Thursday, December 02, 2010

The Uncertainty Principle

In his latest column, Michael Hiltzig has taken a good look at the real reasons businesses aren't hiring, and he concludes that it is definitely not because of uncertainty over regulations and taxation. That may come as a surprise to some folks because of the constant drumming over the issue by the Chamber of Commerce and other business oriented groups anxious to keep CEO salaries high and shareholders happy.

...The idea seems to be that Washington's will-they-or-won't-they dithering over extending the Bush tax cuts, the advent of healthcare reform, financial reform, etc., etc., etc., has unsettled the business landscape so horribly that decision makers are huddled under duvets, gnawing their knuckles in fear and bewilderment.

This argument raises a number of important questions. The first is: When did American business leaders turn into such wusses? This nation spent three decades facing the threat of nuclear annihilation from the Soviet Union. That was uncertainty, and it hovered over the most prosperous period in our history. Now CEOs are crabbing about not knowing if their top marginal federal income tax rate will stay at 35% or rise all the way to 39.6.

The Chamber of Commerce, in other words, has an agenda, one that does not quite fit the consensual reality most of us live in. The real reason for the lack of hiring is actually quite easy to suss out, and it's one that makes perfect sense. The cure for it is going to be difficult, but it also is easy to suss out.

One wonders where the chamber gets the idea that uncertainty about taxes and regulation is such a big deal for business. If you listen to what actual business owners are saying, what's mainly holding back hiring and expansion isn't regulatory "uncertainty," but lack of demand.

For more than a year, the monthly small-business economic trends survey of the National Federation of Independent Business has listed "poor sales" as business' single biggest problem. In the most recent survey, that factor was listed by 30% of respondents, swamping "taxes" (20%) and "government requirements and red tape" (17%). ... might want to spur demand by extending unemployment coverage, enacting more stimulus and not needlessly scaring people about their Social Security retirement, which only provokes them to cut back on spending now. You might also want to avoid imposing a government wage freeze at this particular moment, as President Obama has just proposed.
[Emphasis added]

In other words, the government is taking exactly the wrong approach. This administration has chosen to drink the Chamber of Commerce koolaid rather than get serious about the business of reducing unemployment.

Some change, eh?

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Blogger PurpleGirl said...

There are a number of bigger ticket items I need to replace as the current item is 20 or more years old. I estimate the costs total some $5,000. But I've been unemployed for over a year now, have run out my benefits, spent savings and 403(b) money to sustain myself. I'm facing eviction (again) in a few months if I don't get some money coming in. This situation is probably playing out in millions of other lives. Until we have money, we can not spend it. Why don't (won't?) the politicians, pundits, and thinkers understand this? We can not spend what we don't have.

9:44 AM  
Blogger shrimplate said...

Houses that sit empty do not beg for new appliances.

10:38 AM  

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