Imagine you are a consumer and don't know for sure whether you will have a job next week. How much do you spend? No more than you must, if you're prudent.
Imagine you are a business owner, and sales are down. How many new workers do you hire? Probably none, if those on the payroll meet your customers' demands.
Imagine you run a business with cash in the bank, but you're unsure whether the government will sock you with higher taxes, increase your health care costs or heap on costly new regulations. How much of that money do you spend? To ask the question is to answer it.
A recent New York Times headline bleated the bad news: "A Wave of Worry Threatens to Build on Itself."
The story explained: "Employers delaying or suspending hiring. Homebuyers getting cold feet. Shoppers pulling back on spending. Hesitation is weakening the American economy."
The economy officially left "recession" two years ago. Does it feel like it where you live and work?
Businesses of fewer than 500 employees account for half of U.S. jobs. According to the Los Angeles Times, they are "typically quicker to hire after recessions because they can't make do with less."
But they aren't hiring. The National Federation of Independent Businesses says small-business owners who believe the economy is not improving outnumber those who think it is by 16 percentage points. In a recent survey, nearly 2,100 small-business owners reported reducing employment for the fifth-straight month.
Economic uncertainty is the toughest problem facing small businesses, says a new survey by Pepperdine University's Private Capital Markets Project.
"Just ask a businessman," Northern California Republican Rep. Tom McClintock agrees. "They're scared to death of the additional taxes and regulations they may be facing in the next few years and are pulling back to see what happens. Ask bankers why they're not lending, and you'll hear the same answer."
It is hard to imagine Washington and Sacramento could inhibit economic growth any more if they tried. Here are a few of the hovering swords of Damocles giving rise to foreboding:
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Rules and regulations. Another 81,405 pages of new rules were added this year to the Federal Register, expanding the ever-changing landscape of what once was OK becoming no longer OK. Estimated total cost of compliance: $1.7 trillion.
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Obamacare. The health care overhaul law's countless, detailed regulations are largely yet to be defined by an army of faceless, unaccountable bureaucrats. "Death panel" could just as easily refer to government inflicted regulations as to end-of-life determinations.
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Frank-Dodd. This regulatory overreach expanded federal interference well beyond legitimate boundaries, giving bureaucrats more power to interpret financial matters and to enforce with little oversight. If financial institutions needed another excuse to sit on reserves, this one is a pip.
•Bush tax cuts.
If they are not extended beyond 2012, they represent substantial tax increases on everyone.
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More taxes on the rich. This threat targets people who best can afford to protect their income from taxation. In the past that has meant money fled the economy and was denied to businesses in need of expansion capital. Already, more than a trillion U.S. dollars is hiding in foreign banks for just such protection.
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Tax-happy California. This is a state where, no matter how much tax is raised, the government spends even more. It strains credulity to hear from Sacramento that its looming budget shortfall, pegged at $13 billion by July, requires even more taxes.
There's a reason California ranks at the bottom in business-friendliness and near the top in tax burdens.
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EPA regulations. A parade of new regulations and the inevitable challenging lawsuits will leave much in limbo in 2012. Among them, reclassifying coal ash as a hazardous waste without justification at a compliance cost of $20 billion, leading to closure of up to 350 coal-fired plants. The Environmental Protection Agency plans to regulate more than 10,000 commercial and industrial boilers (to create steam for heat of power generation) that critics say will result in 800,000 lost jobs. Nothing pending is quite as economy-deadening as the regulation of greenhouse gases that could result in 2.5 million lost jobs by 2030 and an increase of 50 percent for gasoline and home energy costs.
Millions of lost jobsUniversity of Chicago business professor Steven Davis concludes that, "policy-related uncertainty played a role in the slow growth and fitful recovery" of recent years. Davis says
uncertainty alone may be costing the nation 2.5 million jobs.
The U.S. Chamber of Commerce says 79 percent of small businesses surveyed said they want government to inflict more regulations and taxes. Just kidding. They said they want Washington to "get out of the way."
Now, consider this: Imagine you're a consumer without a paycheck. There are nearly 14 million of you, more if we count those no longer drawing unemployment benefits. Or, perhaps you're a business where sales are so low you are considering closing the doors. Reliable numbers for current business closures aren't available, but walk through a business park, manufacturing district or shopping mall, and count the vacancies.
Maybe you're a business with little money in the bank. You, too, face the uncertain future of higher taxes, health care costs and myriad costly regulations.
Lower expectationsTrends are going in the wrong direction. Over the next three months,
only 9 percent of businesses surveyed by the NFIB plan to increase employment. That's fewer than the October survey's 11 percent. Worse yet, 12 percent plan to reduce workforces, and 26 percent expect earnings to decline.
Maybe consumer confidence will kick-start small business. Not quite.
"Consumer sentiment remains at very low levels and is reflected in the 26 percent of small-business owners who cite poor sales as their biggest problem," NFIB Chief Economist Bill Dunkelberg says.
Consumers blessed to have money clutch it tightly. -->
That retards sales. -->
That affects how many workers businesses hire.
You may have noticed too few waiters to serve tables in your favorite restaurant. Austerity coupled with continuing technological advancements enable companies to do more with less. Consequently, there are fewer secretaries and grocery checkout clerks.
"[W]hat we're in now is uncharted territory," Alec Levenson, a labor economist at the USC Marshall School of Business, told the Los Angeles Times.
SurePayroll, an online payroll service, has good and bad news. Its October survey showed an increase of 20 percent, to a total of 53 percent, of small-business owners with optimistic outlooks. Of course, the previous month was a record-low. That's the good news. The bad news is that October also revealed there continues to be flat or even decreased hiring nationwide – for the 13th month in a row. A persistently bad trend.
Less worseHere's some quasigood news: Although hiring is down, the decline is slowing. It's getting worse more slowly.
The SurePayroll's Small Business Scorecard asked small-business owners what the administration and presidential candidates should focus on. Balancing the budget, reducing the debt and stabilizing the housing market drew 51 percent response.
But the federal government spends $1 it doesn't have for every $2 it does. The deficit is now past $15 trillion. Home prices are expected to fall further in coming months, pushing them to a new low of 35 percent below the early 2006 peak. Twenty percent of mortgages held by Fannie Mae and Freddie Mac are underwater. You can judge how likely those numbers are to turn around anytime soon.
In the meantime, what is certain?"As the global economies have collapsed in the past decade, nothing has been certain except for uncertainty," observes Andrew Napolitano, writing at Townhall.com.
Unfortunately, you probably can count on that.
At least until government gets out of the way.