Friday, August 19, 2011

Nocera, No

The always wise-seeming Joe Nocera, writing in last Monday's New York Times, knows exactly what companies "should" do:

"With all their cash, companies shouldn’t be waiting for Congress to give them tax incentives to hire people. They should be trying to jump-start the economy — and fend off another recession — by making investments, and hiring workers, that will lead to renewed prosperity." 

Mr. Nocera's entire exercise is futile, because he adopts a number of false premises.

He assumes that "jump-starting the economy" is a phrase that makes sense. It does not. He further assumes that this "jump start" will "fend off another recession." The jump-start is nonsensical in the first place. There is no "fending off" a recession.

If companies could jump-start the economy, they would.

In the climate President Obama has created, "making investments" will not "lead to prosperity."  If it would, the companies would be doing it already. I suppose companies never thought of it.  Maybe they will now that Nocera has mentioned it. (Heard in board rooms all across the USA: "Why, I'll be damned - Nocera's got it! How did we ever miss that???")

Sorry, no. Nocera counters that companies are wrongheaded in being interested in the short-term. But it is the President himself who has created a short-term environment (that is, an environment of uncertainty).

[FUN FACT: The reasons companies are not making investments and spending their cash are largely the same reasons you and I are not doing likewise.]

How will P-PACA turn out? Will the Bush tax cuts be rescinded or extended? Will taxes be raised? Will there be another stimulus? unemployment extension? more tax credits? less tax credits? The answer: We just don't know.

Now the President has announced that come September, he will unveil another "bold initiative to create jobs." God help us all.

As the old adage goes (which may only be thirty seconds old as of this writing): "You don't project five years out on a two-year note."

Furthermore, hiring workers does not lead to prosperity. There is a reason that the employment rate is known as a lagging indicator. Perhaps the best the President could hope for is a shot of inflation, which will (artificially) suppress the unemployment numbers. No matter, just so it happens before November. 

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