With the reelection of Obama, we almost assuredly face four more years of $1,000,000,000,000+ deficit spending, putting us over $20,000,000,000,000 in debt by 2016. Our national GDP is just over $15,000,000,000,000. The federal government borrows roughly 43% of the money it spends, and that percentage continues to increase. The money necessary to run government (all the vehicles, salaries, buildings, paper, copiers, airplanes, military, interest on the national debt) consumes just over 39% of the budget. We don’t have an income problem, we have a spending problem…but that’s a topic for another day.
Congress does not have the strength of character to confront and conquer the problem (they are the cause of it). Voters do not have the restraint to vote out representatives that bring home the pork, despite the obvious results for the next few generations. It’s way past reasonable to expect a reversal of the trend until something drastic blocks its path…but that’s a topic for another day.
I’m not smart enough to predict which segment of the economy will fail first, and what domino pattern will follow, but it doesn’t take a Milton Friedman to grasp the concept that any organization cannot spend 133% of its revenue every year, increase that percentage every year, and hope to stay solvent very long. How long before its creditors stop lending, and how long before they foreclose?…but that’s a topic for another day.
Here’s what I see occurring over the next few years. First, mom-and-pop businesses will either fail, close down, or sell out to others more hopeful about the future. American business has always had the urge to merge; this will only accelerate that trend. It’s hard enough to turn a profit in a business, and that task is hardest on the small businesses that don’t have the buying leverage that bigger chains do. Fred’s Diner cannot buy eggs for the same price that IHOP buys them. Either his prices have to be higher or his profits have to be lower to stay competitive. Many will give up in the coming months.
Next, the right to work states will continue to outpace the rest of the nation in job creation (what little there might be). Here’s a map to see where whatever economic growth we might have in the near future will occur.
Look familiar? Here’s the electoral map from 2012.
They aren’t exact, but they aren’t a coincidence either. People know what keeps food on their table and a roof over their heads. Moving further toward communism isn’t the answer for what ails our country. Centralized planning cannot motivate people to start businesses and create jobs. Union thuggery has perverted the original benefits that unions brought a hundred years ago or so. In this tight economy, businesses that can choose where they operate will do so in the most favorable environment. Right to work states are far richer soil than the others.
The federal government thinks it has a stranglehold on us now. Besides the demands that companies offer insurance to their employees, ObamaCare is chock full of other nasties. There is a provision that employers have to verify their employees’ household income. Now, how can they do that? I know what I pay my employees. I don’t know what their parents, siblings, spouses, roommates, or anyone else who lives with them makes. Yet, the government expects me to track that. I wonder what the penalty will be if I miscalculate that total?
Businesses that own more than one location will likely create wholly owned subsidiaries of themselves, to avoid having to offer insurance. So, a restaurant chain with 25 stores, will now become a holding company that owns 25 restaurants. Businesses will find a way around this law; you can bet on that. Still have over 50 employees? Okay, the kitchen staff is now a separate company, the waitstaff are employed by another company, and the janitorial staff are all now 1099 contract labor.
The government won’t be raking in all the money it thought it would to finance ObamaCare, and not everyone will fall under its guidelines, as planned. What now? Just like all government interventions, first they get their foot in the door, then they leverage it. They will tighten the guidelines to include businesses with 25 employees…10 employees…any employees. As the noose tightens, the most precient will slip out. Where? To the sidelines to wait, the friendliest states, friendlier countries, who knows?
The left will realize some of their dreams and some of their nightmares. The consumers will have to yield some of their wealth to those with less. However, the evil corporations will gather increasing influence with the government as they consume smaller companies and grow even bigger.
Unintended consequences would be a misnomer here. I think the term implies that the situation has been thought out in advance, but some consequences have been miscalculated or unanticipated. What is happening before our eyes is gross mismanagement. A glance at the 20th century should be enough of a deterrent from pursuing these devastating economic policies. Unfortunately, the current administration has the majority convinced that we are moving “Forward” and those who look back will be turned into pillars of salt, or something.
Finally, I won’t say it’s all doom and gloom, because there will be bargains and opportunities in the next few years. For those with any extra cash, those opportunities can be profitable in the long run. The problem I see is surviving in the short term.