We’ve been keeping pretty busy at work. That is certainly nice. But a big part of my focus is constantly on trying to figure out how to make sure the company finds its way over, through, around, or under this tough economy. I am determined to actually add team members in 2009.
Speaking of which … our local unemployment numbers for January just came out … 11.8%. This is up substantially from something like 8.3% in December. It would not surprise me to see us pushing 14% when the February numbers come out. By the way, during the Great Depression, the maximum unemployment was around 25% in 1933. One thing the current numbers do not capture though is how many people are working reduced hours from their norm. That percentage around here at least seems very high.
Have you noticed that it’s not cool to talk about how bad the economy is, though? That bothers me. Whenever you do, folks look at you like you’re a horrible pessimist … or you’re being critical of the Obama administration. Fact is, I am neither. I am an incredible optimist overall. But I believe that we cannot stick our heads in the sand … we must be aware of what is going on … we must learn from it … and we must seek solutions. As far as being critical of Obama … the current economic situation has its roots long before he was in office. Now, do I think that the right things are being done to correct the situation? No, not really. But I realize it’s early in the game yet.
However, in all of this, though, one cannot miss one of the big problems with politics … especially today …
In a fluid situation which is new to all of us … one in which we should maintain maximum flexibility and willingness to change … it is very hard for politicians to stray from the course that got them elected. Every word they have ever said has been recorded and will be used against them if they do not try to fulfill it.
This is the position that the current administration is in … trying to live into campaign promises that, even though they were made a year or less ago, were made in a very different world and very different environment. But, rather than risk political suicide by saying “Hey, things have changed, we need to take a different tact on this,” they barrel forward … putting all kinds of things at great risk.
Does anyone really think that anyone in Washington believes that spending and taxing is the right way to go right now? Maybe I’m naïve … maybe it is my optimism … but I think they are too smart for that. They know better but they have painted themselves into a corner and cannot get out without stepping through the red paint and tracking it wherever they go.
Here’s what’s happening … and everyone knows this … our tax base is shrinking at an incredible rate. Any municipality or organization that depends upon tax dollars knows this so painfully well right now. With so many folks out of work, so many folks working reduced hours, temp agencies (which must pay sales tax) basically shut down, and people buying less and less, tax receipts are declining at a very rapid rate. And from all appearances, I’d say that situation will get far worse before it gets better.
The effect of this is even farther reaching than just taxes though. State unemployment and workers’ comp funds are way down. They are seeking loans and bailout money … Social Security is going to be hurt big-time as well.
So, why does, the government think that spending more on pet projects that will have very limited effect … and trying to tax and fee right and left those who potentially could get the economy going again … makes sense? They don’t. They have to know better than that. But they have made promises and not fulfilling them is political suicide compared to simply failing and being able to blame everything on those who went before them. (Are you hearing that happen already? Listen closely.)
To some degree, at the bottom of this is the information age … much as I do not want to shut down the media, the thirst we all have for information and being able to hold others accountable (forgetting about ourselves usually) is one of the key drivers in all of this.
This economic situation is going to get much worse. Again, I risk people getting upset with me for sounding negative … but I am just being real here. All the markers are there. Nothing is happening to pull us out of this.
Interesting to note that now GM feels that even with the bailout money, they won’t make it through this. Months ago, I said that would be the case. The only way to pull them out would have been big incentives to get people buying cars again. GM didn’t need buckets of bailout cash. They needed people buying cars again. They needed to move inventory and get workers back to work.
That is where things are for the entire country right now. Small tax breaks for low and moderate income folks is not going to do it … those will not be used in ways which get people back to work. That cash will be swallowed up by paying off debt and socking away to recoup retirement savings. But, with extra requirements the fed now has on banks, that money will not go back out in credit … and most Americans are scared of credit now anyway. Any extra money that a business gets ahold of right now is also having to be used to pay back banks or to increase profits to show banks the ratios that the feds are now demanding.
The stimulus spending will eventually have some limited benefit in certain areas and certain industry segments. But for the first many months or perhaps even years after those dollars start flowing, they will be sucked back by the banks and corporate bank accounts. It would be far better for the government to simply incentivize consumers to buy certain things through rebates, making that money flow a bit, and restoring consumer confidence. But that goes against the political promises they made. Some folks will argue that this is all about Obama pushing for an extreme left agenda. And maybe there was some truth to that at one time … but I don’t think there is today … today it’s all about avoiding political suicide … these guys and gals know better than what they’re doing.