With all the advice that our President-Elect is getting, I couldn't resist adding my favorite for his kind consideration. My request is shaped by what I see as an opportunity for America to retake the lead in telecom/datacom and dominate it for years to come.
Before I propose my idea, I wanted to take a shot at first figuring out how much you have to really spend on stimulating the economy. My guesstimate is that you'll need at least $1.1T/year of capital injection for the next couple of years to make up for what we have lost! Here is the un-scientific method I used to come up with this number:
As we all know, much of our economy in the past few years was driven by mortgage spending, military spending, and tax cuts. It is not easy to figure out how much money was really behind the mortgage market because of the multiplier effect (and the fact that we don't know the real decline in mortgage asset prices). So I took a short cut - According to Fannie Mae's numbers their ARM-based mortgage originations was over $750B in 2006 (this was as high as ~$900B in 2005, but came down to $400B in 2007 as the meltdown started). I took this ARM-based financing component as a proxy for the bad mortgages in the recent past, and therefore assumed that this source of funding will be non-existent under the current tight-credit conditions. As a result, the $750B+/year inflow of money from the ARM-based financing market is all but over. Note that I am only looking at the spending at the top of the mortgage food chain - there are a lot of multiplier effects that result from this - i.e. the loans result in new houses being built, which creates demand for home builders/contractors/home equipment/kitchen equipment/ garden equipment/realtors/finance companies/etc.etc. So the true loss to the GDP from the mortgage disaster could be much more. For the sake of simplicity, I am ignoring Freddie Mac.
The rest of the $1.1Trillion/year was made up of $200B/year in military spending and about $150B in tax cuts, both of which are slowly being clamped down. So we have to really make up for $1.1T+/year - Granted, my math is approximate - but I think it is in the ballpark of prviding a "baseline" to the minimum injection we need.
Clearly, this will become a huge debt burden if we invest in the wrong sectors. Furthermore, investments have to be made such that the resulting opportunities cannot be outsourced. One of the ways this can be done is by investing in technologies that are physically tied to this country. Also, we need to invest in sectors that will have a huge multiplier effect in creating jobs for multiple industries and across multiple regions within the US.
The creation of the Internet was a classic example of this - America pioneered the creation of the Internet by creating the ARPANET to interconnect our government/military and educational institutions, and as a result we reaped the rewards via high-tech growth in the 90's. We need something similar now. So here is the suggestion from my vantage point, and it will only cost a few billion and will have huge multiplier effects in multiple industries within the US.
Mr. President Elect, I request you to fund federal/state agencies and universities to deploy tele-presence voice-video infrastructure interconnected via high-speed networks. This has several benefits:
1. It will drive job growth in the telecom/datacom service industry in retooling networks for VoIP and Video readiness. This job growth will be broad-based across the entire countly.
2. It will drive the creation of more MPLS-capable networks, which drives the creation of jobs in the US service provider space
3. It will drive faster adoption of VoIP and Video in a business-to-business environment, which drives the creation of new business models in the service sector, and new startups that pursue these opportunities
4. It will drive new forms of government-to-people communication which will reduce wasteful spending and create new business opportunities (like how the Arpanet eventually led to e-commerce and B2B-commerce)
5. It will give certainty and confidence to VCs (who are sitting on hordes of cash) to invest in new/existing US-based startups to pursue opportunities in this space. The VCs will invest for opportunities that span the next 5-10 years, thus creating jobs in crucial hi-tech areas.
6. It will reduce the need for business travel and therefore help bring down our dependence on oil as well as reduce global warming
7. Most importantly, the build-out of such a US-based infrastructure will create and keep jobs in the US!
Thanks!
Praveen
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