Chart from Jim Pethokoukis of AEI.
America faces an unprecedented debt crisis, true. What is not conventional wisdom is that America could face renewed, even unprecedented, greatness if a decent leader comes forward.
Given that the Republican party seems incapable of getting its collective crap together, that scenario seems unlikely, though.
Businesses are, at this point, forcing themselves to not grow. They are unwilling to take on more risk. They’re keeping cash on hand. They’re paying down debt. They’re waiting.
Individuals are doing the same. Part of it is that they don’t qualify for credit even if they wanted it. Part of it is that they don’t want it.
Still, this unrealized creation and growth waits for the right catalyst.
Obama, is not a catalyst. Quite the contrary, he’s an inhibitor. Hell, he antagonizes any growth potential.
Obama’s actions are so frustrating to expansion that even apathetic business people are paying attention. Usually business folks lobby hard for their interests–they win some, they lose some and they work around the bureaucracy and incorporate the rules and regulations and taxes and fees into the cost of doing business. Not so now. Everyone can thank Obama for being so persecutorial rhetorically and prosecutorial policy-wise, businesses are being put out of business. That’s attention-getting.
The business world is now in open rebellion. Screw you, Obama, we’ll just not spend any money, period. Zilch. The cozy win-win we had going on is over. Sure, we’ll throw some money at you on the outside chance you get re-elected–we don’t want to be the subject of your direct ire. Instead, we’ll do just enough to get by everywhere.
A couple things about this:
America should never be so beholden to the executive branch that one person can do so much damage to the economy. And yet, here we are, and business is mostly to blame. By lobbying tirelessly for the government’s favor and selling their souls (Walmart and the AARP’s obsequious deference on Obamacare comes to mind) to obtain that favor, business leaders find out [surprise!] that’s what’s given can be taken away. Obama has been busily taking away or threatening to do so.
Businesses can afford to lobby the government, but the individual has been marginalized. Businesses were totally fine with that so long as individuals could still afford to buy their wares. Nothing like a long, deep recession to drive home the point that poor people don’t buy stuff.
So, while the cozy relationship benefits businesses for a while, eventually, people have to be forced to buy stuff and people resist being forced to buy stuff (see also really expensive light bulbs). So they just stop buying stuff they don’t want (see also solar panels and the Chevy volt.) And those businesses, warmed by the loving embrace of government tax breaks, bailouts and inducements find themselves screwed. No one wants expensive, useless crap. It’s bad enough when it’s cheap. But the stuff the government touches gets very expensive.
So the individual revolts, too. He stops buying. And if the government creates perverse economic incentives long enough, he loses his job and can’t buy stuff.
And that’s where were at in America.
America is profoundly in debt. America is jobless. America is sitting on the capital it does have.
Obama is making everything worse.
And yet, America is primed for some success–if the GOP can muster something. A steady hand, reduced government interference, positive rhetoric, assurances that businesses aren’t going to be raked over the coals (or given an unfair advantage either), etc.
In a word: growth.
That requires political change and a person willing to articulate a sunny, hopeful message to encourage growth but willing to make some tough decisions–i.e. cut government spending.
More on why this is not likely to happen in the next post.
The Stimulus threw a bandaid on a flesh wound: That is, the states and unions were given taxpayer money of future generations to prop up employment for workers friendly to the Democratic party.
The money has run out.
Talk of a second stimulus is talk of another state and union bailout, for the Federal government is incapable of creating private sector jobs. They’re only capable of getting out of the way of the private sector and the government has been very determined to be in the way of business.
So the question turns to the private sector. Why aren’t jobs being created? I know this is difficult for bureaucrats to comprehend as they don’t have to make a profit, but business owners are rational. There are no reasons to take risks when there are no rewards. So, business owners refuse to expand because expansion translates into increased overhead.
What is the #1 cost of overhead? Business owners are screaming the answer. Bureaucrats are looking up the answer in their basic business text book. Hint: It’s people related. That’s right, employees present the biggest employer cost. That rule is true of nearly every industry.
Employers look at salary, benefits, unemployment insurance, legal liabilities, and now, somewhere in the nebulous future, Obamacare, and employers have zero incentive to hire more people. They’ll sit and wait, keep production costs as low as possible. They’ll pay cash for capital outlays instead of using credit.
Or, they’ll close because of ridiculous regulations — like selling used children books (lead in ink!), like arcane rules for toy manufacturers, like punitive EPA regulations on a state that’s exceeding current regulations, like invading a guitar company instead of going after union malfeasance. All these rules and regulations chip away at businesses and make their lives more difficult. A zillion dollars to change food labeling takes away from the bottom line. A business needs money to hire and create goods.
This is not difficult.
What’s difficult is sucking it up through the inevitable. Jim Pethokoukis has an excellent piece in Commentary basically running through all the “what if” scenarios. The ultimate question, though, is did President Obama’s actions help? The answer is, no (I’m only excerpting a part of it. Please go read the whole thing.):
Did Obama make it worse? It is certainly the case that he only deepened a long-term trend that threatens American prosperity more than any other. The events of 2008–2009 exposed a truth about the U.S. economy from which we had shielded ourselves: economic growth has been slowing in a worrisome way throughout the decade. The nation’s GDP has averaged 3.3 percent annual growth for the past half century. But from 2001 to 2007—before the recession hit—it averaged only 2.6 percent. Going forward, growth might be even slower due to the aftermath of the financial crisis and the aging of the population. The Congressional Budget Office, for instance, pegs long-term growth at just 2 percent or so.
But that downshift isn’t fated. The McKinsey Global Institute thinks a higher retirement age and smarter immigration policy could make the labor force grow more quickly, while smarter tax and regulatory policy could boost worker productivity. Replacing the income tax with a consumption tax, for instance, would likely make the economy grow faster over the long run by increasing investment.
These are the sorts of ideas that are likely to be a central part of the political discussion going forward in a way they never have been. The two-party debacle that was the debt-ceiling debate and the disgusted national reaction to it suggest that the American public is likely to be more open to new remedies for the nation’s ills—remedies that have not been stained by their association with the failed policies of the past four years.
We’re stuck for now with an anemic and debt-laden economy that may muddle along for years. But it didn’t have to be this way. The one thing we can all say for certain is that we could have made it better.
No one wanted to take their medicine. Is there a stomach for it now? President Obama made many promises and they’ve all failed to deliver. His stimulus prolonged the misery and starved the private sector.
President Obama speaks often of the mess he “inherited.” Well. He’s made it worse. Much worse.