Beyond the Cusp

August 12, 2011

What Could the Powers That Be Do to Jumpstart the Economy?

We watch as Stock Markets Worldwide continue their plunge into the depths of investor despair. Many claim that Government has not taken any of the necessary steps in order to allay fears of a second dip or another bout of recession which is about to hit the economy. This begs the question of what exactly could be suggested that the government might have left in their munitions to spur growth and restore confidence in what has at best been an anemic recovery. The most cynical of pundits fear that the Federal Reserve and Treasury Department have about run out of options. The one thing that both pessimists and many optimists seem to agree is that another round of Quantitative Easing is completely out of the question, especially after the most recent debacle around the debt ceiling being raised and the downgrading by Standards and Poor’s recently of the United States credit rating from AAA to AA+ yet continuing their negative outlook of the future. This makes the need for something either radically innovative or massively relieving doubts and negative pressures on the economy be found if any hope is to be garnered from any action. The one constant is that whatever affects the American economy will have effects upon European economies and beyond.

Continuing with this logic, energizing the American economy would have the added bonus of spurring some optimism in the languishing economies of Europe and give a reassuring jolt to the rest of the world that America was back on track. Even those countries who may not have the greatest love for America still desire healthy purchasing power generated by American consumerism over lagging production from lacking sales driving their economies downward. So, for argument’s sake, what is it that is the greatest impediment to the American economy? What is the one indicator that most represents the laziness of the engine behind the American economy? My best guess would be the nine percent average unemployment that has been consistent for going on two years with no relief on the horizon. So, what is the main impediment to opening up more opportunities and spurring an urgency to hire more employees? There are a number of postulations all of which have the common trait of uncertainty. Whether it is uncertainty of future sales, uncertainty of employee costs, uncertainty of taxes going higher, uncertainty of new onerous regulations, just plain uncertainty, it all adds up to a nervousness in business that makes expansion or even replacement hiring fraught with insecurities that tends to force cautious decision-making causing a form of malaise. So, emerging as a main reason behind our shaky economy is a fear of an unpredictable future where the rules and costs may tend to fluctuate sharply due to any number of unpredictable variables. Note these variables are unpredictable, not unknown, and there lies the solutions.

One of the unknowns looming over too many American employers is the unimplemented, often still to be designed and fleshed out with untold accompanying regulations, agencies, bureaucrats, and enforcement mechanisms, fines, and related fees, potential monster of government known as Obama Care. Sure, the thousand plus page legislation has been enacted, but it is a skeleton with much of what it will entail yet to be formed. Obama Care is full of phrases that infer to be determined by the Secretary of HHS or to be determined by this one and that one or group with fines and fees still to be determined while not even fully defining exactly what insurances are to be required or excluded under the full implementation and complications of the law itself. This leaves a huge unknown of the potential costs of existing employees, let alone new ones. This has frozen many companies and corporations from opening new plants or offices and hiring the assorted personnel. Currently, many employers are only replacing essential personnel and leaving positions open should people leave their current position. Repealing Obama Care would very likely spur a large surge in hiring and take a good sized bite out of unemployment.

There is a group who also point to the ever extended unemployment insurance being offered as another reason behind the lingering higher rate of unemployment. They are followers of the theory of “you get what you pay for” and claim the government is paying for unemployment so it is getting unemployed people. Now, I am fairly sure that this is not responsible for a large segment of the unemployed, but on the other hand there must be some amount of truth behind this theory. Those who have high paying skills are less likely to remain on unemployment any longer than absolutely necessary as they lose money for every day they are not working at their given profession. On the other hand, there may be some for whom unemployment is approximately equal to what salary they can expect to receive if they returned to the job market. From my own experiences when I was younger and possibly more foolish, I know that if you lost a job that you were hired at minimum wage but had worked your way up and were making somewhat more than minimum and were released for any reason, the latest downturn could easily have caused such for many as it did in the 1970s, returning to work would merely produce starting again at the bottom collecting minimum wages which makes unemployment possibly a higher pay-rate than working, thus it may be logical to wait until close to end of benefits before seeking employment. This is just a simple and possibly silly possibility.

Add on top of these the facts, there still exists the possibility that President Obama may still manage to get some of his other pet projects enacted such as some form of carbon tax or energy tax, either of which could make heavy demands of industry and all forms of enterprise. Add the seeming constant attempts by the Obama Administration to desire to raise taxes on the wealthy, meaning anybody making more than the President, or on certain industries which would cause increased costs to ripple across the entire employment picture. Threats to further regulate power companies; threats to make the reliance on coal for energy prohibitively expensive; the seeming complete refusal to allow exploration for new oil reserves, especially off shore oil platforms; the refusal to allow the building of an oil pipeline to connect to the Canadian oil-sands production to refineries within the United States; and any other forms of the reflexive revulsion towards all use of fossil fuels coupled with the desire to drive their cost so high that renewable energy become more attractive have all combined to scare the living daylights out of many in corporate America. Taking steps to relieve these fears and assure those who provide the jobs that they are not about to be ambushed from any and every side by government would go a long way to freeing up the economic engine and returning America to fiscal health. Taking such reassuring steps would probably drive the economy to a point that tax revenues would increase sufficiently to satisfy President Obama keeping him from pushing for higher or new taxes. Who am I kidding; nothing would prevent him from his tax the rich and give to the poor unfortunates, government employees of course. For a moment I forgot who we were dealing with, please excuse my lapse as it is too late to go back and correct the whole article.

Beyond the Cusp

1 Comment »

  1. Economics 101 states that if you want to discourage an economic activity tax it and if you want to encourage an economic activity subsidize it. This is why socialism will never work. If you tax income you will get less of it and if you subsidize poverty or unemployment you will get more of it. Eventually it will self destruct.

    The quickest thing the government could do to jump start the economy would be to start drilling again. It is estimated that such an action would create … or should I say put back … 3 million jobs along with all of the tax revenue collected from the workers and companies. Then get the EPA off the back of our coal and energy sector. It is energy that drives a modern economy and to discourage it in favor of technologies that are not proven or even ready for use is stupid. Until there are viable alternatives to coal and oil, the government needs to back off or face the consequences of our economy completely collapsing.

    Like

    Comment by Troglodyte — August 12, 2011 @ 10:22 AM | Reply


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