In his speech today before the US Chamber of Commerce, Obama lectured his audience that gains must be shared with the middle class. He points to the eroding take-home income of middle class Americans.
But, there is nothing business can do about the plight of the middle class. That is pretty much determined by Congressionally imposed mandates on businesses. Imagine that you pay an employee $ 40,000 per year and that productivity improves enough to pay that employee $ 50,000 per year. Why wouldn't you do it? Because, in the meantime, Congress has passed a law permitting that employee to sue you for millions of dollars if another employee makes an off-color comment to another employee at the water fountain (or for that matter, off company premises and after hours....it doesn't matter under the law). Now the employee isn't worth $ 50,000 to you. Business has to factor in the potential cost of litigation (and, of course, they do). In fact, the litigation threat may be so costly to your business that you may simply terminate the employee, even though, absent the litigation benefits enacted by Congress, you would have been more than happy to pay the employee $ 50,000 (and hire more of them to boot).
Congress has punished the middle class with employer mandates. Congress has made much of the middle class economically toxic to American business. Obama need look no further than into the mirror to see the group that is responsible for damaging the prospects of the American middle class.
Monday, February 7, 2011
Knocking Down Barriers
President Obama, speaking before the US Chamber of Commerce today, said that he would "knock down" barriers that hamper economic growth.
Well, for starters, how about repealing all of the enacted legislation from the 2009-2010 Congress. That would be a good beginning. In the process, away would go FinReg, Credit Card Reform, and Obamacare among other things.
If the president is serious, then the road is clear. All he needs to do is a complete about face. Anything else is just politics as usual.
Well, for starters, how about repealing all of the enacted legislation from the 2009-2010 Congress. That would be a good beginning. In the process, away would go FinReg, Credit Card Reform, and Obamacare among other things.
If the president is serious, then the road is clear. All he needs to do is a complete about face. Anything else is just politics as usual.
Saturday, February 5, 2011
Unintended Consequences
The economic recovery in the US is stillborn. All the various "initiatives" enacted by the Congress since September of 2008 have virtually guaranteed that the economy cannot have a robust recovery, the kind of recovery that, from previous recessions brought the economy back to full strength. Instead, the new credit rules, the new financial regulations, the new health care mandates, the new tax gimmicks, and the business-demonizing atmosphere of the Obama Administration all serve to slow down economic recovery and to create long term stagnation in employment and economic growth.
The Administration seems truly puzzled by all of this. The lame duck session, extending the Bush tax cuts for two years, simply avoided disaster. The tax cut extension, since it is a temporary two year extension, cannot possibly stimulate the economy in any meaningful way. Changing the rhetoric in the White House is certainly an improvement but is totally inadequate given the enactment of legislation in 2009 and 2010 that shackles businesses and makes adding employees prohibitively expensive.
Businesses can be seen as growth engines and employment generators or they can be seen as purveyors of social causes. They can't do both. More and more,American business is expected to avoid profit maximizing behavior and be good citizens, promoting various social causes. Being good social citizens and promoting social causes inevitably means growing slower, hiring fewer employees and being less dynamic. That's where we are. The "green jobs" rhetoric is nothing more than rhetoric.
It is time to set aside "feel good" rhetoric and create a business environment favorable to jobs creation. So far, the President doesn't seem to get it. He seems genuinely surprised that American business, reeling from the blows of his policies and rhetoric, isn't racing to create jobs and rescue his presidency.
If your main economic banner is "no tax cuts for the rich," then economic stagnation is probably your future. What is needed is the elimination of the numerous barriers to economic prosperity that the Obama Administration and a compliant (and long gone) Congress put in place. What is needed is no less than a complete dismantling of the legislation passed in the last two years by the Congress. Then and only then can a truly vibrant economy take over.
The Administration seems truly puzzled by all of this. The lame duck session, extending the Bush tax cuts for two years, simply avoided disaster. The tax cut extension, since it is a temporary two year extension, cannot possibly stimulate the economy in any meaningful way. Changing the rhetoric in the White House is certainly an improvement but is totally inadequate given the enactment of legislation in 2009 and 2010 that shackles businesses and makes adding employees prohibitively expensive.
