Restarting an Economic Engine

While spending and governmental policy create work and potential opportunity, it takes risk and confidence to restart an economic engine. Regardless of your party, you would probably agree that we need real growth in private sector employment to address the most serious problems faced by most Americans today.

Businesses across the country are cautious as a result of the sudden economic collapse of 2008 and the bankruptcies and defaults related to real estate and banking. Continued caution is keeping them from taking undue risk until their is more evidence of a turn-around.

Rather than encouraging entrepreneurial risk-tasking, current government policy is adding more uncertainty to the analysis. Businesses need to understand the cost of employees before they hire them as well as the return on investments before they make them.

Whether you support health care reform or not, it is important to understand that businesses are reluctant to hire new employees when the potential cost of an employee could swing by 20 - 30% depending upon the final health care legislation. The timing of this initiative may be ripe in Washington but it is terrible timing if you want to encourage businesses to hire new employees.

The other current anti-confidence wild card is the tax rates for both corporations and small business owners. The government has used up just about all the deficit spending it can finance in the global market and will soon be forced to raise tax rates or stop spending. What do you think the administration will do?

Rising tax rates can greatly impair the net realized return of investments made by both big and small business. This uncertainty is added to the accumulated risks and gives business a reason to wait on new projects.

Regardless of your position on the role of government, it is not the President's confidence in the economy that drives spending and growth but rather the confidence of consumers and small business owners is the driver.

We need to defer governemnt spending and eliminate tax rate uncertainty to allow business to regain its confidence and begin hiring again. We need a job recovery to regain consumer confidence and increase spending.

We are currently in a stall and moderation of the Administration's plans could bring us out of it. The next economic stimulus will come from spending restraint and tax rate stability.