Free Markets, Free People

It isn’t rocket science, Mr. President

Seriously, by now just about anyone – to include the President’s panel of economic advisers – should be able to figure out why there are no jobs. The QoD below tells you why in so many words. Fareed Zakaria tells you why without mincing words:

The key to a sustainable recovery and robust economic growth is to get companies investing in America. So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.

Economic uncertainty was the primary cause of their caution. "We’ve just been through a tsunami and that produces caution," one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.

In other words, back off, get out of the freaking way, quit talking about massive new taxes and programs that deincentivize investment and employment, and let the 1.8 trillion in cash sitting on the sidelines in private hands do its job.

Wow, I wish I’d been saying that for, oh, 18 months or so.

It still astounds me, though, that I and others are still beating this drum this late into this economic disaster.  As the title points out – this isn’t rocket science.  Incentives work to increase behavior you want, disincentives work to discourage behavior  you don’t want.   If you talk about making it harder and more expensive to hire someone, you disincentivize hiring.  Same with investment.

And that’s precisely what’s going on.

One CEO told me, "Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what’s in store for us for the future." Another pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations.

The immediate implication is they’re sitting on the sidelines, sitting on their cash instead of investing it, and they’re not hiring.  And every reason you seen listed above has to do with government.  Not down markets, or lack of demand, or whatever else one might want to blame on “capitalism”. 

Of course, as an aside, I have little sympathy for many of these CEOs.  They’ve learned you get what you vote for:

Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business.

Yet these titans of industry and banking apparently weren’t astute enough, or didn’t want to look under the veneer this “smart” guy presented.  Seems interesting to me that they never got it, but many of us out here in fly-over land saw through candidate Obama immediately. 

Now they – and we – are paying a pretty high price for voting for someone they see as “anti-business” and apparently clueless about how to do what is necessary (or, perhaps, unwilling) to settle the markets, help establish a positive business climate and provide incentives for flowing that 1.8 trillion (it won’t cost the taxpayers a dime) into the economy and spur expansion and hiring.

They must be so pleased with the regime they’ve helped put into place, given their current positions on the sidelines trying to figure out how to stay in business.

Brilliant!

~McQ

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21 Responses to It isn’t rocket science, Mr. President

  • Same problem was identified by Amity Shlaes in her book on the Great Depression, “The Forgotten Man”. All of FDR’s tinkering and bold experimentation created uncertainty. FDR’s tax policies were both inconsistent and punitive. So in this case, history appears to be repeating itself. I also concur with Bruce. He’s doing what he said he would, so anyone that voted for him was warned in advance.

    • The electric companies of the 20′s and 30′s are akin to the internet companies of today. The government investment in direct competition to the electric companies and regulating them to boot, would be like Obama wanting to regulate the internet and also opening up their own cut-rate versions of popular websites. Actually, this does happen when cities attempt to offer “free wifi” as a public service (Taipei did this actually – seems really dumb, but hey, its another budget to control.)

  • As I’ve written before, this regime spins off uncertainty like cotton candy at a cheap carnival.
    More…much more…than mere economic and political uncertainty, Obama has exponentially raised the uncertainty we all face by his war against the rule of law.  Contracts are meaningless, as are most of the formerly solid assumptions we all worked with regarding property ownership, and even such rule-driven legal doctrines as bankruptcy.
    Many of us…me included…have watched in utter disbelief as Obama has perverted institution after institution without effective resistance.   It is hard to take it all in.  Certainly NO domestic or foreign money will flow into this economy at anything like its former levels.
    This dooms the U.S. to what I call the Great Receding, and this is only one facet of that movement.

  • “..did not want to be quoted by name, for fear of offending people in Washington  Caracas.”

     “Almost every agency we deal with has announced some expansion of its authority…”

    Just like in Caracas.

    ” his company had lawyers working day and night to figure out the implications of all these new regulations.”

    It’s a good thing we don’t have a Socialist administration.
    “Most of the business leaders I spoke to had voted for Barack Obama. They still admire him.”

    These are people who receive tens of millions of dollars per year because of their knowledge and good judgement. 

     

    • timactualThese are people who receive tens of millions of dollars per year because of their knowledge and good judgement. 

      Yeah, knowing that people this gullible (if not outright stupid) are at the helm of a business just makes you want to invest your life savings in their outfit, doesn’t it?  Bah…

      Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business.

      This is both laughable and frightening.  How can one get to be a major business leader and be this gullible???  It would seem that they, too, bought into the mystique of the “bright” Dear Golfer.  I have to wonder what former titans of American industry like Carnegie, Rockefeller, Morgan, Ford, and Kaiser would have made of The Dear Golfer.  Would THEY have thought him “unusually smart”?  Or would they have quickly gotten his number as a hustling empty suit who really hated their guts and would do whatever he could to deep-six their businesses and see them in the poor house?

      • How can one get to be a major business leader and be this gullible???

        It’s call a social cascade.  It happens when you let others do your research.

      • Having been through the MBA mill, I can tell you part of the problem is that the business academy…like almost all others…has completely adopted such collectivist ideas as “social responsibility” which corrupt the simple ideas of capitalism.  You can even see this problem expressed in our highest military echelons.  Business leaders should have one central concern; maximizing investor return (which is NOT short-term gain).

        • Which is exactly what Peter Drucker warned against.
          As Tom Sowell has pointed out, free markets are CONSUMER oriented, and hence businessmen (other than the up and comers), unions and politicians HATE them.

      • ” How can one get to be a major business leader…”

        Simple. By following. These folks aren’t leaders, they are followers. Leaders don’t  become part of the ‘social cascade’ Neo mentions. Leaders ask questions and expect answers. Leaders ‘trust, but verify’. Leaders have goals other than having golden parachutes and flying in private airplanes. Leaders rock the boat. They don’t have chapped lips from kissing butt.

      • They still admire him.

        How can they not ?
         The guy may have jumped the shark, but damn … he is the ultimate example of the “Peter Principle”

  • “Social Responsibility” in a capitalist society means creating products and services that people want, and are willing to pay for, at a profitable price so that the company can continue to employ people.

    • And, it is the most MORAL thing a company can do. Because it helps everyone the most, it helps the buyer and the seller, the consumer and the worker, and it provides tax revenues.

  • Absolutely, Uncertainty is the worse thing. even high taxes can be dealt with if you know what they will be, and you know they will not change.
     
    But not knowing, having a  bunch of clueless people in Washington handing out arbitratry descisions, that will kill all investment.

  • America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets

    Just wait till Barnety Frank and Chris Dodd hear about this … more business taxes … on that cash on those balance sheets

  • You know, it would almost be a shame if the economic pain ends before these idiot businessmen get to the point that they no longer “admire him” or think “he was unusually smart”.