ACLPILOT, Thanks for recognizing that even though our ideals may disagree significantly people can in fact have a reasonable conversation on these things if they can keep their emotions in check.
To answer your question, I think we are facing a brave new world in how this economic recovery will happen. Traditional wisdom would in fact support that jobs drive the economy and we need to enable people and companies to create jobs. However I'll make 2 arguments as to why this is no longer true. First, inadvertently companies learned exactly how much more they could really get out of their workers when it was necessary. When times got lean and everyone was cutting back and workers were happy to have a job they busted their humps and companies quickly learned how efficient the American worker could really be. I think(and this scares me a little) that was a paradigm shift that will never go back. People talk about re-creating lost jobs.. I don't think that is going to happen. Many of the jobs that were lost in the last 2 years will never come back because companies realize they don't really need them. And future job growth will be slower because companies realize that new growth that once required them to hire 100 workers can really be done with only 65. Those are 35 jobs are gone forever.
I will respond to all of it in a little bit, but the reason that jobs are not returning is simple. We had one good quarter, and these companies do not want to grow in the face of massive tax hikes that will take a great deal of their fluff away. They do not understand the implications of the national health care programs, they do not know if the "Bush" tax cuts are the only sort of tax change they are going to see, the Health care taxes are going to be in force in three to four year, and a plethora of other things. Simply put they cannot forecast out enough to make sure they can maintain the margins they are now enjoying.
I have been a business owner and if I cannot forecast or have decent probability going forward that I will be able to grow and reap a return on that CAPEx, I will just stay static and squeeze what employees I have for any efficiency we could find. It is calling standing back and taking the safe gamble.
Second part of my argument is that your premise is if we allow companies to make more money they will hire more and grow more. My answer is that if that was true why hasn't it already happened? We just watched the second quarterly round of massive corporate profits. Many sectors including our own are reporting record profits the likes of which haven't been seen in nearly a decade. They've been making these profits for upwards of 6 months now. And yet job creation and job growth have remained stagnant. If companies were hiring like gangbusters now and extending the tax cuts would help keep that going I would be all for it. However they are not, and I have no reason to think extending the tax cuts will have any effect other than contributing to corporate profit.
So if we can't build on job growth, what do we build on? Consumer confidence. The reality is that while 10% unemployment is bad, it is no where near historic highs. Lots of people still have jobs, they are just scared to death to spend because they don't know what the future holds. I think a lot of that stems from worries about the national debt, worries about losing social security, worries about how they will pay for health insurance. To me eliminating the tax cuts is the government starting to say, hey we are overextended. We have to get more money in the coffers, and get our debt under control so we can continue to provide services for our citizens. Stabilizing the debt and proving that government programs are in fact sustainable would be a big step towards drawing out consumer dollars, and my bet is that is where the back bone of this recovery needs to be.
Ok, To the second part where do I start.
I will dovetail what I said in my first response to answer the second response. I am "Joe Consumer" I am not spending because I do not have any confidence in the return from historic lows that we have had. I am not confident that the world economy with major banking issues though out the globe will still not fail. We have propped them up, but it is like adrenaline in a heart that has stopped. It works for a little bit, but that machine better start its own work before it wears off.
IMO, if the government has any past practice of cutting these huge programs that have run their course, citizens of this country may be more willing to see new ones start up. Problem is that once a program always a program no matter what it is. NASA may be the first government program that gets scrapped. No that is not a right comment, that is just my take.
On to the flow of the economy. People are also not spending because either them or their neighbor are out of work. Again, consumer confidence. How do you increase confidence. America as a nation was built on the tenant of; "Anyone can succeed with hard work." We can never forget that, nor can we try to minimize it. Reality bites, and for those that are not willing to go to any means to provide, means they expect the government to step in. Not a path to success in my opinion.
Government needs to be an accumulator in the system, not the reservoir. Everything has its place. They used to say 5% unemployment was the min, well we broke that mold.
We as a nation need to pay down debt, quit spending, and return to basics. People that want to work should be able to work. More workers makes more income to tax. We have lived on credit for so long, that many people do not like the prospect of living within their means. I was one of them, and then decided to make it work, no matter what. I cut up every credit card I had, went to cash, and saved for purchases. It sucked, because I had to wait. Well, on the back side of the pain, I get it.
Putting people to work is the key. Stating that those jobs are gone forever is just a straw man. History proves that jobs or Skilled trades leave every day. Jobs change, give ppl the tools to change to. It is not different than when bar codes were invented, or computers, or even air travel. People will follow the jobs, but you have to allow the innovators and corporations some incentive to take on risk, have a reward, and grow. Looking at tax raises, and fewer consumers to buy the prospective product makes any person thinking of taking that risk less likely to do so.
At a point in the future we need to pay off the 14 trillion in debt, but we do not do it when the economy is just starting to come back. We do it with more jobs, more taxable income, and fewer programs the government is paying for. It is called balancing the federal budget. Both parties are to blame. We need to find a solution that returns this country to prosperity, and not on fiat money.
I too agree, lets argue the issue, and not attack the person. It gets less heated that way.
