Posted on 01/21/2010 6:19:22 AM PST by SeekAndFind
Laura D'Andrea Tyson, former Chairman of the Council of Economic Advisors under President Clinton, recently praised the virtues of additional massive government spending with an editorial entitled "Jobs Now, Deficit Reduction Later". Never mind the deficit. Time for that later. We need jobs now! Job creation is all the rage.
The theme rings throughout Washington and the media as a talking point for Congress and the Obama administration. Spend now, pay later. Green jobs here. Tax credits there. Government micro management run amok. Problem is, they're misguided and we as a society will be forced to pay the price.
Under the not so thinly disguised veil of economic "justice" (code for redistribution), this administration and leaders in Congress have created a toxic environment where precisely those individuals in our society who have the ability and willingness to create employment for others - the dreaded "wealthy" - simply refuse to do so. And it's easy to understand why.
The producers in our society, a distinct minority, are under attack. What government bureaucrats, academics and many in the media fail to understand (or refuse to accept) is that intelligent, capable people - those who build businesses and create employment for others - are anticipatory in nature. Businesses, markets, governments (some, not all), and entire sectors of the global economy are all anticipatory in nature.
It's understandable that if a proprietor of a small business is concerned about his or her economic future, they are naturally more conservative with their capital and the manner with which that capital is deployed. It's human nature.
If you believe your taxes will soon skyrocket under the cloak of redistribution, you conserve. If you believe that energy costs are about to increase due to specious legislation such as "Cap and Trade", you hesitate to invest in plant and equipment. If you see a government beholden to labor unions and a President intent on "turning the country purple" with pending legislation such as the oddly named "Employee Free Choice Act", you naturally have concerns over future labor costs.
Increased concern means fewer employees. Too much concern causes businesses to take a hard look at their current staff. If you see the regulatory pendulum swing so far in the restrictive direction that it puts your business at an increasingly competitive disadvantage, you do your best to simply maintain the status quo.
Why consider expansion when the prudent thing to do is wait? If you anticipate government dominance of health care, you take a wait and see attitude on employee benefits. If you see massive government deficits as far as the eye can see which will throttle the economic vitality of this country and the lives of Americans for generations to come, you simply stop investment in the future. If you see a reluctance to rein in frivolous lawsuits with any meaningful tort reform in the name of political expediency, you manage your business in an overly cautious manner out of concern that you could be the target of one of those suits.
We've recently heard rumblings of a "war tax". We've heard the possibility of no limit on Social Security taxes. We've heard of a punitive surtax on upper incomes to offset "health care for all". Now we're hearing of an additional Medicare surtax. All of this has a negative effect on investment. And it has a negative effect on innovation.
If you see the potential for hyperinflation and a continued marginalization of the dollar, you play defense. You don't play offense. You don't spend. You don't hire. You certainly don't put capital at risk. You hold on to your company and what you have for dear life until the storm hopefully passes. You make do with less. Unfortunately, that's the situation we're faced with today.
Government policy intended to penalize the targeted upper income earners in the name of social reform in turn ends up penalizing those who can least afford it. Regrettably, once again, the law of unintended consequences.
Government created taxpayer financed public sector jobs are not the answer. Far from it. In an environment where approximately 80% of private sector job creation comes from small to medium sized businesses, now is the time for sound economic policy to trump the great society social architects of "progressive" big government.
And it's not simply job creation. Those very people who have the ability to create private sector jobs are also the same segment of our society who control a disproportionate share of discretionary spending as well as a large portion of charitable contributions. It's a vicious cycle. One doesn't continue without the other.
The current fallacy in government is that we need to spend our way out of this recession. This is naïve, amateurish and dead wrong. The only way we as a country are going to extricate ourselves from this economic free fall is to grow our way out of it.
Washington needs to step back, take a deep breath, and for once make policy decisions that are in the best interests of the United States and not simply consolidation of power for a particular political party. The danger of not doing so is too great.
Will that happen any time soon? I'm not holding my breath. The amateurs in Washington are making short-term political decisions that are disastrous in nature, the effects of which will have negative repercussions on this society for generations to come - all in the name of political power.
