Thursday, August 25, 2011

My View

Random ruminations from your resident curmudgeon...

When Barack Obama took over as President in 2008, the economy was sliding into a recession, one from which we have not yet emerged. The approach of the new administration was to provide "stimulus" to the economy to get companies to hire and reverse the negative economic trends. It was thought that if the federal government provided funding (stimulus) to "shovel ready" projects, companies would employ more people, buy more equipment and materials, and move the economy in a positive direction. How's that workin' out for ya, Mr. Obama? $4 trillion dollars later, real unemployment has soared to over 17% and public confidence in the ability of this administration to successfully manage the economy has cratered to an all time low. Here is the conceit of the apparatchiks and wonks in the federal government: they believe they can create jobs, that when money is thrown out there, jobs magically appear. Here is the truth: no amount of federal "stimulus" can create permanent jobs. Once the stimulus money runs out, the job is gone. However, there is a corollary to the truth that I just gave: while it is true that government cannot create jobs, it is also true that the government can most assuredly PREVENT jobs from being created. How so? The Obama administration is a classic case study in creating the threat of a more onerous tax regime and costlier regulatory environment. So how does business respond? By reductions in their work force to save money and by not making capital investments to grow their business. It is time that we as a nation realize that government more often serves as an impediment to the creation of jobs and a thriving economy, and we should demand that government get out of the way of the entrepreneurs that create that vast majority of jobs in this country.

I used to be addicted to soap, but I am clean now.

In the paragraph above, I called government, especially federal government, an impediment to business. Just so you will know this is not the random ruminations of your resident curmudgeon, Investors Business Daily took a look at rules and regulations that have been promulgated and implemented under the Obama Administration. In the first 26 months that President Obama has been in office, 75 major new regulatory rules have been implemented. Doesn't sound like much until one realizes that each one of these new federal regulations is a "friction cost" for a company to do business in the United States. Friction costs are the cost to render a good or service that are imposed from outside agents, such as government. As government drives up the cost of doing business, more and more jobs disappear in this country and the unemployment rate remains intractably high. 75 major new regulatory rules is a lot. Here is a warning: you haven't seen anything yet. According to the Federal Register, the official record of government rules and regulations, there are 4,200 new rules an regulations that are in the pipeline to be implemented in the next few years. This staggering number does NOT include the massive regulatory burden that will be created when Obama's socialized medical program is in full swing. This simply means that for a business to open its doors, it will have already had to pay an exorbitant amount of money to comply with the burden of federal rules and regulations before they earn their first dollar. Now it becomes clear as to why many companies have moved their operations to more favorable regulatory and tax environments. And this reinforces what I said above: government cannot create jobs, but government can certainly kill jobs.

When songwriters die, do they de-compose?

Many experts have said that if we want to get our economy healthy again, we must provide an environment where it can grow. The factors mentioned above contribute to an environment that does not foster growth, and as such, our growth as measured by our Gross Domestic Product (GDP) is slumping. At the start of 2011, it was estimated that our GDP would grow around 3.5%. Economists have now revised the growth estimate downward to 1.5%. This anemic growth rate is problematic for two reasons: obviously, the economy is not growing fast enough to add net new jobs; and the lower level of economic activity means less tax revenue going to the federal government. That last point is particularly important in light of the leadership in Washington today. Why? Because, unlike families or business that cut back their level of spending when tough economic times hit, the federal government does not seem to have the capacity to rein in their spending. Consider this: between 2000-7 the public debt grew in inflation adjusted terms 56%. Between 2007 and 2012 (the U.S. fiscal year will end 9/30/12), the public debt is expected to grow 134%, more than double the rate of growth from 2000. Friends, here is the stark truth: if Washington cannot control the rampant spending there is no way we can possibly grow our way out of this hole in we we find ourselves. Again, Washington has to realize that our nation is no different financially than any family in this country, and that is when income levels fall, spending has to fall as well or the risk of financial calamity grows ever greater. It is time for all of us to make our politicians realize that our nation's current fiscal course is one that  will lead to economic disaster.

One little known talent that I have is that I know how to juggle. I just don't have the balls to do it in public.

And that, my friends, is my view.

No comments:

Post a Comment