OBAMA ADMINISTRATION STILL BELIEVES IN GOVERNMENT SOLUTIONS

“The problem with socialism is that eventually you run out of other people’s money.” Margaret Thatcher

Last summer I commented that the new administration was moving full steam ahead with left wing government spending programs to “save” the economy and change the way America works. One year later, it looks like my comments were an understatement. The government bureaucracy has become more intrusive and bloated each day. For example, the government “stimulus plan” has not reduced unemployment which is still over 9% . . . (Don’t forget that much of the stimulus has still not been spent,. . . remember it was for “shovel ready” projects) . . . the federal deficit is projected at over $1.5 trillion for the foreseeable future . . . regulations are on the rise with the new healthcare law and proposed cap and trade laws. New financial laws have also been passed to “save us” from another financial crisis although we will still have bailouts. (Don’t forget the Feds already regulate Wall Street, public companies, the banks and the mortgage industry). Couldn’t we just enforce the laws we have?

Offshore oil drilling has been suspended because of the BP oil rig explosion (don’t forget the government already regulates drilling). The moratorium has been defeated in court but the Feds still refuse to lift it. In this environment, the Obama administration has record tax increases on deck for 2011 to help pay for more spending. Is this a Centrist government agenda?

Impact on Business

Although the 2008 recession is technically over, the GDP growth rate is relatively weak compared to prior economic recoveries. (See Kennedy, Reagan and Bush tax cuts) Why? Uncertainty and lack of confidence in the future is a strong deterrent to economic growth. Business expansion requires risk analysis and cost projections. Many small businesses and entrepreneurs are sitting on their hands (and wallets) waiting to see what happens next. It has been reported that the Fortune 500 has a record amount of cash on hand waiting for signs of improvement and stability. The stock market continues to be very volatile and many investors have suffered significant losses. Moreover, the banks and mortgage companies have been severely criticized. The effect has been an overly cautious and skittish lending philosophy which has punished deserving borrowers as well as marginal borrowers. Growth has been difficult in this environment to say the least.

The Good News... Free Enterprise Works!

All of the above bad news puts the focus back on the good news...we still believe that free enterprise is the key to economic recovery...not government central planning.

When we return to limited government and tax cuts, the economy will boom for all! Financially successful companies will expand and grow and add employees. New companies will be motivated to start up. Entrepreneurs will get excited again. Highly profitable people will increase their spending. As a result, state and local governments receive more tax revenue, universities receive more funding and non-profits receive more donations!

We believe it is going to happen very soon and you can be ready. The backlash against big government has already started in Massachusetts, Virginia and New Jersey. Watch the next election in November.

See Tax Tips for 2010 and Time to Change your Strategy