The Guest Blog

Henes: Top 5 Economic Questions for the Fall

Jon Henes|Partner, Kirkland HKSCKPVIamp; Ellis LLP

The summer has ended. As fall begins, the economy is a mess. Unemployment is at 9.1 percent. The U.S. economy failed to add jobs in August. Consumer confidence is at record lows. The housing market is in despair. Europe is imploding. And, our political leaders cannot seem to put their differences aside to create some certainty and progress. What is in store for the U.S. economy?

Here are the top 5 questions to ask.

#1 - Will Obama's Job Speech Do the Trick? No. It all seems too political. The "it" is not just the speech. The "it" is the speech, the lead up to the speech, the Republicans tactical decisions on how to answer the speech and the debate that will start in response to the speech. All the while, the U.S. economy continues to stagnate and our leaders fiddle.

#2 - Can Stimulus Spending Create Jobs? President Obama's job plan appears to be a new “New Deal.” The focus will be on re-building our infrastructure. The simple rationale is that we have plenty of unemployed construction and manufacturing workers who could use a job and we have plenty of roads and bridges that need to be fixed. Consequently, if the federal government hires private companies to rebuild the roads and bridges, the private companies will hire new employees. This will lower unemployment, put money in people's pockets and create new demand for products and services, which will lead to more hiring to deal with this new demand. It seems simple, but it’s not.

Construction Highway

#3 - Why Isn't It Simple? To re-build our infrastructure and get employers to hire, the federal government needs to do a number of things. It needs to figure out which roads and bridge to fix. It needs to decide which companies to hire. And, it needs to find the money to pay the companies so they can hire workers. None of these endeavors are easy. Plus, any “New New Deal” needs to get past Congress.

#4 - Wouldn't It Be Great If It Could Work? Of course. If the federal government could rebuild our highways and byways, create high-speed rail, fix our airports, strengthen our bridges and allow our cell phones to work everywhere in the U.S., while spurring hiring, decreasing unemployment and restarting our stalled economy, it would be outstanding. But certain dreams don't come true.

#5 - So, What Do We Do? This is the question. No one really knows. The U.S. is over-levered and financially distressed. The economic downturn was caused by too much debt. Consumers and companies borrowed to grow. As we have moved forward, much of the corporate debt and some of the consumer debt (although consumers remain over-levered) was moved to the federal government. A de-leveraging process needs to take place. It is hard to grow - really grow - until that happens. This is the worst economic environment since the Great Depression and there is a reason that the Great Depression lasted from 1929 until 1945. De-leveraging takes time and is painful. We need to hit bottom, de-leverage, restructure and build a foundation for growth.

The fall will be interesting to say the least. It will be a rough ride. We need a comprehensive, long term restructuring plan for the U.S.

Jon Henes is a partner in the restructuring group at Kirkland & Ellis LLP where he has led some of the most complex restructurings in a variety of industries, including media, chemicals, energy, manufacturing, real estate, retail and telecommunications. Jon has also frequently appeared on CNBC's "Worldwide Exchange" as a guest expert on various financial and economic topics and is a member of the Economic Club of New York.