Tuesday, January 19, 2010

White House Hopes for Economic Growth... But Won't Change It's Counterproductive Policies

Yeah, Well, Good Luck with that! The Irrational Policies coming from this administration couldn't be more wrong if they are truly attempting to promote an economic expansion, they would change them. The tried and true methods to promote economic growth don't include any of the following: tax hikes, a weak dollar, trade wars, additional regulatory burdens, increased energy costs or a takeover of the health-care industry.

Only a year ago Democrats were mouthing phrases denoting the sheer folly of raising taxes in a recession. Having passed their massive public spending free for all they called a stimulus, which I call the Mother of all things pork, and wasting a mountain of taxpayer dollars the results are in and are at best, unimpressive. It has resulted in the creation of a large number of bogus jobs but very few real ones, but has been fairly good at increasing the wages of public sector employees (people who are already employed)and building a few skate parks. Now their sensible tone along with any notion that fixing the economy was job one, is gone, having been thrown under the progressive bus, in favor of their standard class warfare vernacular, an ideology they are much more comfortable articulating. Once again they wrap themselves in the mantle of Public Savior, guarding the poor, the planet and the working men and women of America from evil capitalists and business owners everywhere. Righteous crusaders, who but for the lack of an extra trillion or so more tax dollars can make all of our wildest dreams come true.

It is the focus of their ire, Businesses and the rich whom I call capitalist (you know, the ones with capital)who will lead us out of this economic malaise or not. Whether the time is right for them to lead is dependent solely upon their own very rational assessment of the business climate going forward, and that outlook is not promising. The President and his advisers hope that brow beating bankers will lead to more business borrowing to expand output and create additional jobs. He acts as though CEO's will plow ahead, willy nilly, borrowing and investing no matter how many additional burdens he and his political allies on the hill ask them to bear.

As far as private sector job creation goes, the President has missed the point entirely, quite possibly because very few of his advisers know anything about the private sector, having never worked in it. So I'm going to let him in on the dirty little secret of job creation, one that those of us out here in the real world already know. Businesses borrow money only so that they can earn additional profits, jobs that are created are really incidental to their focus, which is to grow the bottom line. Many of the policies the President promotes serve only to diminish the ability of a business to earn a profit. No Profit! No Growth! No Jobs!

The Business world is totally different than the political world. Companies don't have to expand. Investors don't have to risk their capital. They only do so when the conditions in place enable them to forecast an increased profits. When CEO's look at projections showing a bottom line that is shrinking, their thoughts are not of expansion and job creation, but rather they work nonstop trying to rationalize their cost structures to insure profitability, enabling them to survive the downturn. Labor savings is at the top of the heap when it comes to cutting expenses.

The good news is that an accelerated recovery can get underway any time the administration wants, but it will require them to make that hard pivot they have been talking about. They need to turn away from raising taxes, encourage the production of our domestic energy resources and stabilize the value of the dollar.

Domestic drilling will directly create thousands of real jobs in US oil fields and have the added benefit of reducing energy prices, enabling a more robust economic recovery and the jobs that come along with it.The prospect of lower taxes and a stable dollar will renew the incentive for investors and their Capital who are clearly watching from the sidelines to get back into the game of providing the fuel for economic growth. The nightmare of a health care bill, which seeks to punish healthy people with higher premiums and younger folks with fines for being young needs, to be scrapped in order to promote an economic environment that is, if not Employer friendly, at least not hostile.

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