Thinking about your future

As that comedienne used to say, “We need to talk.” And you knew it was something crazy.  Well, I sold my hotels and am now at the point of being retired.  But I need to talk to the guys just starting out about their jobs.  And it’s a little crazy.

This week has been full of Olympics and Chick-fil-a and the politicians arguing.  This is America, Jack, and you can think of gay rights or speech rights and be on either side of the chicken place.  You can vote for Barack the cool or Mitt the nerd.  But I want to talk about your careers and how badly they are in jeopardy and why.  Have you seen that chart of unemployment broken down into generations?  Guys 55 or older  lost only half a percentage point in employment during the recession and now it is back to where it started at nearly full employment of 4.8%.  Middle aged people, 30-55,saw 4% go to 10% and now it has struggled back to 8.5.   But for those under 30, unemployment went from 5% to 12% and flatlined at 12% ever since 2009.  Why?

It’s all about businesses just maintaining the status quo and not taking risks.  You can’t force somebody to go bungee jumping.  They have to be talked into it.  So how do you kill risk-taking by businesses and thus kill the job market for people just starting out?  First, create regulatory hell.  You must buy health insurance, you must hand over your health records, we can’t tell you what it will cost.  You suddenly must comply with regulations on your industry that you have never seen or dreamed of.  Don’t know what it will cost.  Make it hard to break into a new field because of crushing regulation. So why, a business asks, would I venture something new?  Just stay with the tried and true--and the old crew.

Number 2, kill the investors.  In the past, if a business was failing, it failed and either reorganized (if it was large) or was liquidated (if it was just a pick-up truck and some hand tools).  Reorganization bankruptcy allows businesses to  be reorganized (not by the original owners who had screwed up) and do what is needed without interference from unions, creditors, and other third parties.  Often they emerged with a new business plan and became successful, although different. But when the government bought the car companies and propped up banks that were “too big to fail”, everything changed.  Those firms are now in cahoots with the government since they owe an obligation.  Moreover, if banks are merely ‘deemed’ (by implication) to possibly fail in the future, the feds can shut them down now, take them over.  How do bankers avoid this fate.? They don’t loan.  Bad loans can get them ‘deemed’. Just invest in government bonds and stay friendly with the feds. But when businesses can’t borrow, how will they risk and grow and hire new folks?

Third diabolical disaster, tax the schnitzel out of everybody.  I’m not talking a lousy 2% tax on the rich that the Prez and Congress argue about now, I am talking about 21 hidden taxes in Obamacare like the 3.8% levy on real estate sold. Gee, that should help the housing market, shouldn’t it!  Social Security and Medicare has to be fixed.  The budget deficit has to be fixed or the international bond market will fear lending to our country.  How will they do that?  Raise the payroll taxes, raise other taxes.  And then there are the hidden taxes of having healthcare insurance premiums rise by 40% (whoa! That’s already happened.  What next?) And it will cost you a couple thou a year. And I’m talking about the raise of capital gains taxes to discourage old guys from selling out their businesses to young guys (because they’d just give it all the government, the old guys reason).

Fourth, install crony capitalism.  If only businesses with an inside track with government succeed, like in the 3^rd world, every honest business has a disadvantage.  When bureaucrats decide which do well, they never choose wisely, like the market of free-choices-new-ideas does.

Fifth, deficit spend in government.  Deficit spending leaves a mountain of debt that the bond market lenders eventually grow leary of.  How will they get repaid?  It’s proven that when the ratio of debt to annual production (GDP) exceeds 1.0, your currency has problems.  Interest then rises dramatically, like 38% in Greece or 14% in Spain.  Nobody can borrow and see a possible profit.  Hiring dies.  Spain and Greece have 25% unemployment, mostly in the young.

Sixth, kill innovation and new technology.  Waste good government research grants on outfits like Solyndra and porkbarrel projects that never pay for themselves.  For businesses, research dollars are the first thing cut when profits go down.  So by killing profits or taxing them to death, research is the first casualty. And with little new to sell, the old guys can do the selling.

Now I want you to sit back and think.  Isn’t this exactly what Obama has done?  Well, it’s a free country.  Vote how you wish.  But remember this Story of How the Greatest Economy in the World was killed.  I told you this was going to be crazy.