Businesses can be seen as growth engines and employment generators or they can be seen as purveyors of social causes. They can't do both. More and more,American business is expected to avoid profit maximizing behavior and be good citizens, promoting various social causes. Being good social citizens and promoting social causes inevitably means growing slower, hiring fewer employees and being less dynamic. That's where we are. The "green jobs" rhetoric is nothing more than rhetoric.
It is time to set aside "feel good" rhetoric and create a business environment favorable to jobs creation. So far, the President doesn't seem to get it. He seems genuinely surprised that American business, reeling from the blows of his policies and rhetoric, isn't racing to create jobs and rescue his presidency.
If your main economic banner is "no tax cuts for the rich," then economic stagnation is probably your future. What is needed is the elimination of the numerous barriers to economic prosperity that the Obama Administration and a compliant (and long gone) Congress put in place. What is needed is no less than a complete dismantling of the legislation passed in the last two years by the Congress. Then and only then can a truly vibrant economy take over.
Tuesday, January 4, 2011
The Unemployed will Stay Unemployed
As the economy recovers, don't expect employment to improve in the manner of past recoveries. Long term unemployment is here to stay for the US for a similar set of reasons that have made long term unemployment a permanent feature of the European economic landscape. Hiring people costs too much. That is it -- pure and simple.
If you offer an employee a salary of $ 35,000 per year and if $ 35,000 respresented your actual annual cost of the employee, there would be little or no unemployment in the US or in Europe. But, it doesn't work that way. Where to begin?
How about Social Security and Unemployment Compensation? Need we mention health care? How about mandated family leave and mandated paid sick leave (by many states). What about the right to sue your employer if another employee is guilty of .... you name it....racial or sexual discrimination, etc., etc. How does the threat of a multi million dollar lawsuit feel if you are a small business? Especially if the alleged violations of existing law are incidents between employees that are after hours and not on the job site. Employers are still liable for such things.
In essence a $ 35,000 employee now costs $ 60,000 or more if you factor in the liabilities and costs that various levels of government have mandated as part of the process. So, who needs employees at these prices? Hardly anyone.
In the long run, these costs are borne by employees, which goes a long way toward explaining the declining fortunes of middle class America. But, in the short run, these extra costs are impediments to hiring.
The economy will recover and outsourcing and capital equipment will be factors of choice for employers. Forget hiring real live people. They have been priced out of the market by big government.
If you offer an employee a salary of $ 35,000 per year and if $ 35,000 respresented your actual annual cost of the employee, there would be little or no unemployment in the US or in Europe. But, it doesn't work that way. Where to begin?
How about Social Security and Unemployment Compensation? Need we mention health care? How about mandated family leave and mandated paid sick leave (by many states). What about the right to sue your employer if another employee is guilty of .... you name it....racial or sexual discrimination, etc., etc. How does the threat of a multi million dollar lawsuit feel if you are a small business? Especially if the alleged violations of existing law are incidents between employees that are after hours and not on the job site. Employers are still liable for such things.
In essence a $ 35,000 employee now costs $ 60,000 or more if you factor in the liabilities and costs that various levels of government have mandated as part of the process. So, who needs employees at these prices? Hardly anyone.
In the long run, these costs are borne by employees, which goes a long way toward explaining the declining fortunes of middle class America. But, in the short run, these extra costs are impediments to hiring.
The economy will recover and outsourcing and capital equipment will be factors of choice for employers. Forget hiring real live people. They have been priced out of the market by big government.
Sunday, December 26, 2010
What's Ahead in 2011?
2010 was not all bad, by any stretch.
Probably the best news of all was that problems that have been swept under the rug(s) for generations have now surfaced and are regular conversation topics. It is now quite apparent that the Western economies' love affair with entitlements may be coming to an end. They now know, as they should have known earlier, that there is simply no way these entitlements are affordable. That discussion is now front and center. That's good.
Public employees are finally coming under scrutiny as virtually every one of the 50 states in the United States faces bankruptcy under the weight of the benefits that have been promised to these public employees. Teachers, for one, have long been showered with guaranteed job security and extremely generous pension and health care benefits. All of these public employee benefits are now in play. Unions are in the middle of this because almost all of union organizing successes in recent years has been in the public employee sector. Unions are not really a factor of any significance in the private sector, since everywhere they have had a major presence, the companies have gone bust.
This is all good news, because failure to notice the impending disaster of entitlements and public employee largesse was moving the US and its 50 states into certain bankruptcy. Now, there is truly some hope. No solutions, but hope.
