Impressions of a Flailing and Uncertain Economy
12:00 AM, Jun 11, 2011 • By IRWIN M. STELZER
Word out of Chicago, home of the president’s reelection organization, is straightforward. The president is in trouble, no surprise given the 9.1 percent unemployment rate, and the obvious failure of his economic program to “transform” the energy, health care, and financial sectors. David Axelrod, the president’s most influential political advisor, is telling his boss that it is essential that he hold the trade union vote, financing, and doorbell ringing that helped propel him to the White House in 2008. The agencies of government are marching to the tune of the trade union drummers.
Adding to the uncertainty is Obamacare. It is proving so onerous for employers to meet the terms of the new legislation that the administration has issued 1,372 temporary waivers to employers – many of them trade unions – who say they cannot afford the cost of the mandated benefits. And 50 percent of employers who have studied the new law tell McKinsey & Co. they will stop offering workers health insurance in 2014, when Obamacare cuts in, and instead pay the $2,000-per-worker fine that will be imposed on companies with more than 50 employees that offer no coverage. All of this adds up to one simple fact: employers cannot predict their labor costs – except that they know those costs will rise if they allow new hires to take their total work force beyond 50 employees.
There is more: Will taxes on entrepreneurs and what Obama various calls “the rich” and “millionaires and billionaires” rise as part of a deficit reduction settlement? Will the Environmental Protection Agency revive plans to force huge new investments in carbon emission reducing equipment? Will the administration allow the oil industry to get on with drilling, and hire the thousands of workers it would need?
No one knows. So hoard cash, and wait for clarity or, perhaps, a less anti-business administration. Result: Don’t look for the private sector to fuel an investment-led recovery very soon. With consumers too nervous to spend freely – high unemployment and falling house prices do not generate confidence – that is a serious matter, indeed.