure a level playing field going forward. China
We will of course most definitely not extend the Bush tax cuts to the wealthiest Americans; they will be allowed to lapse and the revenue saved or gained from these will substantially meet the cost of our infrastructure initiative.
I expect the Fed will continue to keep the interest rate low to facilitate the flow of money for national investment.
These employment generating and revenue enhancing ideas are not exhaustive and we will be adding to them as we continue our internal deliberations and our on-going consultation with you, the American people, in whose judgement and common sense we have complete trust.
Government will do what it must; but we also call on the American consumer to play an important part. There is much he or she can do. One area is in the auto industry. The American auto industry will remain, through the myriad ancillary industries it promotes, one of the main employment generators in our economy for years to come. It is the backbone of our manufacturing sector and it must be kept strong. The surest way to achieve this is by continuously producing the best and most efficient and economical vehicles. The industry must maintain a competitive edge. But is has to be supported by Americans for it to achieve its full potential. I urge American citizens to buy an American made car whenever there is a choice. This way you will be contributing to a job for your neighbour or friend down the street.
I will end with an assurance to our Unions. I put myself fully behind the plans of the organizations which best represent workers in their efforts to improve the conditions of the working class, to enhance productivity and economic growth, and to expand the base of productive enterprise in America.
In closing, I have heard the arguments as to whether I should go bold or keep my proposals within the limits that the Republicans will find acceptable. There is nothing I can propose that the “Just say no” party can find acceptable, whether bold or timid. Today we change the rules of the game, for a game it has been. We want all these proposals implemented in a concerted effort to put American workers back to work and the American economy back to its transcendent position in the world.