The Fear-Based Economy
Further tax increases could bring an already frightened, sputtering economy to a standstill.
July 21, 2011 - 12:00 am
Did I say, “additional tax increases”? Well, yes. The Wall Street Journal helpfully reminded us on July 11 that tax hikes associated with ObamaCare amounting to $438 billion over the next 10 years will begin taking effect in 2013. Of course, these impending levies, the legislation’s stifling bureaucracy, and disastrous work disincentives have been hanging over employers’ growth and hiring plans since Pelosi, Reid, and Obama made it law 16 months ago.
As if we needed more problems, make no mistake: The economy, which has failed to grow at the brisk pace required for a genuine recovery in employment since the end of the recession, has shown signs of serious deterioration in the past few months. Here are just a few of the indicators:
- In May and June combined, seasonally adjusted employment grew by only 43,000, while the unemployment rate rose in both months.
- The new-home market has barely budged from its historic lows.
- Consumer confidence is at its lowest level since March 2009, one of the worst months of the recession.
- The director of the widely read Consumer Reports Index stated his belief last week in a radio interview that seeing the unemployment rate hit 9.6% in the next few months “is not out of the question.”
- In mid-July, announced U.S. layoffs and terminations at Cisco and Borders alone were within striking distance of the number of seasonally adjusted jobs the whole economy gained in June.
- On Friday evening, July 15, the better to avoid attracting much attention, Goldman Sachs dropped its annualized second- and third-quarter growth forecasts to 1.5% and 2.5%, respectively, and indicated that another recession is “clearly a possibility given the recent numbers.” Putting its employment practices where its predictions are, Goldman announced on Tuesday that “it might lay off as many as 1,000 employees globally.”
- Most germane to the Washington discussions is the fact that federal collections, after rising steadily if not spectacularly for about a year, suddenly fell on a year-over-year basis in June.
When the economy is sitting on such a dangerous precipice, unless the goals are to deliver a knockout punch and to take the intimidating uncertainty to the level of debility (given this administration’s mindset, these cannot be ruled out), you don’t even think about raising taxes. With a federal budget hopelessly out of balance, all you can do is cut spending, period.
You also don’t raise taxes when you know, as anyone with an ounce of perception does, that for the next eighteen months if we’re lucky, or an unthinkable 66 if we’re not, we’re stuck with the current fear-based economy. I could be wrong, but I can’t conceive of anything this administration could do to change the current frightened mindset in the business community before it leaves the stage. Wynn agrees, saying that until Obama is gone, “everybody’s going to be sitting on their thumbs.”
You could also call this “going Galt.”