Wednesday, August 25, 2010

Our Government Is Not Helping

  Our government is doing more to hurt the problem than help.The constant infighting and partisanship  is creating public resentment and great uncertainty and uncertainty is the real problem holding back economic growth.
 So what are those uncertainties that are holding us back?The number one is the debt.A large national debt , now up close to 90% of GDP has a crippling affect on growth as consumers and businesses are afraid to spend and invest.Our debt could get to the point where we get into the same situation as Greece  which led to major cuts in government spending,high interest rates fear and even riots.Do not think this can not happen in the USA,the laws of economic forces play the same in Greece as here.Our president recently attended the G10 summit on the world financial situation where all attendees but one committed to a goal to reduce government debt.Our president committed to a 50% less ambitious goal sending the message that he is not serious about reducing debt.
 Are we all now sick of the political finger pointing ? Everyone wants to blame someone else or some other political bent from Bush back to Regan.I for one am offended when I hear about the " failed policies of the past".Our economy is so big and so dynamic that its close to impossible to point to one event and signal it as "the problem"All policies from government spending to the tax code to the value of the dollar and many , many others affect the economy.For example its pretty certain that the prime rate set by the fed has a fairly clear cut affect on growth and inflation but the time lag is less clear and if combined with for example a tax code change then the relationship becomes less direct .
 When our president ran for office he pledged no more pork/earmarks but in his first budget there was plenty, as usual. Surprisingly earmarks make up about 0.5% of spending they give unnecessary power to the politicians and generally waste money. When questioned about the earmarks  the president's reply was "next time" Again the message is clear, no one is serious about the debt.It is this attitude ,special interests ,a desire to help select groups,vote buying and the attitude that we will never run out of money and if we do we will borrow or tax the rich ,that allows the budget to go out of control and that is why we have no growth.The problem today is not "its the economy stupid"  it is    'IT IS THE DEFICIT STUPID"
 Moving on there are other uncertainties that impede economic growth.The next big one it the current tax code. That is to continue the Bush cuts for the rich.{see seperate blog} We have known for years that the tax codes expire at the end of the year yet we are nowin late august and have no idea what they will be next year.How does anybody make future spending plans under such circumstances ?I thing many individuals and companies fear that ,due to the deficit,taxes may possibly go up for everyone.This creates fear ,uncertainty and a resistance to invest and spend.
 And finally there is the health care bill.I agree with our president that health care costs and there increases that far outpace inflation are a major problem hurting future growth. I never understood how, while in debate, we keep hearing that the bill will cost X billion dollars and save Y billion dollars .Does not make sense to me. What I strongly believe is that no one really knows what the bill's impact will be and I also believe that no one in washington has read the bill in it,s entirety.What I do believe is that in the desire to get something passed, a much less than ideal bill was passed.I really do not see much in the bill that actually works to reduce future costs. I was equally offended by some of the back door negotiations to gather votes for the bill when we were promised transparency.Also remember when the president ran for office he pledged that under his administration he would make it easier for us to buy less expensive drugs from canada. Well it did not happen. Why ,because he made a deal with the drug companies to donate free drugs for 10 years to those who could not afford them.For those who believe that this is an example of corporate america running the country you have a good point.But I point out that the president did not have to make the deal.The question then becomes does corporate america run this country or does government allow them to? And what happens after the ten years? I guess the poor dont get their medications and the rest get to buy easier from canada.
 As a business man I listen to and read as much as I can about what is going on in washington.It is clear to me that most of those in washington ,especially our leader do not like big corporations,believe that small business,private enterprise ,or the evil word profit are the enemy.Under these conditions  how can we expect private enterprise to take risk and make the investment to help grow the economy
 So the message of this section is uncertainty is the problem and our politicians can fix that if they would only work together for our collective best interests.

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