Friday, August 19, 2011

The Real Trouble with our Economy: Quicksand



The President and Congress are in economic quicksand.

Throughout his presidency, Obama has often blamed our economic woes on the past president, on a tsunami, on headwinds, on anything other than facing up to his greatest fear, he's in over his head. It seems like he can't get a break. At this point, the more Congress struggles, the deeper we sink.

Whenever our leaders blame outside forces for causing our slump, it only highlights the lack of control they have over our situation. When you shift the blame, you also shift confidence in your abilities away from your person.

True, the President and Congress did inherit some economic problems; but, they also created new ones. When they muscled through the health care reform bill, they spooked a lot of people. They spooked people who are concerned about national debt, eventually forming the Tea Party. Most importantly, they spooked the business community, who have some heavy economic burdens waiting for them in coming years as the full effects of health care reform and other legislation come due.

The Dallas Fed president, Richard Fisher, makes good points about the underlying cause of the slow economy. The problem is not lack of credit or market liquidity. It's not lack of talented labor; in fact, after being unemployed for so long, much of our talent would accept a lower-paying job in their field. It's not lack of entrepreneurial spirit. The problem is that Congress has shifted too many laws too quickly during hard times.

You do that sort of thing when there's money coming out of everybody's ears, when they are out-earning Washington, D.C.'s meddling. You don't do that sort of thing when business is tight.

Business is naturally resilient. If you change one law, they'll adapt and fold the cost into their pricing. However, since the President took office and had a congressional majority in both houses, they ran rampant "fundamentally changing our country." Business will recover eventually; but many of the changes pushed businesses beyond their ability to recover quickly.

The money management skills that make businesses successful in staying afloat is what is also preventing them from hiring people. If they go under, they aren't going to hire anybody ever again. It is in a business's and employee's best interest that they stay in business, even if it means parking their capital until better times.

Many of the laws, spending cuts, and other manipulations were back loaded past the next election. Many of the big costs to business will come due after 2012. Extra employees are future heavy burdens in their minds. It's hard to plan with uncertainties.

Ironically, all the thrashing about that Congress is doing only leads the business community to worry more about their, our, future. Congress is feeding the fear.

All the ingredients for an economic recovery are there. But, our Government is not instilling confidence in our abilities or chances of successfully doing it.

So, every time they pass the buck on why we aren't doing well economically, it reveals to us that they are in quicksand and rapidly sinking over their heads, dragging us along.

If they would just stop and allow business some breathing room from new regulations and costs, it would give business time to figure out what to do next.

The real problem is Congress making "Comprehensive" legislation. They don't just tweak laws here and there; they change everything. Business can't hope to keep up if the rules change every month and require boatloads of lawyers to decipher, so they clam up and hold on to cash to pay for hidden costs and said lawyers.

Keynesian economics might work if we all participate moving money along in the economy; but, when you freak people out, we save rather than spend.

What we need is confidence in a better future. Unfortunately, our present leadership does not inspire that.

What could we specifically do?

  • New management
  • Moratoriums on all major legislation coming due in the next 5 years. Just, hold off until better times.
  • No more new laws that cost state governments (yes, states are hurting too) or businesses more money.
  • Real spending cuts rather than cuts in projected budget growth.
  • Hold off on new taxes (unless it's banks, tax them good). I don't like banks.

I'm not saying do this forever; just until our economy floats enough that we can pull ourselves out of the quicksand. But, I understand how difficult it is to keep the sinking victim calm; the last thing they want to do is stop thrashing around.

Good luck to all of us. Remember, don't panic.
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