One way to think about why there is anemic jobs creation while the economy has started to grow and company earnings are good is to look at the entrepreneurial class, as opposed to the large international corporations who have recovered from the Great Recession, and the "working class" who are accustomed to taking what The System gives them, or doesn't.
The "entrepreneurial class" manages people, real estate, farms, small businesses, and investment portfolios. They figure out the rules, assess risk and reward, and make decisions about how to deploy their resources. They trust their judgment and believe that their decisions have a significant affect on outcomes. With Pelosi declaring that the Democrats needed to pass the health care bill to find out what was in it, and Chris Dodd admitting that we won't know the result of the financial regulation bill for years, those who must figure it out are screwed.
- For the shop owner or restaurateur, how long will customer demand be down; how should they deal with health care - their employees' and their own; will the bank pull the line of credit; what if the landlord goes under; which taxes will go up, and how much; how about undocumented workers?
- For the farmer, will financial reform affect their ability to hedge crop and fuel prices; should he buy a new tractor; will the bank advance funds for the next planting season; what about his seasonal labor?
- For the small banker, how much will capitalization requirements increase; how much will FDIC fees increase; how will definitions and disclosure regulations change; will consumer credit become unprofitable; how will his borrowers be affected by changes in energy policy; when will the commercial real estate market turn?
- For the investor or retiree, what rate of inflation should he assume; what will capital gains, dividend, and estate tax rates be; what will happen to Medicare and Social Security; can he afford to contribute to college funds for kids and grandkids?
The natural response to waves of undefined change for the millions of people who make the decisions that drive the economy is to hunker down. For the disconnected politicians, it is to consider the job done when the 2000 page bill is passed. Let the bureaucrats write the implementing regulations, and move on to find the next apple cart to overturn - energy; immigration; whatever. Small wonder when the Obama administration has the smallest number of people with private sector experience (except lawyers) of any in the last century. This is why nobody is hiring in Obama's America.
It is no surprise that countries are doing fine where the business managers know the rules - China; India; Brazil; Canada; Germany; Turkey. We will eventually recover, but not until much of the Obama/Pelosi/Reid legislation has been modified, the regulations have been litigated, and the managers know where they stand. Fortunately, we are an adaptive nation, blessed with leadership in technology and higher education in a century that will be dominated by technology and knowledge. Unfortunately, it will take years to undo the damage and let the entrepreneurs make informed decisions.
We don't normally endorse commercial products, but this You Tube submission by reader Themis Michos calls for an exception.
bill bowen - 7/23/10