Kevin Price
GDP numbers raise questions about the value of the stimulus
By Kevin Price
Recently I interviewed Gerri Willis of the Fox Business Network on my program, the Price of Business (on CBS Radio) about the number one business story of the third quarter of the year. One area she pointed to was the decline in the Gross Domestic Product in the second quarter. She noted that, after over $700 billion in stimulus money we had less than a 2 percent increase in the Gross Domestic Product. She sarcastically proclaimed "woohoo" as she expressed the frustration of millions of Americans. The vast majority of the increase in the GDP in the first quarter (which was 3.7 percent) was driven by government expenditures. The proof is in the pudding as the projected growth for the entire year is only 1.6 percent, in spite of the artificially high first quarter. The first quarter offered promising growth because of the hundreds in billions in government spending. It appears very little of it had much traction.
People have sacrificed a great deal to achieve very little. Deficits that took 200 years to accumulate into the total national debt just a couple of decades ago, are now being done annually by this current government. This is driving the largest tax increase in US history starting in 2011, if the Congress does not take actions to protect President Bush's tax cuts. With the ability of capital to easily move from a country, and the US about to have the highest taxes of any industrialized country in the world, the future does not bode well in our ability to keep businesses and those who create them in the United States.
One of the factors that separates advanced economies from developing ones is a predictable business environment. The current one we are in is anything but predictable. Changes in tax, regulatory, and licensure laws, both real and projected, create fear in the hearts of business owners of all sizes. The woman who owns a company with around 40 employees knows she can significantly increase her income and expand her footprint with ten more hires. Thanks to Obamacare, ten more employees would put her at fifty and will then have her saddled with $150,000 in fines because she does not have "qualifying coverage" according to the new law, for an employee group of that size. Fifty is a key number with government regulations. Once businesses reach that level, they are pounded with no bureaucracy.
The Obama administration has added thousands of pages to the Federal Register of Regulations. The 1,408 page financial reform act alone added 243 bureaucratic regulations that should run to thousands of pages. These create uncertainty for investors and employers. The Chairman of the Senate Finance Committee, Christopher Dodd (D-CT) said he had "no idea" what this bill will do. Neither do businesses, which is why real economic activity is stagnant.
If the administration wants to increase real GDP growth, this will only be accomplished through lower taxes on the businesses that create jobs and produces goods and services, reducing regulations and treat such as deterrents to economic growth, and fostering an economic environment that encourages growth.
© Kevin Price
October 27, 2010
Recently I interviewed Gerri Willis of the Fox Business Network on my program, the Price of Business (on CBS Radio) about the number one business story of the third quarter of the year. One area she pointed to was the decline in the Gross Domestic Product in the second quarter. She noted that, after over $700 billion in stimulus money we had less than a 2 percent increase in the Gross Domestic Product. She sarcastically proclaimed "woohoo" as she expressed the frustration of millions of Americans. The vast majority of the increase in the GDP in the first quarter (which was 3.7 percent) was driven by government expenditures. The proof is in the pudding as the projected growth for the entire year is only 1.6 percent, in spite of the artificially high first quarter. The first quarter offered promising growth because of the hundreds in billions in government spending. It appears very little of it had much traction.
People have sacrificed a great deal to achieve very little. Deficits that took 200 years to accumulate into the total national debt just a couple of decades ago, are now being done annually by this current government. This is driving the largest tax increase in US history starting in 2011, if the Congress does not take actions to protect President Bush's tax cuts. With the ability of capital to easily move from a country, and the US about to have the highest taxes of any industrialized country in the world, the future does not bode well in our ability to keep businesses and those who create them in the United States.
One of the factors that separates advanced economies from developing ones is a predictable business environment. The current one we are in is anything but predictable. Changes in tax, regulatory, and licensure laws, both real and projected, create fear in the hearts of business owners of all sizes. The woman who owns a company with around 40 employees knows she can significantly increase her income and expand her footprint with ten more hires. Thanks to Obamacare, ten more employees would put her at fifty and will then have her saddled with $150,000 in fines because she does not have "qualifying coverage" according to the new law, for an employee group of that size. Fifty is a key number with government regulations. Once businesses reach that level, they are pounded with no bureaucracy.
The Obama administration has added thousands of pages to the Federal Register of Regulations. The 1,408 page financial reform act alone added 243 bureaucratic regulations that should run to thousands of pages. These create uncertainty for investors and employers. The Chairman of the Senate Finance Committee, Christopher Dodd (D-CT) said he had "no idea" what this bill will do. Neither do businesses, which is why real economic activity is stagnant.
If the administration wants to increase real GDP growth, this will only be accomplished through lower taxes on the businesses that create jobs and produces goods and services, reducing regulations and treat such as deterrents to economic growth, and fostering an economic environment that encourages growth.
© Kevin Price
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