CNN Money has a 2 minute video entitled, “Throwing Money at Problems”. In the video, they compare Obama’s estimated $1,000,000,000,000 stimulus package with massive projects from the past adjusted for today’s dollar values. They are quoting this Wall Street Journal article.

The Wall Street Journal is saying that only World War II cost the United States more money than the $775 billion dollar stimulus package that Obama is getting ready to pass through Congress and the Senate and into law.

Here are the highlights:

President Eisenhower’s Interstate Highway System cost $800 billion in today’s dollars

FDR’s New Deal - $500 billion

The Race to the Moon - $140 billion

The Atomic Bomb - $29 billion

Only World War II cost American’s more than Obama’s current stimulus package which could easily end up being over $1 trillion. According to the Wall Street Journal, World War II cost America $4 trillion back in the day which is equivalent to $17 trillion in today’s money.

What is truly sad about this expenditure by Obama and the US is that in the end it will be wasted. They keep trying to stop the economy from tanking. Unfortunately, it will tank no matter what the Americans do to try to stop it. At best, they are prolonging the misery because these stimulus packages do nothing to help the bad money clear the system.

Some argue for tax cuts to stimulate the economy. Again, tax cuts do not address the underlying problem which is about lack of trust in the financial system and lack of confidence. This can only be dealt with through lawsuits and letting bad companies fail, no matter how big they are.

I think the biggest reason why the politicians are spending this money is because they can’t be seen to be doing nothing. I agree with Krugman though that any effort that Obama makes to be more bipartisan will only end up biting him in the back when it is bound to fail.

I came across this really insightful article in the New York Times entitled, As Vacant Space Grows, So Does Lenders’ Crisis. The article shed light on the fact that commercial real estate could lead to a whole new wave of banks in financial trouble. This isn’t the first time I’ve heard about this problem. The video below talks about how the mortgage crisis is far from over.

Stock analysts say commercial real estate is the next ticking time bomb for banks, which have already received hundreds of billions of dollars in capital and other assistance from the federal government. Big banks — like Bank of America, JPMorgan Chase and Morgan Stanley — each hold tens of billions of dollars in commercial real estate securities. The banks also invested directly in properties.

Regional banks may be an even bigger concern. In the last decade, they barreled their way into commercial real estate lending after being elbowed out of the credit card and consumer mortgage business by national players. The proportion of their lending that is in commercial real estate has nearly doubled in the last six years, according to government data.

This whole crisis is far from over. Some media like CNBC is trying to call the bottom. I believe that the bottom is far from reached. It will most likely get much worse before it gets better.

President-Elect Obama announced yesterday, January 5th, 2009 that his administration was going to be offering $300 billion dollars in tax cuts. This is great news for the consumer right? I mean, who doesn’t feel that the government already taxes us too much as it is. There is a problem though.

During a recession or depression, tax revenues that are collected by the government go way down simply because people are losing their jobs or getting wage cuts that result in their paying less tax. Businesses are also shrinking or going out of business which further reduces government revenue. Cutting taxes therefore seems like a good idea but in a severe downturn like we are in right now, cutting taxes only makes the problem worse. Further, in a bad economy where consumer confidence is at an all time low, people will take the extra money they are getting from the tax cuts and simply save it. They won’t spend it yet that is why the government is offering tax cuts. Further, as Mish points out, these tax cuts will work at to about $19 / week for the average American. Clearly not something that will have a huge impact on the average household. It look to be something more for political purposes than real relief.

Obama is trying to pull out all the stops to get the economy going again. I give him full marks for at least doing something for the average Joe on the street. The previous administration was only concerned it seemed with the super rich. The problem comes from the fact that this will lead to further U.S. debt and will do little to nothing to stimulate the economy.

Paul Krugman argues, I think rightly, that public investment will give more bang for the U.S. buck than tax cuts. He makes the point that public stimulus will leave something behind when it is done whereas tax cuts will not.

Others argue that it doesn’t matter what the government will do at this point, the economy will continue to tank for the next few years. Some, like Robert McHugh, and Mish, predict using Elliot Wave theory that we are still staring at a grand super cycle correction some time in the next 1-6 months that will make the just finished crash look AND the great depression of the 1930’s look like child’s play. Time will tell I guess.