Tuesday, July 6, 2010

Why There Aren't Any Jobs. . .

“That’s funny, they’re dustin' for jobs where there ain’t no jobs.”

-- North by Northwest. . . sort of.

The Democrats are worried. They expected the American economy to start producing jobs galore by this point in the election cycle no matter what they did. They were wrong. The economy has lost 7.9 million jobs since the recession began. Joe Biden says those jobs are gone forever and will never return. And it's hard to disagree: as long as the Democrats are running the show, those jobs won’t return.

Most of these jobs vanished because the economy entered a recessionary period. Recessions are a normal and necessary part of the economic cycle. In recessions, businesses cut the fat out of their operations, consumers retrench and make their own balance sheets more healthy, and poorly run companies go under, freeing up the resources they were wasting for better uses. This usually results in a strong period of growth once you emerge from the recession. Yet, this hasn’t happened.

Part of the reason is that this recession was worse than most. In fact, it was basically a depression. It also had a different character than most recessions because this one was caused by consumers living way beyond their means because a bubble in the housing market made them feel much richer than they actually were, and they spent accordingly. Now that housing prices have crashed, consumers have lost that source of credit and their imaginary wealth. This will take some time to balance out again, meaning prolonged trouble for the economy.

But that’s not the only problem. Over the past two years, the Democrats have piled insane levels of debt onto the American taxpayer. This inflated interests rates, dried up credit, and weakened the dollar. All of this made it more expensive for the already-hurting consumer to spend. The Democrats then enacted a series of tax hikes and new regulations, each of which further reduced the desire of consumers to spend and made it more expensive for producers to produce. They also passed various measure that made credit more expensive. Basically, the Democrats kicked the economy right where it was injured.

What the Democrats were betting on was that the economic cycle was strong enough that whatever they did wouldn’t stop growth from returning. In a growth cycle, that might have been true: their policies would have slowed growth, but might not have stopped growth entirely. But with consumers already on the verge of collapse, this was the worst possible time to impose growth depressing and consumer crushing policies.

And that’s not even the worst of it. The Democrats have added to the misery by talking big but simultaneously trying to remain vague. Indeed, they have outlined an aggressive leftwing agenda in principle, but they have been too afraid to outline the specifics. Even when they have passed bills, they usually kicked the important decisions on the details down the Executive agencies level.

Why does this matter? Because before employers will hire or expand (which leads to hiring), they want certainty. If they don’t know what regulations are coming, then they won’t hire and they won’t expand because they can’t determine if it makes sense to do so. The Democrats’ big, vague talk leaves employers fearful of what is coming and uncertain as to its effects. Hence, they simply won’t hire or expand until they get some certainty. In fact, they’d be crazy to do so. But certainty won't come for another couple years until the relevant agencies issue their regulations.

The Democrats don’t understand this. Indeed, right now they are in a near-panic about the lack of jobs, but they don’t have a clue what to do. Some of them want another stimulus, even as their own side finally admits that the first three or four stimuluses didn’t work -- mainly because they showered money on non-job-producing projects like supporting state debt. Others want a “jobs bill,” which is another name for a stimulus bill. Some just want to put their heads in the sand and blame Bush. . . seriously, they started a new campaign this weekend to blame Bush. Even their friends in the media have dutifully created polls to show that the public blames Bush for the economy.

How sad.

In any event, the Republicans should take a lesson here. When they get back in power, they need to resuscitate the consumer and employers. That means tax cuts, and it means providing certainty so that people can hire or expand with confidence.

In the meantime, enjoy the show as the Democrats run around like maniacs beating a very dead horse.

** Update: Interestingly, after I wrote this, several liberal blogs tried to explain why there were no jobs. The answer they came up with was "after the last 12 months of change, businesses aren't certain yet how the business environment has changed." That's close, but not quite there. The problem isn't that businesses don't understand the last 12 months yet, the problem is they don't know what the next 12 months will look like.


DUQ said...

