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The Economy’s Biggest Problem: Politicians

12:00 AM, Mar 2, 2013 • By IRWIN M. STELZER
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Most analysts agree that the manufacturing sector, or at least many of its components, is on the upswing. Factory activity in January expanded at the fastest pace in nine months. Orders for so-called core durable goods, which exclude volatile orders for non-defense aircraft, jumped 6.3 percent in January. Both production and new orders rose in February. Société Général’s economists, after studying activity reports from around the country, see “positive momentum in the data.” 

All in all, there are signs that the economy continues to grow, and that it is only policymakers who stand between it and a really good year. One example of the cost of uncertainty: a major oil pipeline company is reluctant to lay pipe from the new Western oil fields because it can’t be certain that the administration will allow continued development of those resources. Uncertainty trumps the incentive provided by the new oil discoveries.

Then there are the plans the administration has for the business community.

·     Obamacare will cut in next year, imposing costs on small businesses that grow to need 50 employees during the current year, and on large businesses that now are contemplating paying the $2,000 tax that will be imposed on them if they do not buy mandated, generous health insurance for their employees, policies that will carry premiums in excess of $2,000 per employee.

·     If the president and the Democrats have their way, taxes on high earners will be raised yet again.

·     Regulations are being prepared that will drive up energy costs and result in the closure of many coal-fired power plants.

·     Small groups of employees within large companies are being recognized as legitimate bargaining unions, and will be in a position to shut down a giant company even though most of its employees have refused to join a union.

·     The president is pushing for an increase in the minimum wage to $9 per hour from $7.25. 

These are called headwinds. They blow with mighty force, inducing corporate boards to seek shelter behind walls of uninvested cash. Reduce them from gale force, and the economy could sail forward more rapidly than most expect.

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