What Can We Expect From The ‘Stimulus’ Package?
- Feb 16, 2009
Don’t expect government infrastructure jobs to bail out the commercial real estate industry. A recent story on the Inland Empire area of California shows the limitation of a government-created job market. The 9.5% unemployment rate in the area matches Detroit as the worst in the nation. At the same time, Riverside (one of the Inland Empire communities), has almost $1 billion worth of public-works projects underway or planned, from widening roads to building a new jail. The area illustrates both the promise and the limitations of President Obama’s spending proposal to pull the U.S. economy out of a recession through government infrastructure projects. The commercial real estate market will more closely follow unemployment and investment in the sector, not infrastructure spending.
The fundamental economic problem cannot be solved by government employment and contracting. You don’t have to go far for an example. I visited Havana, Cuba a few years ago and as I watched thousands of people out walking and chatting into the early morning hours on a Tuesday night, I asked my uncle who was born and still lives in Havana, “Don’t these people have jobs to go to in the morning?” He responded, “We all have jobs. We all work for the government. Tomorrow we’ll get to work around noon and do the same thing we are doing right now – chat.” The city of Havana looks like something out of a zombie movie with buildings falling apart after decades of neglect and decay and people spending most of the day without any particular purpose other than looking for something to eat. The system is so dysfunctional Cuba actually imports sugar, one of the few natural resources it enjoys and formerly its largest export. Now the Cuban government’s most effective resource is asking others for aid.
Ultimately the private sector will carry most of the weight to resolve the recession. America needs to make something, invent something; we need to provide a service with value. The government must put more effort into making it compelling to invest, grow and create an environment where businesses are motivated to hire and consumers have the confidence to spend.
Investment and spending will drive us out of this cycle. Uncertainty, fear and lack of confidence along with expanding the national deficit and debt will prolong it.