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Thursday, May 27, 2010

We have An Incredibly Dysfunctional Government

Here is the basic problem. We have something like 30 million people without jobs, or working short hours, or have given up looking. That is about one in five employed Americans.

The only growth in our economy has come from businesses restocking shelves (a one time bump), extremely wealthy people buying jewelery and yachts (a one time bump), and people who have stopped paying on their mortgages (a short term bump).

Seventy percent (70%) of our economy comes from consumer spending (20% from government spending and 10% from business spending). Most consumer are cutting back on their spending for a variety of reasons, i.e., rebuilding savings, providing protection from lost jobs, etc.

Small businesses have generated something like 70% of all new jobs over the past decades.

But small businesses are not hiring because their order books are down and they are cutting expenses, not hiring new employees.

O.K., that is the basic problem. Now here is what our dysfunctional government has done about the problem.

For every new employee a small business hired who had been unemployed for six months, or more, they could get a tax holiday on their social security contribution for the rest of the year.

Two huge problems with that lousy idea. One; no small business ever hired an additional employee to get a tax break. Two; to get the tax break, the business had to prove the new employee had been unemployed for six months or more, e.g. more paper work, exactly the thing that small business hate because it directs employees away from profit making work.

Now comes the lousy health care bill. In California, the major insurers are raising rates 12% to 23% for businesses with fifty (50) or fewer employees. The result is that small businesses are firing people to reduce costs, or giving up company paid health insurance for their employees.

If this is not dysfunctional, then I do not know what the word means!!

As far as I can tell, we have the enormously arrogant Larry Summers for this stupidity. Yet it seems that Obama really trusts Larry because he thinks Larry is really smart. What do you think?

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