Thursday, September 8, 2011

Only One Thing Needed To Jumpstart The Economy...

The clowns in Washington - all parties - just do not seem to understand what the problem is. They do not comprehend why businesses are not hiring, and not investing in new equipment. And I find that very strange, because the answer is incredibly simple.

The short take - businesses need certainty and stability. Every business needs to run on a 5 year minimum business plan. If they can be reasonably certain that taxes, regulations and other factors will remain reasonably constant for 5 years, they can plan. And then they feel justified in growing and hiring.

But if a business does not have any idea what their tax rate will be in 6 months, or how often it will change in 5 years, they cannot write a viable plan. Same with regulations.

All the talk about lowering taxes, or changing the cap gains rate, or adding/subtracting regulations means very little, really. What counts is whether or not those things will have a least a 5 year lifespan.

So, here is the solution: Decide what the corporate tax rate will be and guarantee it will not go up (but could go down) for at least 5 years. Decide what the cap gains rate will be, and guarantee it will not go up for a least 5 years. And whatever regulations you do or do not have, guarantee there will be no more costly regulations added for at least 5 years, but that some may be eliminated.

Give businesses 5 years of relative certainty and they can move forward to create jobs. And if we also happen to reduce their costs (taxes, regulations etc.), all the better - it will give them a bigger push. Failure to provide a sense of certainty will result in continued economic failure. As a business person myself, I cannot risk spending the money to hire and train a new employee, only to have to lay him off a year down the road because my taxes go up, or costly new regulations decrease profits. If I cannot expect to keep an employee for a few years, I simply cannot afford to hire them.


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