The June unemployment numbers came out Thursday and -- good news everybody! -- we've managed to slow the massive economic arterial bleed to a little trickle. The unemployment rate crept up 0.1 percent to 9.5 percent. though, as James Pethokoukis notes, if you take into account all the people who simply stopped looking for work last month, we're looking at a 10 percent rate.
The "glass half-full" folks, are sure to hang their hats on the relatively small rate of increase. The rest of us will note that our unemployment rate is the highest since 1983, when I was a junior in high school, and will be frantically scrabbling around on our hands and knees looking for "green shoots". I'm no economist; in fact, I'm generally lousy at math, but I don't expect that we'll be seeing any real growth in our economy for several months. The pessimist (and news-reader) in me says that we may not start seeing solid signs of recovery for at least a year.
Last week, I wrote about the vital role small businesses play in our economy and how they are the key to any economic recovery. Well, small businesses are hurting right now and our Federal government is inflicting the wounds. Listen to what this New York Times blogger, who also owns a small business, says about what the Stimulus Plan is doing to his company.
Here’s an example: Recently, there have been changes to the Cobra laws that grew out of the stimulus package. The government site that explains the program is 22 pages long, hard to follow, and didn’t answer all of my questions, but it was the best I could find.
As I understand it, there are two basic changes: First, employees who initially turned down Cobra have another chance to say yes (if they became eligible for it after Sept. 8). Second, business owners who have more than 20 employees and offer health insurance are now required to lay out 65 percent of any Cobra payments for employees who qualify for the benefits (this, too, applies to employees who took Cobra after Sept. 8). In addition, employers also must collect the 35 percent that employees still have to pay.
This represents a significant new burden to small businesses. Yes, the government will eventually reimburse employers for these Cobra payments through payroll tax credits. But that can take months.
Let’s think about what’s happening here. There is an assumption that an employee who is laid off is going to need help making those Cobra payments, and that may well be the case. But what about the employer? If a company is laying off people, there’s a pretty good chance it’s losing money. Possibly a lot of money. In some cases, it may be fighting desperately just to stay in business.
In reality, the government is forcing small businesses to float the government a zero-interest loan to cover the insurance payment. The situation gets far, far worse when it comes to unemployment. As those of you who own a business know, when one of your employees files for unemployment, your insurance premiums go up. So what happens to those premiums now that unemployment insurance has been extended an extra 20 weeks? The government isn't picking up that slack. That money is coming straight from the businesses. So, says the blogger, he's far more hesitant to hire new employees, even if he could use a few new bodies, because the cost to hire, retain, and lose them is far too high.
And all that was caused by the Stimulus Plan, which was supposed to create jobs (or save them, har har) and head off a dizzying unemployment rate of 9 percent! Imagine what will happen when nationalized health care and cap-and-trade hit those businesses? CNBC gives a pretty good summary (via Instapundit):
America isn’t hiring precisely because of government policy. Small business owners, who are usually the first into and the first out of the job pool, are standing by the fence and watching. They are paralyzed by regulatory uncertainty. If they hire someone who ends up doing poorly, will they be able to fire that person? Will they have to pay their health care bills after they’ve been terminated? If so, for how long? Who will pay for all these stimulus checks? If it will turn out to be small business, why would they hire instead of keeping costs low to prepare for the big tax bill? Where will the market move? Are you in the right business or are your clients in a politically disfavored industry? . . . Jobs aren’t languishing despite the government’s best efforts. They’re languishing because of them.
So what do we do about the problem? Francis Cianfrocca has some pretty strong medicine, but getting it into our sick economy will require the Obama administration mostly doing the opposite of what it's done thus far.
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Commit to a zero interest rate policy for at least 2-3 years.
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Enact a 100% tax holiday on business income and capital gains. That’s not a deferral, it’s a full abatement.
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Commit credibly to eliminate new regulations on business.
The Stimulus Plan has utterly failed to do what the administration promised and the White House is busy hustling the goalposts all over the field to try to obscure that inconvenient truth. It seems like now would be a pretty good time for conservatives to point out that the President and the Democratic Party have had their chance and they blew it, badly. Now, its our turn to use tried-and-true conservative solutions to get the economy back on track.