23 October 2009

Waiting Out the Recession from the Sidelines

These are grim times for the US Dollar and US employment. The new US President and Congress are proving antagonistic toward business interests. They have been distinctly unfriendly to small businesses that employ most ordinary Americans. It is an unpredictable time to start a business, or to expand an existing business. No one knows what is coming from the green rookies currently in power.

The wisest and best informed observers recommend battening down the hatches for a long economic winter storm. More and more members of the US productive class have decided to do just that.
Year-over-year collections from withholdings fell over 10% during the most recent quarter, even though average quarterly unemployment increased “only” 3.5% during the intervening year. Many formerly well-paid employees are earning much less, paying not only less tax, but proportionally less as a percentage of their lowered income. Employees at the lower end of the pay scale are working fewer average hours. Given that most economists and other analysts both in and out of the government are saying that unemployment will stay high until at least late 2010, future year-over-year improvements in the withholdings number, which is by far the most important one on the list, are probably not on the horizon.

That’s especially true because the disincentives to work hard have increased significantly during this administration’s early months, and there are more possible disincentives on the horizon. This Forbes report by Janet Novack and Stephanie Fitch (”When Work Doesn’t Pay For The Middle Class”) explains how ugly the situation is in great detail.

What the Forbes pair is essentially telling us is that “Going Galt” has spread from the highest producers to above average and average ones. This, at least as much as the recession itself, explains why collections have cratered so severely, and why anyone expecting a robust recovery in money coming into the Treasury is probably setting themselves up for significant disappointment.

The establishment media’s failures to recognize and cover the “going Galt” phenomenon of the past 16 months, and the more recent “it isn’t worth it to work” trend, are two more significant journalistic oversights in a very, very long list of them. _bizzyblog
Al Fin predicted all of this well before the November 08 US elections. Anyone paying attention could have predicted that when faced with a rabidly anti-business, anti-energy, pro bureaucracy expansion, pro-taxation government, prudent private producers would cut back and step back from exposing themselves to ever more government abuse. The government has essentially declared war against the private sector. It is the oft-told tale of the scorpion, stinging the turtle upon whose back it is riding across the river. It always ends badly.

No one knows exactly what is going to happen next. The green rookies controlling the US government have proven to be both incompetent and over-reaching. The destructive aftermath from Obama / Pelosi meddling in the US economy will reverberate nationally and internationally for decades. During that time, the population IQ of the US will decrease from 98 to 95, and government education and state-controlled media will proceed to dumb down the population. You get what you vote for.

H/T Glenn Reynolds

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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