This is a really good point. Businesses won't hire until they know what the future holds, and we still don't really know what all Obama is planning.

AndrewPrice said...

Thanks DUQ! I think it's true. . . obviously or I wouldn't have written it. What's funny is that this puts the Democrats between a rock and a hard place. If they lay out their full agenda, then the public gets angry. But if they don't lay out there agenda, then no one is going to hire until they know what the Democrats are up to.

That's the problem with having a philosophy you need to hide from the public.

Ed said...

I love the photo! :) I actually just read an article about this in the Wall Street Journal. It sounds like they agree with you.

AndrewPrice said...

Thanks Ed, I mostly made it myself.

Yeah, the Wall Street Journal has been following our lead for years. . . just kidding. This is basic economics and human behavior, something the Democrats just don't seem to get.

CrispyRice said...

Ugh! I heard the dear leader touting that "650,000 jobs created" number again. Sure, if you include jobs that already existed and you threw some TARP money at, or temporary jobs with the census that you fired and re-hired and fired and re-hired.


The private industry is not making jobs, and as you've succinctly pointed out, they have no reason to.

DUQ said...

"That's the problem with having a philosophy you need to hide from the public."

This is very true, Andrew! And it seems to me that that is the only way the Democrats continue to get elected.

Joel Farnham said...


Good points. One thing is missing is the impending loss of Bush tax cuts, effectively becoming tax increases on Dec 31, 2010.

AndrewPrice said...

Crispy, Yeah, the figures he's using are basically government temporary hires. The bigger problem form him with those numbers will be that they will all start getting laid off at the end of the summer -- along with a lot of seasonal workers. So unemployment will spike just before the election.

AndrewPrice said...

DUQ, I think that's been their plan, in essence. Talk against the things they believe, then enact them once they get to Washington and try to blame everyone else. . . and hope it all works itself out. But I think things are changing. People are much more politically aware than they've been at any time in my life time. So I don't think they can get away with this anymore.

AndrewPrice said...

Joel, Very true, that's another issue that will be kicking the economy in the teeth right at the end of the year.

The Democrats sure know how to break things don't they? They way they are headed, I could easily see an 11% or 12% unemployment rate by the middle of next year.

Unknown said...

Andrew: There's nothing much that people dislike more than uncertainty. The market, of course, is just a collection of people who are filled with uncertainty produced by this "most transparent government in history." And you're absolutely right. The only thing worse for the market and Obama than not telling us his real plans, is for him to tell us his real plans. Not telling us prolongs the uncertainty and bad investment and jobs markets, the other would create the certainty that they won't be back for another round and somebody who actually understands the market will be taking their place.

AndrewPrice said...

Lawhawk, They've really talked themselves into a corner. They've promised too many contradictory things to too many people. They told the left, "here comes socialism." They told the public "we're not socialists." They told the market "no changes." Then they told their supporters "we're remaking everything."

The result is that no one could possible hiring or expand under these circumstances. You'd be crazy to invest if you don't know what will happen in six months.

Even with ObamaCare, the fact they pushed all of this down to the agency level means another one to two years of uncertainty.

It's very stupid.

rlaWTX said...

And we all know that the fairest folks in the land are those Executive branch bureaucrats... after all let's take a look at their shining example - the IRS! They are always fair and even-handed and never say "yes, we know you don't owe us that money, but if you don't pay us we are going to garnish your wages."
So, we can have faith that all of these bureaucrat-led charges toward our freedoms and pocketbooks will unfold in the fairest, kindest way possible.

StanH said...

Aw…come on Andrew, Barry knows best! The good news is Barry’s purchased “Capitalism for Dummies,’ and reports forthcoming from the White House say, there’s no one that’s better at reading comprehension, the president will be up to speed in no time, it’s even been reported that the president has set up a lemonade stand with his two girls, and after the first month in business, he only needed to use a million in TARP funds…of coarse he’s deemed his lemonade stand too large to fail.

Barry doesn’t have a clue about business, it’s gonna be this way until he’s gone!

