Society's Producers Are Under Attack

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Laura D'Andrea Tyson, former Chairman of the Council of Economic Advisors under President Clinton, recently praised the virtues of additional massive government spending with an editorial entitled "Jobs Now, Deficit Reduction Later". Never mind the deficit. Time for that later. We need jobs now! Job creation is all the rage.

The theme rings throughout Washington and the media as a talking point for Congress and the Obama administration. Spend now, pay later. Green jobs here. Tax credits there. Government micro management run amok. Problem is, they're misguided and we as a society will be forced to pay the price.

Under the not so thinly disguised veil of economic "justice" (code for redistribution), this administration and leaders in Congress have created a toxic environment where precisely those individuals in our society who have the ability and willingness to create employment for others - the dreaded "wealthy" - simply refuse to do so. And it's easy to understand why.

The producers in our society, a distinct minority, are under attack. What government bureaucrats, academics and many in the media fail to understand (or refuse to accept) is that intelligent, capable people - those who build businesses and create employment for others - are anticipatory in nature. Businesses, markets, governments (some, not all), and entire sectors of the global economy are all anticipatory in nature.

It's understandable that if a proprietor of a small business is concerned about his or her economic future, they are naturally more conservative with their capital and the manner with which that capital is deployed. It's human nature.

If you believe your taxes will soon skyrocket under the cloak of redistribution, you conserve. If you believe that energy costs are about to increase due to specious legislation such as "Cap and Trade", you hesitate to invest in plant and equipment. If you see a government beholden to labor unions and a President intent on "turning the country purple" with pending legislation such as the oddly named "Employee Free Choice Act", you naturally have concerns over future labor costs.

Increased concern means fewer employees. Too much concern causes businesses to take a hard look at their current staff. If you see the regulatory pendulum swing so far in the restrictive direction that it puts your business at an increasingly competitive disadvantage, you do your best to simply maintain the status quo.

Why consider expansion when the prudent thing to do is wait? If you anticipate government dominance of health care, you take a wait and see attitude on employee benefits. If you see massive government deficits as far as the eye can see which will throttle the economic vitality of this country and the lives of Americans for generations to come, you simply stop investment in the future. If you see a reluctance to rein in frivolous lawsuits with any meaningful tort reform in the name of political expediency, you manage your business in an overly cautious manner out of concern that you could be the target of one of those suits.

We've recently heard rumblings of a "war tax". We've heard the possibility of no limit on Social Security taxes. We've heard of a punitive surtax on upper incomes to offset "health care for all". Now we're hearing of an additional Medicare surtax. All of this has a negative effect on investment. And it has a negative effect on innovation.

If you see the potential for hyperinflation and a continued marginalization of the dollar, you play defense. You don't play offense. You don't spend. You don't hire. You certainly don't put capital at risk. You hold on to your company and what you have for dear life until the storm hopefully passes. You make do with less. Unfortunately, that's the situation we're faced with today.

Government policy intended to penalize the targeted upper income earners in the name of social reform in turn ends up penalizing those who can least afford it. Regrettably, once again, the law of unintended consequences.

Government created taxpayer financed public sector jobs are not the answer. Far from it. In an environment where approximately 80% of private sector job creation comes from small to medium sized businesses, now is the time for sound economic policy to trump the great society social architects of "progressive" big government.

And it's not simply job creation. Those very people who have the ability to create private sector jobs are also the same segment of our society who control a disproportionate share of discretionary spending as well as a large portion of charitable contributions. It's a vicious cycle. One doesn't continue without the other.

The current fallacy in government is that we need to spend our way out of this recession. This is naïve, amateurish and dead wrong. The only way we as a country are going to extricate ourselves from this economic free fall is to grow our way out of it.

Washington needs to step back, take a deep breath, and for once make policy decisions that are in the best interests of the United States and not simply consolidation of power for a particular political party. The danger of not doing so is too great.

Will that happen any time soon? I'm not holding my breath. The amateurs in Washington are making short-term political decisions that are disastrous in nature, the effects of which will have negative repercussions on this society for generations to come - all in the name of political power.

We recently learned that private sector experience in the Obama Administration is at its lowest level in over a century. It shows. The speed and magnitude with which our society is being damaged is truly stunning. As Warren Buffet recently stated, we're in imminent danger of becoming a banana republic.

Steve Borowski is a co-founder of an investment firm that employs 53 people who collectively return tens of millions to the economy annually.

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