Obama’s Simple Plan

One major reason why Senator Barack Obama won the just-concluded U.S. Presidential elections is that he is so much of a straightforward kind of guy, no-fuzz and no-going-around-the-bush kind of guy he is. Even in the way he speaks and the manner he relates his intents, he becomes as clear as the morning dew.

And he ain’t stupid.

Former President Bill Clinton had always emphasized the “it’s the economy stupid” ideology of governance that in the years he was president, economic recession was not a major headache for him and the U.S. economy was at its strongest like no other time before.

Maybe, it’s the Democrats way of handling things, to look more internally and to minimize outward engagements. Home is where their hearts are.

And now I heard in the news, Obama is applying that same simple rule of governance, to keep an effective rein of the nation’s money and be good at it.

Now, even if he would be officially inaugurated as president by January still, he is already laying ground to an employment boosting plan through increased government spending on infrastructure, over an extended period of time.

If I am not mistaken, Obama is applying the much-vaunted Keynesian economic strategy, one that had been proven already to be effectual in several instances in the past; even despite that such scheme is not really working in some jurisdiction, especially in our own turf.

Former President Ferdinand E. Marcos had been building thousand of miles of roads in the 70’s but the local economy had spiraled downward instead of the upturn that such huge government spending was expected to generate. Perhaps, there was just too much government funds that had gone down the drain in those years, where most possibly what we see is merely half of the kilometers that the government had really planned to build at that time (most of them located almost exclusively in Luzon or near his home province of Ilocos Norte).

Presently, President Gloria Macapagal Arroyo is pursuing the same strategy yet the economy is sputtering instead of becoming like a roaring machine.

In fact, our government workforce had become so bloated in the 80’s just in order to create job opportunities and create a huge buying sector out of government workers that was then expected to boost consumer demands.

In hindsight, Keynesian economics was conceptualized by the very famous British economist John Maynard Keynes to which Mr. Keynes had proposed the innovative idea that the state or the government should be interventionist in a major way (not through controlling trade as you might be thinking), but by stimulating economic activity through major government spending.

The main key factors in this strategy are:

• A reduction in interest rates.




• Government investment in infrastructure where the injection of income results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

In simple terms, the government would be spending on infrastructure projects that are expected to jumpstart a series of economic activity—- such as the direct and palpable increase in the production of cements for example, the hiring of more drivers to deliver such cement to the construction sites, and the immediate hiring of more construction workers too, thereby straightforwardly creating jobs both in the factory as well as in the government. When the wages comes in, these workers would create demands for consumer products that in effect factories of garments, cigarettes, food items and such similar commodities would find the need to increase production and thereby may need to increase work forces. It’s like a merry-go-round kind of thing.

It’s like as if the economy is a freely revolving wheel and when it seems to run so slowly, Mr. Keynes wants the government to intervene by trying to push the wheel and make it run faster and faster, hoping that this egging on would be enough to leave it alone, running at a good speed by its own force, through inertia.

That’s what I like with this economic concept – it’s simple and highly doable. In fact I have become such a great fan of Mr. John Maynard Keynes some years ago because of this highly touted and very workable economic idea that Senator Barack Obama is presently aiming to apply and utilize in order to solve the very dire economic crisis that his own country is experiencing right now.