AndrewPrice said...

rlaWTX, Yeah, that's the other problem with bureaucrats -- not just the uncertainty involved, but the fact they people making the rules have no experience in the real world, they aren't answerable to the public, and they are petty, vindictive and territorial. And they don't treat anyone with respect, courtesy or even fairness.

It's an all around mess.

AndrewPrice said...

Stan, LOL! If his daughters are running a lemonade stand, then it's the first thing anyone in his administration has run in the private sector! And if they listen to Obama, then their business will fail before it even begins.

"Uh, um, uh, did you uh, file OSHA paperwork before you uh, cut the lemons? I uh, think that's what comes first, right? Where's my team of economists to help me figure out what to do next?"

LL said...

Businesses want certainty. I want to know what the payroll taxes will be, what my medical benefit (tax) will be, what sort of fixed costs including tax levels I am facing BEFORE I hire somebody.

As an employer, I can tell you without any reservation that I have held off hiring people because the present regime LIES and changes the rules almost continuously.

Ok, I don't hire a lot of people. I have two attorneys and seven other employees who work directly for me on a daily basis. If we don't make money, nobody eats. The barack hussein obama regime has made it VERY difficult to predict or forecast because they are all over the board.

They LIE about tax rates, they LIE about what they intend to do and fixed costs (overhead) will kill you as a businessman if you don't have them dialed in.

One of the largest problems small businesses have with the recovery is that it's all window dressing with absolutely NO attention paid to the core needs of those who hire people. ObamaCare created a horrible medical care situation where nobody (including attonies hired to explain it) really knows what anyone will be paying and what the costs will be. 10% profit (more or less) is a big deal. 20% more employee expenses across the board means I'll lay off an employee or two. They can be wards of the State because I can't afford to pay them AND remain in business.

Nobody in Washington DC seems to understand this.

Business passes costs on to consumers. And if we can't pass it on, we lay people off. It can't be more simple. You raise my taxes or employee costs by X% and I have to decide who won't be working anymore or what benefits I will be forced to cut.

So far the government has created jobs by hiring government workers with money borrowed that must be paid back. Don't tell me THAT is recovery.

LL said...

Additionally, since ObamaCare went into effect, the cost of medical insurance for every employee went up 24%. What a bargain! If we hadn't done well this Spring, it would have forced me to lay off clerical people. I don't know what summer will bring, but it's no frigging joke. When I see our moronic barack/barry and Slow Joe boasting on the news shows, it makes me want to throw vegetables at the TV screen.

AndrewPrice said...

LL, I agree with everything you've said.

Having hired people myself, it is very risky to hire another person because people cost a LOT to employ. And if you aren't sure how much it will cost, because the government starts messing with the benefits requirements, or if you can't estimate your sales because the market is frozen waiting to see what the government does next, then you simply don't hire. You can't afford to take the risk that things won't turn out the way you need them.

I don't think very many people in Washington understand this. Few of them have ever been in the private sector and they don't understand the dynamics. And when they do think of companies, they think of huge unionized monsters that move slowly like oil tankers, not small business where a few percentage points makes a huge difference.

I've done a lot of work with government contracts in the past, and nothing highlights to me more the ignorance of the government than cost plus contracts. If you've even dealt with a government auditor, you know that they really think that the private sector bases its pricing on cost plus. But that's ridiculous. You can't make someone pay your costs, you can only charge them the market price. If your costs are too high, that's your problem.

The government sorely needs an injection of private sector thinking. . . and the Democrats most of all.

Tennessee Jed said...

Some journalist labeled Obama officially "the job killer." Interestingly, it leads to a couple of long debated questions. Either Obama has been getting very poor advice on the economy figuring it would rebound just enough to get him a second term, or he is an absolute ideologue willing to sacrafice a second term to ram through as much of the leftist agenda as possible, or as Rush Limbaugh has wondered, he actually is trying to destroy fee market capitalism to, he hopes, be replaced by a Euro styled democratic socialism.

