Consumers hold the key to restarting the economy game
By Ken Harwood
I was recently the speaker at a sports banquet, which was a challenge because I speak about the economy. My opening analogy did seem to get the point across, though. In a basketball game, if the ball goes flat, while many solutions are obvious, in the case of the economy we have chosen to solve the problem by sending money to Wilson, the ball manufacturer. We then sit in the stadium waiting for the game to continue while Wilson pays bonuses to their executives and buys a soccer ball manufacturer in Brazil. In the long term, they do need to fix the ball, but in the short term, we need to restart the game.
Thus, we need to identify the core of the problem. I think that we are safe in betting on jobs, consumer confidence, investment, spending and credit as the major issues. While banks, investment firms and manufacturers are key components, the real players are us, the consumers, and we need to quickly get the ball back on the court.
Here is a question for us all: Is it more important to prevent bankruptcies in the automotive industry or to create consumers who can afford and want new cars? Let’s reward companies, even the small ones, that create jobs rather than bail out companies that reduce employees to stay afloat. I believe if we focus on jobs and the consumer, the manufacturer will respond in kind.
The consumer is also a better motivator for improvements in design and fuel economy than is the government. If the government believes it must get involved, it could use a tax to stabilize fuel prices at a level that would stimulate alternative power sources like hydrogen, electricity or biofuel. I am not a huge advocate of new taxes, but I believe businesses and consumers alike would rather plan on three-dollar gas than the roller-coaster pricing of the past.
A consumer focus makes sense on the banking side as well. Spending a trillion dollars to buy up “toxic” loans, foreclose on the properties, and then return the homes at below market prices into an already flooded market does not help anyone. In fact, it hurts everyone.
These banks made bad decisions, and government should not simply bail them out. Instead, why not spend the same trillion dollars on a loan program that would allow us, the consumers, to restructure all of our debt at reasonable interest rates free of penalties with an opportunity to stay in our homes even in difficult times? To help the banks, we could let them administer the new loans with a fair profit margin while playing by our rules.
Several smaller local banks have remained profitable by not following the subprime, easy-credit trends of their larger counterparts. My favorite is the 3-6-3 philosophy of Union Bank & Trust Co. in Evansville that earned it national attention. Pay 3 percent on deposits, charge 6 percent on loans and be on the golf course by 3 p.m. Not a bad philosophy. Oh, and if you lose your job, call them, and they will work something out, probably over a round of golf.
