Economic Miasma Ahead

by: thomas e. brewton | published: 07 09, 2009

You will be disappointed if you expect the economy and the stock market to rebound vigorously after we hit the bottom of the economic cycle.

What's in store for us, if the President's budget and Congress's pet projects are enacted, is a long, dreary slog of the sort imposed upon the nation by Franklin Roosevelt's New Deal social engineering. For eleven years, beginning in 1929 with President Herbert Hoover, himself a liberal-progressive social engineer, business operated well below the levels attained in the late 1920s, and unemployment was always in double digits.

Our present-day economy is bound for the same slough of despond, because President Obama and the Democrat/Socialist Congress are energetically repeating Hoover's and Roosevelt's mistakes. Higher costs imposed upon business - via regulation, taxes, support for socialist labor unions, expanded welfare-state entitlements, and "green" regulation - will reduce profits and incentives for business to create new jobs, just as similar actions did under Hoover and Franklin Roosevelt.

Looming ahead on the trail is the almost certainty of rampant inflation of the kind that gave us the 1970s stagflation - high unemployment and a severe economic recession, with the costs of living rising every week.

-- Reams of new agencies and regulations will make business less agile in dealing with changing world conditions, and will greatly limit profits. Without strong profit growth, business is less adventuresome and less inclined to invest in new technology or to expand production capacity. Moreover, without strong profit growth, most businesses will have great difficulty in attracting the financing to do more than make ends meet from day to day.

-- Vast increases in taxes, both on individuals and businesses, will similarly choke off growth momentum needed to create new jobs. High taxes mean lower demand and lower profits. The President's claim that people earning less than $250,000 will not have their taxes raised is a transparent lie. Increased taxes on business will be passed directly to consumers via higher prices, an indirect tax on all individuals, including the bottom half of tax-return-filers, who pay almost no direct income taxes. Rising inflation, which robs the purchasing power of people's incomes and savings, will amount to a pervasive tax increase.

-- Deliberate favoring of socialist labor unions over business, bond-holders, and stock market investors, exemplified in the nationalization of GM and Chrysler and the new labor-friendly NLRB, will raise business costs and reduce profits. Labor unions extort wages and benefits higher than business can afford to pay workers in a free-market, world economy. Labor unions impose work rules designed to force businesses to employ more workers than are needed. Labor union strikes and deliberate production slow-downs, as well as deliberate product sabotage, reduce business profits and make business cautious about hiring new full-time workers.

-- "Green" legislation and regulation also raise business costs, cut profits, and reduce incentives to create more jobs. The only new "green" jobs are in government agencies and the legal, accounting, and consulting staffs that business will be forced to employ. Such jobs add zero to our economic or social well being, but they cost business a bundle, further weighing down profits and the incentive to create real, productive jobs.

Bottom line: President Obama's plans have nothing to do with getting the economy back on its feet, and everything to do with the goal of socialism, which is the so-called social justice of forced equality of consumption. His motto is, "If everyone can't have it, then nobody will."

In his liberal-progressive-socialist jihad to cut down the capitalist class, the President will end by making us all equally poorer.

For a detailed review of the outlook, read Forbes's How Congress Will Steal the Recovery.

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