We recently learned that private sector experience in the Obama Administration is at its lowest level in over a century. It shows. The speed and magnitude with which our society is being damaged is truly stunning. As Warren Buffet recently stated, we're in imminent danger of becoming a banana republic.
-- Steve Borowski is a co-founder of an investment firm that employs 53 people who collectively return tens of millions to the economy annually.
I’ve owned my own business for about 25 years. I started as a sole practitioner with no staff, went to five, and now have one part time person - a contract person so I don’t have to mess with all the stupid employment regs. Business is always slow in January but as I did last January I’m giving more and more thought to retiring. Can’t really afford to but if I’m going to have to start drawing from my IRA, I don’t want to use it to pay rent on an office. We’ll see if the January slow down persists into March like it did last year and if it does, then sell the house and move to the farm. Not bad choices but we’ve worked for 40 years to have them.
And it's being done on purpose.
Beck said it is a plan. We have to stop them cold. We are in for a rough ride for a few years but as they are exposed we can make a comeback.
WE need to Liberate the Free market from the Commie Libs. More and more are realizing it.
A different way of saying this is that successful small business owners are successful because they know when
to take risks and when to stand pat.
This is why the whole redistribution think never works.
Just picture a poker game where the winner of a pot has to
split the winnings with the ‘house’. At a certain point the risk is not worth the reward.
The author makes some excellent points. However, one area that he neglects is labor costs. Federal regulations, taxes, and litigation (encouraged through federal and state laws) are increasing the cost of employment. The response from investors and venture capital is to move more work offshore. Almost every new venture has a substantial offshore component. Small and medium sized businesses are reducing employment and moving work offshore to deal with the increasing labor costs. In addition, rigid laws about work classification prevents many individuals from working as contractors.
To change the stagnant employment situation, we need a major overhaul in regulations, employment classification laws, and business taxes. Until we focus on reducing barriers to labor expansions, we will have a stagnant employment situation.
deregulate...detax...defascise....rinse ...repeat...for a generation or two...
Excellent article — thanks for posting it. Looks like a good article to send to those seeking my vote in the upcoming election cycle — tell them this is my yardstick for measuring to see if they meet the economic awareness standard. Any candidate attempting to say that it is more complicated than that will automatically be dismissed from further consideration.
To put it bluntly, when you see the inputs (raw materials, energy and environmental costs, other O&M costs) go up and outputs stay the same or go down not only is it a recipe for bankruptcy, but, the financiers won’t even talk to you.
Get rid of the Keynesian malarkey and bring on the free marketeers.
Had they taken the trillion dollars and given 3o,ooo to every small business in America (defined by being under 100 workers) to either not lay off a worker or hire a new worker , they would have saved so much money on unemployment, welfare, food stamps etc AND stimulated the economy.
NO this administration’s real reason for the stimulus was to pay back all of their supporters that helped elect them. It was a blatant way to show the private sector who was boss and if you dare bad mouth the administration we will punish you through passing laws that will hurt your business.
Now small businesses have huge increases in unemployment rates to contend with and the fear of having to pay a new tax on health insurance, they will not hire new or even bring back the ones they have laid off until they know about health care and other new taxes.
One major reason was left out: the recent increases in the federal minimum wage.
If they'd just stop for a few months, the economy might actually be able to stabilize.
The problem is that recovery is going to take several years, but the government is behaving as though it can be mended in a couple weeks.....they just need to stop throwing billion dollar plans at the wall thinking one will stick....because it won't.
btt
We need to dratically reduce the size of Government at all levels, they are ever growing leaches on the productive sector.
It is a good article. The author covers many of the ways that people react to a hostile business climate. Here is one more, move your money oversees. That is happening. I suspect it is happening on a large scale. Another way to adapt is to move yourself oversees. Perhaps that is happening too.
Liberals have never learned that when you attack employers you attack employment.
How long before many of the actions delineated in “Atlas Shrugged” are further blocking any business from contuing?
Who will be the first business owner to “Go Galt”?
There is no one in either party with my background in government today. Rather I see myself governed by people who have made their careers in government being directly opposed to what I do.
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