Saturday, December 26, 2009

2009 - Annus Horribilis and the New Normal

2009 was the worst year I have experienced in business in my 30 years working in corporate America. It was truly Annus Horribilis to quote Queen Elizabeth in 1992 as she described the year for her family as a "horrible year". While I have lived and worked through 3 recessions, various real estate downturns, the Cuban Missile Crisis, the oil embargo, numerous wars, the Cold War and 9/11, I have never seen a business year like 2009. Major corporations in just about all industries just stopped hiring. And then, big companies used the severe downturn as their cover to not only eliminate bloated staffs grown in good times; but to restructure in recognition of off-shoring, outsourcing and technology advances that have finally led to productivity gains. Small companies that often support major corporations downsized as well because their revenues fell dramatically in 2009 with significantly less business from their clients and customers.

Most important, 2009 was not just any other bad year. The fact is that the balloon finally burst in 2009 as a variety of factors came together in addition to the financial meltdown to create the "New Normal" in the United States and other Western countries. Manufacturing jobs have been shifting to China for years as a result of higher wages, stifling regulations and high taxes in Western countries. Those old smoke stack industry jobs are never coming back including in the auto industry. But what is even more significant is that new industry jobs are going to China too. I love my Ipod, Kindle and cell phone, which are all made in China. Most electronics are made in China. Most consumer goods are now often made in China. And, solar and wind turbines are also made in China.

The reality is that the United States and other Western countries cannot compete with China related to manufactured goods because union demands have driven the cost of labor way beyond its worth on the world stage. And then, government has added employment practice and environmental regulations and various high taxes that make it impossible to manufacture goods in the US. To this mix add frivolous lawsuits that drive up the cost of doing business in the US and it turns into a perfect storm.

So instead of protecting jobs, the US government particularly as managed by President Obama and the Democrat Socialists that control Congress has pushed those jobs overseas. The very people, factory workers, that Democrat Socialists supposedly represent, are hurt most by their actions. Perhaps, Democrat Socialists want to see these people out of work so that they become even more dependent on government, which is the basis of Democrat Socialist power.

Knowledge work has been shipped off to India at about a third the cost of employees in the US. Every year, a million or more Indians graduate from college. They are ready, willing and able to fill back office jobs that are often viewed as tedious and boring by Americans; but a real opportunity for Indians to enter the middle class. Indians in those jobs are usually better educated than Americans and more conscientious in their work. As a result, those back office jobs are also not coming back any time soon in the New Normal.

Finally, the promised gains in technology have arrived in the New Normal. It just takes fewer people to get work done today than was the case years ago. Many jobs that were needed to get work done are just not needed any more. So those jobs are gone forever.

Government has a role to play in the New Normal; but it is not the role being played by President Obama and the Democrat Socialists. At the beginning of the financial collapse, the Bush team stabilized the banking system, which was critical to preventing another Great Depression. The Federal Reserve has kept interest rates low and has pumped Trillions into the banking system to keep money flowing. However, the reason banks are not lending is that they fear the commercial real estate downturn and they must maintain Reserves to comply with other government directives to deal with it. Extending unemployment and COBRA benefits is a good thing to help the unemployed. The stock market is up because major corporations have cut expenses not because they are experiencing top line revenue growth.

Otherwise, everything else Obama and the Democrat Socialists that control Congress have done to stimulate private sector job growth has probably been counter productive. Obama's SwindleUS Plan, much of which has not even been spent yet and will add almost a Trillion dollars to our deficit, has been a complete failure related to creating private sector jobs. Obama's, HeathScare, CAP & TAX and various bail outs are all actually killing jobs. Further every government job saved or created probably cost two in the private sector because higher taxes needed to pay for government jobs rob the private sector of monies available for investment. It is just Economics 101 plain and simple.

We will continue to see the decline of the United States if Obama and the Democrat Socialists in Congress are allowed to go forward with all their Socialist Schemes. Unemployment will continue to be high for years if pro-growth policies are not enacted and soon. We need to develop our own energy sources including nuclear, clean coal, oil and natural gas. Eventually, newer technologies like wind, solar and bio fuels will be feasible; but not for years and certainly not enough today to cause job growth. The US has about the highest corporate income tax in the world. We need to cut corporate income to China's level of about 20 - 25% instead of the 35% where it is today to be competitive. Capital gains and dividend taxes should remain at the Bush tax cut levels instead of going up dramatically at the end of 2010 as proposed by Democrat Socialists.

The United States cannot tax its way out of this deep recession. Raising taxes, on anyone or anything, when we have high unemployment will only lead to even higher unemployment. And, Keynesian government employment only retards the growth of the private sector, without which it is impossible to bring down unemployment.

Just look to bankrupt California for the best example of bad economic policy. California has the highest taxes in the country and among the highest unemployment; but employs more than 300,000 public sector employees. California is now projecting another $20 Billion deficit for 2010. Major corporations have been moving out of California for years. If Obama and the Democrat Socialists are successful in enacting all their Socialist Schemes, American companies will vote with their feet the same as has occurred in California. Companies will simply move out of the United States to headquarter in a more business friendly country like Singapore. Technology today allows connectivity from any place on earth. As such, companies can do business from any location in the world. If corporations leave the United States, their jobs will go with them never to come back.

We have to take back our country. The things I describe are already happening. The 20th Century was the American Century. If we don't change course soon, the 21st Century will be the Chinese Century. We can't let that happen. We can't let President Obama and the Democrat Socialist controlled Congress turn our country into a second rate power and a Socialist nation where our people live dreary lives without big dreams. That is not the America I want to leave our sons and eventual grandchildren. We have to act to elect Conservatives in the 2010 and 2012 elections to save our country. Short of civil strife, which is inevitable if unsustainable deficits cause the collapse of the United States, there is no other way.

No comments:

Post a Comment