Tuesday, June 14, 2011


Larry Summers, former advisor to President Obama in his role as Director of the National Economic Council, wrote a couple of articles this weekend stating that the answer to all of our problems must be "more stimulus". 

Unfortunately, economists and government leaders have this infatuation with the government and believe that the only answer for every question is "more government and more of my money". 

Summers came up with two brilliant ideas that are absolutely not original;
1)  Increase the payroll tax holiday and expanding it a bit
2)  Greater spending on public works projects!

Personally, I don't agree with Summers that the payroll tax could have an impact in this environment.  Small business owners are scared to death of the potential for tax increases and more regulatory interference.  These worries all prevent them for taking steps to hire more and especially hire a person that would throw their company over the 50 headcount threshold.  Some readers may say that I'm over doing it and going too far.  I would simply reference the study on Health Care from McKinsey released last week that stated that as many as 30% of employers would drop health coverage and force their employees to use a government option in 2014.

What does health insurance have to do with a hiring decision?  A lot.  Health insurance costs are just one more justification for not taking additional risk in this scary environment.  Note also something that didn't get much play in the fervor after the study release.  When employers were extremely informed of the ramifications of Obamacare on their business, they stated that they were MORE LIKELY to drop coverage for their employees.  50% of these informed employers reported they'd make this decision.
This is pretty damning and will undermine the stated goals of the Patient Protection Act, the foundations were based on employers continuing to offer coverage, not shifting the burden to the government plan and exchanges.

Finally, our President quipped yesterday that we haven't seen as much job growth in the US because "shovel ready" jobs weren't really shovel ready.  The excuse made was that government regulations held up many of the projects that were slated to have amazing impact on the jobs markets.  Clearly, this acknowledgement rebuts Summers' notion that government projects could be a boon for the jobs market.  What we do know is that government stimulus and jobs does little in the long run to change the employment landscape.  We also know that too much government crowds out private sector jobs, and finally we see that the threat of more government keeps employers from hiring and providing benefits for new and existing employees.

Let's just stop the stimulus and get back to solid fiscal management of government and our out of control spending.  Many of the absurd policies made by the Fed and US Treasury are made in an effort to obscure our reckless deficit spending, let's not give them more reason to create inflation and unrest.


Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/.   Please check in often as we are updating stories daily.