Recoveries Aren't for Wimps

Recoveries aren't for wimps, and this is a recovery from the worst recession since the Great Depression.

It isn't as if anyone knows exactly what economic actions will work the best since we've never really faced anything quite like this. Even though the Great Depression was a more serious financially distressed situation, it was for very different reasons. We have had a collapsed bubble of real estate, with a lot of collateral housing/mortgage damage still dangling in the system. We had a total pull-back of the lending system which is still being historically tight. Companies pulled back substantially on investment in equipment, technology and people and are still squeezing ever ounce of productivity out of their existing assets before they hire and make capital expenditures.

You may also hear that companies are holding back because of uncertainty of increased taxes and/or health care costs. Any business owner who says this is either pulling your leg, looking for an excuse, or doesn't really understand business and is lucky to still be in it. There is never certainty on any of these things. There are congressional elections every 2 years and presidential elections every 4 years. Health insurance companies have been raising rates an average of 7% per year for the last 2 decades and that is just the average. It is not unusual for small companies especially to get a 20-30% increase in one year which is why they usually find themselves shopping around for a new insurer every 2-3 years. Businesses hire if that next employee has a better than even chance to bring in more revenue directly or indirectly than it will cost to employ them (salary, benefits, taxes, office space, etc.). The so called 'uncertainty of taxes and health insurance costs' are just a fraction of the total costs to employ an individual for a year. So estimate a bit high and see if that person will still bring in more revenue for the company. Besides, the only taxes seriously being discussed recently are the marginal tax rates for individuals and couples who have more than a quarter of a million in taxable income. I have previously posted a more detailed analysis, but basically, for a family who have an income of about $400,000, this amounts to perhaps as much as an additional $3,000 per year in federal income tax. If that $3,000 stops a small business owner from hiring an otherwise profitable new employee, they don't deserve to be in business very much longer.

This recovery won't be quick, steady or painless and nobody, absolutely nobody is able to implement plans that would make it so. There aren't people sitting on the sidelines with all the answers. There are some very intelligent, experienced people discussing options at great length with one another. There are differences of opinion. Good! This isn't a simple problem and only by discussing all possibilities will we have the best shot at coming up with plans that are more likely to produce the desired results. Even with this process, there are still no guarantees that the chosen options will work. Nor is there even a guarantee that there are any options that will produce the desired results. It isn't easy to live comfortably with this ambiguity, but that is how you get through tough times.

It is OK to be unhappy that it is taking so long to get back to 'normal', but claiming the recovery should be faster just because you want it so isn't based on any economic reality. This recovery would be very difficult regardless of what party is in the White House or leading Congress. Given statements that were made during the 2008 campaign, it is unlikely that we would be in a better place if John McCain and Sarah Palin were now in the White House. The House of Representatives is now run by the Republican party for 6 months and it does not appear that any steps have been taken during that time that have brought us closer to a full recovery.

This recovery isn't easy and it will take smart, courageous people not afraid to make mistakes and be blamed for trying what they think is best and possibly losing their jobs in the process.

Recoveries aren't for wimps.

Unemployment Issues for President Obama in Key States?

In a recent Wall Street Journal article, it is pointed out that some state-specific unemployment numbers could cause particular problems for the Obama 2012 campaign:

In four states that may prove key to the Obama re-election strategy -- Florida, Nevada, North Carolina and Michigan -- the jobless picture is bleak. In three of the four, the rate tops 10%.

This is a great example of statistics that don't tell much of any story. There are different stories in each of these four states.

Many in Michigan know that unemployment could be far worse were it not for the auto bailout. Whereas most of the other 49 states is split on whether or not the Obama Administration should have propped up GM and Chrysler residents of Michigan know that it had a big impact on their employment reality. So even though many are unhappy about the current absolute level of unemployment in the state, it is unlikely many will blame that on President Obama.

Nevada has been trending more blue recently, even as unemployment has risen. The Reid campaign machine showed last year that they have some impressive power in Nevada. Although the 2012 Republican Presidential Nominee is unlikely to be as soft an opponent as Sharron Angle, it will take more than an elevated unemployment rate in Nevada to turn it back to "R".

Unemployment in Florida is a legitimate problem for the Obama 2012 Campaign. However, thanks to Governor Rick Scott, Republicans aren't too popular in Florida now either. I think Florida will be closer than in 2008 and could easily turn Red, but it will take more than the unemployment rate for the Republican nominee to win there. Florida has one of the highest concentrations of people on Medicare and the Ryan Budget Plan will affect more Floridians than the unemployment rate.

If North Carolina is even in the discussion of voting for President Obama again, the Republican candidate, whoever they are, has no chance of keeping President Obama under 300 Electoral Votes. If North Carolina is in play, then as Bill Murray famously said in the forgettable movie "Meatballs", "It Just Doesn't Matter":