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Steve Lunetta: The path we're on

Posted: March 1, 2009 11:25 p.m.
Updated: March 2, 2009 4:55 a.m.
 
In business schools, students are taught important lessons about business that will hopefully help them avoid common pitfalls that destroy fledgling companies and major multinational corporations alike.

One such lesson is called "The Road to Abilene." The story goes something like this: you and your family are sitting around your house in Fort Worth, Texas. It's a hot summer day with the mercury hitting around 95.

Being Texas, it is also very humid, which puts everyone in a generally cranky mood.

About 4 p.m. the family realizes that dinner time is approaching. Wanting to avoid the typical Fort Worth dinner of armadillo road kill and hideously sweetened iced tea, Aunt Bessie says, "Y'all want to drive over to Abilene and go to the Clifton's cafeteria?"

You think this is an incredibly stupid idea but blurt out, "Good idea, let's go."

The family, looking reminiscent of the Clampetts, goes outside and piles into Uncle Earl's 1993 Cadillac Eldorado and starts the journey to Abilene, a distance of 40 miles.

After five minutes, the stench of sweating human bodies reveals the fact that Earl's air conditioner is still broken.

Forty-five hot and oppressive minutes later, the family arrives at Clifton's and dines on a feast of breaded chicken fillets, mashed ‘taters, soft-serve yogurt and hideously sweetened iced tea.

Piling back into the Caddy, the family sojourns back to Fort Worth through the sweltering heat and deposits themselves back on the sofas in the family room.

After 10 minutes of rehydration with glasses of hideously sweetened iced tea, Bessie exclaims, "Y'all, that was a miserable trip."

Earl chimes in, "Yeah, and I didn't even want to go."

Other family members also complain that the trip was a bad idea and all Bessie's fault.

Bessie complains, "I was just suggestin'. I really didn't want to go, neither. I was just talking."

In the end, no one wanted to go to Abilene. In fact, since everyone was trying to be polite and not cause waves, a really bad idea came to fruition and was acted upon with very negative consequences.

Such is the same with President Obama's recent bailout/stimulus package. The Democrats seem to be united in their desire to push through massive spending without raising questions or concerns.

The Republicans, seeming superfluous and essentially ignored, have been relegated to bystander status as the Democratic Congress piles into the Caddy bound for Abilene.

But how do we know the stimulus package will result in a miserable trip over a dusty road to eat a sub-standard meal? (No offense to all you Clifton's fans out there. I still remember those Swedish meatballs. Mmmm.)

One needs only to look at Japan for an example of what not to do.

In the early 1990s, Japanese banks were buried under a mountain of bad debt caused by a collapse in the real estate market. This collapse fueled a general economic collapse that necessitated intervention by the central government.

Sound familiar?

There are many similarities to our current situation. Besides the crisis originating in real estate, the banking industry in Japan at first denied any problems and then only slowly admitted the disasters.

U.S. banks were seemingly much quicker to admit that there was an issue, but recall that this problem has its roots back in the Clinton administration. It took years for the seeds of rot and corruption to come to full germination.

To combat the recession, Japan began a series of highly wasteful public-works projects. Trillions of yen were spent on paving riverbeds and building airports to service small communities.

Think Newhall International Airport with connecting service to Acton.

With the massive amount of pork built into the Obama stimulus package, you can bet a few more "bridges to nowhere" and other massive boondoggles will be created.

Japan has spent about 18 trillion yen ($168 billion) on its several bailout packages. Further, between 1991 and 2007, Japan has spent a staggering 560 trillion yen ($6 trillion) on public-works projects.

Unfortunately, Japan is still in the grips of this recession that looks to deepen as the United States slips further into a similar hole.

Hirofumi Gomi, a former commissioner of the Financial Services Agency in Japan, recently declared, "America is walking the same road as Japan, and that road will be long and hard ahead."

He also said "there is a lot more pain and turmoil coming" (Int'l Herald Tribune 10/10/08).

The Democrats have not learned from the example of Japan. Enamored with the failed New Deal mystique of the past, they plow forwarded with ill-fated public-works spending and no discernable plan for fixing the root cause of our problem - the U.S. banking system.

We Republicans are yelling, "Get out of the Caddy! All that awaits you at the end of the road is a bad meal, lots of sweat, and broken hopes."

Obama's stimulus will probably be followed up with additional spending packages that will get us deeper in debt.

Pass the hideously sweetened iced tea. We're in for a long road trip.

Steve Lunetta is a Santa Clarita resident. His column reflects his own views and not necessarily those of The Signal. "Right About Now" runs Mondays in The Signal.

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