The Federal Reserve has signaled a slowdown is coming in the economy. But why should there be a slowdown when we have had all of the stimulus by the Government. First the TARP, then the stimulus package, the cash for clunkers program, and the home buying credit. Of course all of these stimulus actions are now over with and for all intents and purposes dead, except maybe for some very long-term programs like high speed rail (What happened to that program?)
But there are recent Government actions and policies that will now hold back the economy. What are these?
First, there is the uncertainty of what the new taxes will be. Also the uncertainty of what the new health care costs are going to be as a result of the Democrat's new health care law. Another uncertainty factor are the new financial regulations which are very complex and the future effects are not yet known. All of this uncertainty is very bad for business activity. Businesses will hoard cash and refrain from hiring and even cutting costs wherever they can including layoffs. Since future sales for businesses are uncertain in most cases, businesses will also cut inventories to a bare minimum. This affects suppliers of materials and parts, reducing their business.
Second, business will face higher taxes in the near future. So even if a company needs to hire workers, they will not because of the new taxes that will cut earnings. This will affect small businesses the most as these businesses are usually struggling for survival.
Third, is the new health care law which will cause increasing insurance rates. Any business that provides health care insurance will have to pay out more money for each worker they hire. This will cause some companies to either cut health care insurance payments for their workers, provide lower coverage, and further reduce hiring to reduce their health care costs to a minimum.
Fourth, the new financial regulations will cause more overhead expenses for businesses and this translates to cutting costs somewhere else, probably more layoffs or a slowdown of hiring. Some companies may go out of business totally because the new law grossly interferes with their business.
Fifth, the anti-business actions of Congress are accumulating and will add up to a dampening of business activity.
Sixth, and one of the worst factors, is "free-trade". So-called free trade has caused massive loss of jobs in the US with whole industries moving overseas to find cheaper labor. What we really need is FAIR TRADE!
Seventh are the nuisance lawsuits that put a damper on business and causes a large part of health care costs we have today. A doctor's cost for insurance against these lawsuits may run $300,000 or more per year. Congress needs to put a cap on these suits but has refused to do so.
Eighth, the US Space Program has been drastically cut back causing large layoffs of highly skilled workers and engineers. A lot of small businesses that were serving NASA needs will now be cut back or even going out of business.
Ninth, the military budget is being cut back by Mr. Gates. This will probably end-up causing more job losses and may cause a loss of military power for the US.
Tenth, the restrictions on oil drilling and new nuclear power plants is holding back energy growth and jobs in this industry. In the meantime we are virtually held hostage by the OPEC countries who can charge us anything they want to. If oil and gas prices go up substantially, this will cause a real recession.
When Reagan was president, he reduced taxes and beefed up the military. the economy improved and there was no lack of jobs.
We need to get back to sane government and have some policies that are friendly to US businesses. Vote accordingly in November.
To sum up, we have a lot of problems that are mainly a result of bad government policies and bad legislation.
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