Found this item on World Net Daily. Lays the foundation of why the economy is doing so bad.
“Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they’ve yet to amp up hiring or make major investments.”
So writes the Washington Post about the recession’s stubborn refusal to go away. The statisticians at the National Bureau of Economic Research declared the Great Recession over – but tell that to people who can’t find jobs. Today, businesses replace equipment and inventory, but they are reluctant to hire new workers. Investment that does occur aims at replacing the use of labor by adopting advanced technology. In a growing economy, that’s a sign of progress. Freed-up workers are then available for new projects. But lately, those new projects aren’t being launched.
The two wings of the establishment offer their usual remedies. Government-oriented types want more tax-financed “stimulus” spending, claiming last year’s nearly trillion-dollar dose wasn’t enough. That’s dubious. As economist Mark Skousen writes, “Production and investment lead the economy into and out of a recession; retail demand is the most stable component of economic activity.”
Business-oriented types want tax cuts. I’m sympathetic, but cuts should be accompanied by spending cuts, or the deficit will grow even uglier. There’s no free lunch. Deficit spending must be covered by government borrowing, which takes capital that could be used for investment out of the private sector.
Why isn’t the economy recovering? After previous recessions, unemployment didn’t get stuck at close to 10 percent. If left alone, the economy can and does heal itself, as the mistakes of the previous inflationary boom are corrected.
The problem today is that the economy is not being left alone. Instead, it is haunted by uncertainty on a hundred fronts. When rules are unintelligible and unpredictable, when new workers are potential threats because of Labor Department regulations, businesses have little confidence to hire. President Obama’s vaunted legislative record not only left entrepreneurs with the burden of bigger government, it also makes it impossible for them to accurately estimate the new burden.
In at least three big areas – health insurance, financial regulation and taxes – no one can know what will happen.
New intrusive rules for health insurance are yet to be written, and those rules will affect hiring, since most health insurance is provided by employers.
Thanks to the new 2,300 page Dodd-Frank finance regulatory act, the Wall Street Journal reports, there will be “no fewer than 243 new formal rule-makings by 11 different federal agencies.” These as-yet unknown rules will govern lending to business and other key financial activity.
The George W. Bush tax cuts might be allowed to expire. But maybe not. Social Security and Medicare are dangerously shaky. Will Congress raise the payroll tax? A “distinguished” deficit commission is meeting. What will it do? Recommend a value-added tax?
Who knows? But few employers will commit to a big investment with those clouds hanging over our heads.
“As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company’s vulnerability to government,” Michael Fleischer, president of Bogen Communications Inc., wrote in the Wall Street Journal.
Nothing more effectively freezes business in place than what economist and historian Robert Higgs calls “regime uncertainty.”
“All of these unsettling possibilities and others of substantial significance must give pause to anyone considering a long-term investment, because any one of them has the potential to turn what seems to be a profitable investment into a big loser. In short, investors now face regime uncertainty to an extent that few have experienced in this country – to find anything comparable, one must go back to the 1930s and 1940s, when the menacing clouds of the New Deal and World War II darkened the economic horizon.”
Uncertainty created by Obama’s legislative “successes” are comparable to the Depression and World War II? This does not bode well for job growth.
Higgs says: “Unless the government acts soon to resolve the looming uncertainties about the half-dozen greatest threats of policy harm to business, investors will remain for the most part on the sideline … consuming wealth that might otherwise have been invested.”
Thanks for your attention.