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President Obama’s upcoming State of the Union Address will without question be the story of the week. This address could prove to be a pivotal starting point for the Obama administration’s upcoming agenda, and could set the tone for a bipartisan approach to policy.
No doubt jobs and the economy will be the President’s focus, however his plan is still unclear. When Obama took office, his first action was to stimulate the economy through government spending programs and incentives. The employment situation has masked the mild success some of these programs have had. For instance, GDP has had stable and predictable growth since June of 2009, but with an unemployment rate hovering around 10% the output gap is just to massive to celebrate real growth.
Lending institutions have been hesitant to supply liquidity for capital investment, thus inhibiting the possibility for job growth. Many claim this hesitation is due to intangible uncertainty. In other words lenders are unsure of how government policies will inhibit their operations. The federal government has supplied many of these institutions with trillions of dollars from both TARP and the Quantitative Easing programs, yet still they are hesitant to lend money. These institutions have been supplied with a great deal of liquidity, and rather than redistribute it to credit worthy firms and individuals, they are instead choosing to hoard it because of "uncertainty." If banks won’t lend then firms cannot grow, and if firms cannot grow than neither can jobs, period. So what can government do about this? Incentives for lenders, more regulations, fewer regulations, a government jobs program? I anxiously wait for the President’s answer.