You have previously pointed out that Republicans need to have an agenda so they will have a mandate if they do take back control of congress. Interestingly, Limbaugh today agreed with just that point.

AndrewPrice said...

Jed, I'm glad to hear that Rush agrees.

Actually, I don't think it's any great insight. I think history has shown repeatedly that if you don't spell out what you plan to do before an election, then you end up getting almost nothing after the election.

The reasons for this are that without an agenda, (1) there is nothing to keep your people in line, i.e. no uniform goal that they've all signed up for and can be held accountable to, (2) the public doesn't know what you're planning to do, so they fill in the pieces themselves and when your post-election plan doesn't match their pre-election expectations, they turn on you, and (3) your side can't make the very powerful argument "we promised this before the election," which works with a lot of people.

In terms of Obama being "the job killer," I think that applies to the Democratic philosophy entirely. Do I think he's being ideological? Actually, I don't. I don't see any ideological rigor with him. I see him as primarily an empty suit who enjoys the trappings of power and is really way beyond his ability to handle his job. I think he's flailing around basically. If he was ideological, you would have seen a lot more determined action right away. In fact, that might make for a good post.

Ponderosa said...


In your view - what should the Republican agenda be for 2012?

I'd be happy w/lower taxes, less - dramatically less spending, a strong defense, repeal (and replace?) of HCR - fixing the economy by getting out of the way.

I'd don't want any new programs or departments. Just take the "party of no" and restate in the affirmative and we're good to go.

Life, liberty and the pursuit of property. That's catchy.

AndrewPrice said...

Ponderosa, I've been doing a series called "Rebuilding the Republican Party," you can find it in the index. In that series, I've been slowly going through various issues the party should consider.

In the first one, I outline a set of general principles that the party should adhere to. Those don't really answer your question, because an agenda should be more specific, but they are a good statement of principle.

Let me put together what I would use as an agenda and post it on Sunday night, after I've had a chance to give it some thought.

Joel Farnham said...


On the subject of agenda, I would like to see the removal and non-replacement of all czars and czarinas.

Cutting down the number of departments would also do nicely. The Department of Education would do for a start. :-)

AndrewPrice said...

Joel, I agree entirely about the czars and it's already on my list.

On the Dept. of Ed, I don't think the politics is right. I would instead starve it off, devolve it's duties to the states, and kill it off after it has withered on the vine. Alternatively, I would use it to break some of the educational monopolies.

Joel Farnham said...


Withering on the vine as well as using the Dept. of Education? You might have something there.

Joel Farnham said...

Using the Dept. of Education to destroy or break up monopolies of education. That Idea I can get behind. Once it is done with getting rid of the monopolies, I want it removed.

AndrewPrice said...

Joel, That's one of the things that I've seen work extremely well against the Democrats. Every time we've taken some lever of power that they've created and we've begun to use it to push "right wing" ideas, the Democrats suddenly discover "the horror of letting so much power be concentrated in one agency," and they do their best to eliminate that lever of power. It's worked every time.

That's why it's often best to fight fire with fire rather than just trying to put fires out.

Also, doing this gets the Democrats to be the first to advocate eliminating the agency. That inoculates us from the "extremist" label when we finally get around to eliminating it.

MegaTroll said...

Good stuff, I totally agree. I also saw that they've dubbed him the Job Killer. I hope that sticks.

AndrewPrice said...

I do too Mega, that seems like such a very appropriate name for him.

Ponderosa said...

Not sure I'll get through all the articles by Sunday but I'll give it a shot.

BTW, did you see the Rove article?

"They [GOP] also need to offer a competing agenda for increasing jobs and prosperity, and outline the concrete steps they will take to get back on the track for economic growth."
A Growth Agenda for the GOP

Sounds familiar...

AndrewPrice said...

Ponderosa, It does sound familiar doesn't it? I'm just glad that multiple people are saying this now. Of course, the devil will be in the details. . . but we'll see.

P.S. You don't need to read everything by Sunday -- take your time, it will still be there! :-)

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