With the economy the way it is, there are three major ideas for a Government influx of money. One is to “Bailout” specific industries that the nation needs (Banking, Automotive, etc…). A second is to invest in infrastructure (roads, bridges, etc…). The third is tax rebates/reductions (lower taxes, tax holidays, tax rebate checks, etc…). All of these will fail unless we deal with the most important issue in our downturn, - consumer confidence!
This is the critical piece that very few are actively discussing. We need to feel confident enough to start spending, investing and building.
DISCLAIMER - THIS ARTICLE DOES NOT CLAIM TO HAVE THE SPECIFIC ANSWER FOR THE DOWNTURN. HOWEVER, IT DOES CLAIM TO HAVE THE RIGHT CONCEPT THAT NEEDS TO BE ADDED TO THE STRATEGY. WE MUST DEAL WITH THE “FEELING” OF THE DOWNTURN AS MUCH AS THE MECHANICS OF IT.
So, what should we do? We should bailout Americans. Here’s one concept:
The bailout number over the next couple of years will be several trillion. For this idea we’ll use 1.5 trillion of that. This amount should be set aside in two separate funds: 1 trillion for year one and ½ trillion for year two.
These funds will be accessible by US businesses, specifically small and medium-sized companies. Each business can petition for funds to supplement the payroll of full-time employees only. Each company may only supplement a certain percentage of their full-time employee base, say 33%. Example: A 15 person company can supplement 5 full-time employees. As a company grows, so does it’s authorization for supplementation
How much should each company get? Just to illustrate the point, each employee salary may be supplemented by up to $50K, in year one and up to $25K per employee in year two. So, that’s 20 million jobs supplemented for up to $75K over two years.
1. Why is this better than the other three ideas?
Industry Bailout: Government will gain control of these industries; perhaps to the point of nationalizing. In addition, this tactic is inherently unfair to those not bailed out. Why Automobiles and not Peaches? Finally, Americans SEE NOTHING and therefore feel nothing. – BAD.
Company/Employee funding: The private sector retains control of the businesses. In addition, all industries may petition equally – much fairer. Finally, Americans will see people all around them (20 million – in this case) being directly effected. They will feel better, more confident and spend! - GOOD.
Infrastructure Investing: Spending money on infrastructure will take years to implement and therefore may be too late. In addition, once it’s done, we have lots of unemployed workers and no new jobs! Finally, we have built no “business equity” in our private sector. – BAD.
Company/Employee funding: Funding companies/employees can be implemented right away getting dollars into the system now. In addition, the employees will be working for private companies building business equity and growing industries. Finally, after two years, we’ll have created some growth and hopefully the majority of supplemented employees will have shown/built value so that most will stay employed. Knowing this rosy looking future, they will feel more confident and spend! – GOOD.
Tax rebates/Tax Holidays: These are single hits. They are nice, but not ongoing, so we’ll feel like we’ve received a temporary reprieve only. We’ll still feel like the world is ending. Lowering taxes is also nice, but we still feel like we may lose our jobs. No confidence. – BAD.
Company/Employee funding: Funding companies/employees for two years will allow employees to believe that their job is secure for at least two years and therefore they will feel more confident and spend. – GOOD.
2. Why small and medium-sized businesses?
For these businesses, a payroll supplement of $75K for up to 1/3 of their fulltime workforce over two years will save lots of jobs! In addition, many will actually hire more: administrators, sales reps, IT staff, managers, and other middle class jobs. If the company can’t afford $90K per year for talent, maybe it can afford $40K (with the $50K supplement from Uncle Sam) for that talent. In addition, that employee has two years to earn their keep while the company grows. - GOOD
3. Won’t there be corruption?
Of course! There is in all bailouts. Does anyone know exactly where the first $350 billion went? The difference is, since each business has to petition, we can track all the money, find and punish offenders – this in itself will lessen the amount of corruption.
In addition, how bad could it be? It’s $75K over two years. If some business owners just use it to supplement their own salaries, they’ll still spend it anyway (and probably on their businesses), which is what we want! - GOOD
4. How will the petitions be answered, who gets selected, how do they pay it back?
That’s what actuaries and bureaucrats are for! They’ll figure out the details of whom, why, when, etc…
By supplementing payroll, even current employees will feel safer. Now, even those currently employed are scared of losing their income and have stopped spending.
But the best part is that this plan is targeted at individual Americans, it is limited in money, limited in time AND allows the government to step away and not grow. With that, it does what it must and that is: it influences us to act not wait – like the other plans!
Is this the answer? Maybe - what we are doing now is surely NOT the answer.
In any case, the idea is to stop trying to just fix the boat. We need to get the people on the boat to stop trying escape or hide and to start bailing and navigating. This is an emotional issue. As silly as that sounds, it’s the most important item for turning this thing around quickly.
“When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion.”
– Dale Carnegie
Good luck in 2009!
Larry
I believe you are right, AND I believe there will be another 'bailout', and that is not only for consumer confidence, but for a different sort of competitive advantage.
I think when we are done funding things back to fruition, we will then need a 'behavioral bailout'. It will help to engage consumer confidence, but it will certainly create a new way to increase a company's market share.
Those companies that allow for a new behavioral culture, will see success in their innovation, their collaboration and their retention of talent. Given the lack of trust in 'employment', workers will begin to demand a 'partnership' with their organizations before they will stay and be productive, according to their strengths.
Thus, we will have allowed 'entrepreneurialism' to infiltrate the corporate structure.
The company that gets this right will have created a competitive advantage, through their workforce, that will work internally for their people as well as externally to their consumer.
Just something to add to an already articulate statement above!
Take care of you!
Pam
Posted by: Pam | January 28, 2009 at 09:33 PM