The monthly unemployment figures seem to have shaken many economists and analysts, but really, it simply looks like more evidence that we are entering into a lost decade. Merry Christmas.
Job growth, while positive, was worse than anemic. Adding just 39,000 jobs per month (net) isn’t anywhere close to the 120,000 needed to keep unemployment from rising or the 300,000 needed to push unemployment down. While rising unemployment rates in a recovery aren’t that unusual, the trajectory of job creation should be up — significantly. And it’s not. That, or the trend in the numbers is simply more transparent now that the distortions from misguided government spending are beginning to wane.
The pull-back in November likely reflects many firms bringing laid-off workers back on line. But these same employers aren’t ready to take the risk of putting more people on the permanent payroll yet. They still don’t trust the long-term commitment of consumer demand. Plus, too much uncertainty — over tax policy, deficits, and regulation — is wreaking havoc on the private sector. It doesn’t help that current White House seems intent on pushing through policies that punish wealth creation by capping personal and disposable income for high earners.
If we ever needed a commitment to aggressive pro-growth policies with teeth, we need it now.
— Samuel R. Staley is Robert W. Galvin Fellow and Director of Urban & Land Use Policy at the Reason Foundation.
Uncertainty over tax policy is at the heart of the matter. I own a business and I hang around lots of other business owners. No business owner I talk to has the desire do risk more capital and make the necessary investments to hire more people because we all believe that taxes will be going up. Why the heck should we risk our money only to give a larger share to the government. This is what politicians don't understand.
I employ a certain amount of labor right now. I make a certain amount of money right now. To increase both of those requires that I risk the capital I have accumulated. That capital I risk is 100% at risk, but with higher and higher tax rates, the government takes a larger and larger share of the benefit of that risk. Most people I know think that in the future the risk won't be worth the return. We would rather get by with what we've done do far.
This is the flaw in our tax system. The government requires you to risk 100% of your investment and doesn't share any of the risk. However, the government will take what ever share it wants of the fruits of that risk.
The added risk, the added hours worked aren't worth it. This is especially true when the government taxes 0% what of you do outside making money. There is no tax (yet) on the return I get for coaching my kid's football team, etc.
Reply to this commentLinkReport AbuseThat's a nice trick, extrapolating an entire "lost decade" from a single year at the tail end of huge downturn.
Reply to this commentLinkReport AbuseAemJeff - but all the tools are in place to make it so. We are now historically underperforming from a recovery perspective. As the initial poster noted - capital formation for productive purposes is restrained in the US and will remain so now that the debt commission proposal of a huge tax hike with some ceremonial spending cuts that are more likely glorified spending restraint - that won't be enough to do much - is coming this way. And with Obama's moves to increase the bite of all the federal business regulatory apparatus, kiss job formation goodbye. Which means the tax rate as a percentage of GDP is actually going to be higher than 21% - because GDP is going down.
Politicians don't get it - and some of the writers on this site don't get it. We have entered the lost decade and at least until a new president is elected, there is nothing we can do about it, because he is clueless. The tax and regulatory structure in this country is driving unemployment and misery. And no amount of spinning will change that.
Reply to this commentLinkReport AbuseStuartH: I'm confused about your support of the "uncertainty" aspect suppressing investment.
The results of additional investment are positive even under higher taxes, because even though the rate may be higher, the after tax profit will always be higher with a successful investment than without one.
Even under the extremely unlikely scenario that the marginal tax rate is goes above 100%, your taxes will increase and your after tax income will decrease, but it will be higher with the added investments than without. Therefore, no matter whether or not taxes go up, it behooves you to successfully invest.
If you don't think you can successfully invest, that's a different issue, having nothing to do with whether or not the taxes go up. Remember, when they went down, it's not like we had huge boom times.
As for whether or not we're starting a lost decade, as the writer suggests, that's a funny perspective since the aughts were basically an anemic decade.
Reply to this commentLinkReport AbuseAnecdotal, but yes - my salary now is the same as I was making in 2001. I've had to take a $24,000/yr pay cut in order to get back to work.
Reply to this commentLinkReport Abuseentering a lost decade? we just had one...look at the domestic stock market the past 10 years...alternative asset class returns....pro-growth bush policies didnt work...obamas are not working....maybe some fresh thinking could be useful.
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