Last night President Obama addressed a joint session of Congress and the nation on the subject of jobs. The result was a proposed bill he called “The American Jobs Act,” which he repeatedly urged Congress to pass right away.

The president summarized his proposal in a pre-speech announcement by describing it as a series of bipartisan proposals that allow Congress to take immediate action to rebuild the American economy. He went on to say that his proposal would strengthen small businesses, help get Americans back to work, and put more money in the paychecks of the middle class and working American. His proposal would do all this while still reducing the deficit and getting our fiscal house in order.

The meat of the president’s proposal could be summarized as follows:

• spending $447 billion on infrastructure,
• tax incentives to increase hiring,
• a reduction in the employer portion of the payroll tax,
• and a few other changes.

The President has a very difficult situation on his hands. The 2012 presidential campaign has already started; his approval rating is the lowest since such records have been kept; and he is facing 9.1% unemployment.

He knows that no president since FDR has been re-elected with unemployment above 7.2%. He must, therefore, bring down unemployment; he must do it quickly; and he must do it without offending any particular voting constituency.

His very difficult situation is made close to impossible by the fact that he has only a set of failed economic theories to work with. The Keynesian Theory of how to revive a faltering economy has been tried several times in the last four years with no lasting effect. The trillions spent to prop up failing financial institutions, Cash for Clunkers, $8000 home purchase incentives — are all gone, all disappeared into the black hole of debt as if they were never there.

The President is right about one thing, though. This fiscal disaster we are facing has been built by a joint effort of Democrats and Republicans. After all, one-half of the Federal Reserve’s mandate is to maintain full employment. It usually attempts to fulfill its mandate through a bipartisan formula of debt and more debt.

What then is the problem?

The problem is several decades of the Keynesian approach of debt and inflation. During the 98-year existence of the Federal Reserve, the dollar has lost more than 95% of its value and the national debt has passed 15 trillion dollars. The deep fiscal problems — perhaps unsolvable without serious pain — which we now face are the inevitable result of America’s severing the last connection of the dollar to gold in August 1971. That act, in effect, changed the world’s reserve currency from gold to paper and now the paper is returning to its intrinsic value.

The other problem is the relentless transferring of American jobs, especially the high paying ones, to foreign countries. This process was brought about through trade agreements like NAFTA, CAFTA, WTO and GATT. President Obama made a campaign promise to revisit NAFTA but he has not done so.

The President recognized that unemployment was a serious problem shortly after his inauguration, and he created a position commonly referred to as Jobs Czar, to deal with it. That position is currently held by Jeffrey Immelt, C.E.O. of General Electric. Congressman Dennis Kucinich (D — OH) recently issued a statement calling for Mr. Immelt to resign or be removed because of G.E.’s transference of vital technology to Chinese state-owned companies. Mr. Immelt, it seems, has created a lot of new jobs — in China. A problem caused by profligate spending, high inflation, and the resulting unsustainable debt, along with transferring jobs to foreign countries cannot be solved by more profligate spending and more job transfers.

What then is the solution?

There is no solution that will not bring with it at least temporary pain. Change our monetary system from one based on debt and inflation — which lead inevitably to recession or depression — to one based on sound money. Sound money would quickly return America to fiscal sanity after a period in which debt in the system is flushed out through repayment or default. Abolish the Federal Reserve and with it the policy of never-ending debt and inflation. Withdraw from international agreements such as NAFTA which encourage the transferring of American jobs and technology to foreign countries.

Perhaps President Obama’s “American Jobs Act” will be passed by Congress, and will delay the inevitable long enough to allow him to survive the 2012 election. Time will tell, but should the things I have proposed be enacted, I have no doubt that America would quickly become the most prosperous and dynamic nation on earth again.