Other good news is that President Obama seems, at long last, to have awoken to the fact that his economic policies are a serious impediment to economic recovery. The tax agreement forged between the President and Senate Republicans was a foolish package, but better than the alternatives. For the first time since January, 2009, there was some recognition in that compromise that business matters. Finally!
So, there is hope that 2011 will be a better year than 2010. There will be continual reminders as 2011 unfolds that virtually every Western European nation will eventually default, in some manner, on their public debt and that several states in the United States are headed in the same direction. But, bankruptcy can be therapeutic; bailouts are never therapeutic.
Probably the best news of all was that problems that have been swept under the rug(s) for generations have now surfaced and are regular conversation topics. It is now quite apparent that the Western economies' love affair with entitlements may be coming to an end. They now know, as they should have known earlier, that there is simply no way these entitlements are affordable. That discussion is now front and center. That's good.
Public employees are finally coming under scrutiny as virtually every one of the 50 states in the United States faces bankruptcy under the weight of the benefits that have been promised to these public employees. Teachers, for one, have long been showered with guaranteed job security and extremely generous pension and health care benefits. All of these public employee benefits are now in play. Unions are in the middle of this because almost all of union organizing successes in recent years has been in the public employee sector. Unions are not really a factor of any significance in the private sector, since everywhere they have had a major presence, the companies have gone bust.
This is all good news, because failure to notice the impending disaster of entitlements and public employee largesse was moving the US and its 50 states into certain bankruptcy. Now, there is truly some hope. No solutions, but hope.
Other good news is that President Obama seems, at long last, to have awoken to the fact that his economic policies are a serious impediment to economic recovery. The tax agreement forged between the President and Senate Republicans was a foolish package, but better than the alternatives. For the first time since January, 2009, there was some recognition in that compromise that business matters. Finally!
So, there is hope that 2011 will be a better year than 2010. There will be continual reminders as 2011 unfolds that virtually every Western European nation will eventually default, in some manner, on their public debt and that several states in the United States are headed in the same direction. But, bankruptcy can be therapeutic; bailouts are never therapeutic.
Saturday, December 11, 2010
Reconciling Tax Cuts with Long Term Debt Issues
Hail to the Wall Street Journal! In one short paragraph the Journal has summed up the heart of the US debt problem and why keeping all of the Bush tax cuts in force make sense as well. In today's Journal and I quote:
"While in a hopey-changey mood, let's note for his (Obama's) benefit that the real fiscal problem today is not the immediate deficit, which does not call for radical action. The real problem is a system of health-care and retirement finance that deters us from saving and budgeting for our own needs while at the same time piling up disencetivizing taxes on those who work and whom we expect to pay for us in old age. Fix this and the government is solvent again."
Wow! The WSJ nailed it. .
"While in a hopey-changey mood, let's note for his (Obama's) benefit that the real fiscal problem today is not the immediate deficit, which does not call for radical action. The real problem is a system of health-care and retirement finance that deters us from saving and budgeting for our own needs while at the same time piling up disencetivizing taxes on those who work and whom we expect to pay for us in old age. Fix this and the government is solvent again."
Wow! The WSJ nailed it. .
Wednesday, December 8, 2010
A Beginning
The compromise between the President and Mitch McConnell on taxes represents a new beginning for the President and, perhaps, for the country. The compromise will definitely help the economy. The economy needs it.
There are still problems, especially on the unemployment front. Employees are still too expensive, laden down by government-imposed mandates and implied litigation liabilities for businesses. But capital expansion should pick up dramatically in 2011.
It's not perfect, but this deal is definitely an improvement over the policies of the past two years.
The looming debt problems are still there -- both for the US and for Europe. Hopefully, the idea of "workouts" and "defaults" will soon take the place of "bailouts." The debt problems have no easy fix.
There are still problems, especially on the unemployment front. Employees are still too expensive, laden down by government-imposed mandates and implied litigation liabilities for businesses. But capital expansion should pick up dramatically in 2011.
It's not perfect, but this deal is definitely an improvement over the policies of the past two years.
The looming debt problems are still there -- both for the US and for Europe. Hopefully, the idea of "workouts" and "defaults" will soon take the place of "bailouts." The debt problems have no easy fix.
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