The AP news story starts off with the title of “Initial jobless claims increase unexpectedly.” My initial reaction was disbelief. How could the current unemployment be anything but expected?
The number of newly laid-off workers seeking unemployment benefits rose last week, a sign that jobs remain scarce even as the economy recovers.
The Labor Department said Thursday that first-time claims increased by 18,000 in the week ending April 3, to a seasonally adjusted 460,000. That’s worse than economists’ estimates of a drop to 435,000, according to a survey by Thomson Reuters.
“…a sign that jobs remain scarce even as the economy recovers.” What? How can the economy be said to be recovering when jobs continue to hemorrhage away? I also have to laugh at the way the economists are constantly surprised by the unemployment numbers. It’s not all that surprising to me.
Quite simply, the principal purpose of a business is to make money. A business that doesn’t make money soon stops being a business, and all its employees are then out of a job. The more uncertain the future, the more uncertain businesses become about hiring and expanding. And hiring people and expanding business is exactly what will get us out of our current recession. Why would a business hire people and purchase equipment if the likelihood of making a profit is dubious at best? And what is producing that uncertainty? Government, of course.
The massive health care overhaul has passed. What does that mean for additional taxes and fees to businesses? At this point, it’s too soon to tell. After all, the Senate version was passed, but the House is still fighting for its changes to be reconciled into the law. That is producing uncertainty.
People in the White House are talking about tax increases. What will those tax increases be? Will they be focused more on people or on businesses? And if businesses are targeted, will the increased taxes apply to all businesses or just businesses over a certain number of employees? If additional tax burdens apply to a business once it has 51 or more employees, what would a struggling business with 51 or 52 employees likely to do? If you say “fire enough people to drop below the new tax level,” you’re right, and obviously not a government economist. So the prospect of increasing taxes is producing uncertainty.
In the same Reuters report talking about increasing taxes, Paul Volker also floated the idea of a European-style value-added tax. If you think our current tax system is complex, the VAT adds yet another layer of complexity on top of it. And his comment doesn’t show any assurance that our current income tax would be replaced by a VAT, so I’m left to believe that we would have a VAT on top of our current income tax. Adding a VAT to business would produce uncertainty.
Even though much of the science behind human-caused global warming has been shown now to be fraudulent, eco-freaks and people in government are still pushing for a carbon tax. Since everything humans do, including simply breathing, produces CO2, a carbon tax would affect every business, and not in a nice way. Discussion of a carbon tax like Cap and Trade produces uncertainty.
The tax breaks signed into law by President Bush are scheduled to expire in 2010. Will Congress renew the tax breaks, or will it let them expire? The expiring tax breaks would mean a hike in the taxes paid by businesses, and increasing taxes on businesses just puts an additional burden on them in an already tough economy. Not knowing whether the current tax breaks will remain or vanish away produces uncertainty.
Every time government steps into a business and tells it what it may or may not do, it is creating uncertainty. Will this meddling change with the next administration? Will it change with the next big scandal or witch-hunt? Toyota is being pummeled by the government for a run-away acceleration problem which is most certainly mostly hype and partially driver error. But government, who controls Toyota’s competitors, is creating a hostile work environment and fining Toyota over this latest bugaboo. Not knowing if government will allow a business to actually do its job produces uncertainty.
Government isn’t able to create wealth; it can only take it from one person to give to another. And while it is transferring the wealth, some of it sticks in the bureaucracy, so this wealth transference isn’t efficient. Likewise, government cannot create jobs that will stimulate the economy. The most it may do is create government jobs that require taking more of the nation’s wealth to feed the bureaucrats. And that way does not lie prosperity, just more government bureaucracy.
To promote the common welfare, stimulate the economy, and foster the creation of real jobs, government needs to make it easier for businesses to do their business. Our government could easily do that by lowering taxes and reducing uncertainty. But as long as this administration, or any other one, continues to make the future scary and uncertain for businesses, we will be slow to exit this recession, and businesses will be reluctant to hire new people or even keep all of their employees on.
Next time you read that joblessness or recession numbers are unexpected, you may rest assured that you are dealing with someone who doesn’t understand business, even if they have a Ph.D. in economics. Why else would they be so surprised?