Thursday, January 29, 2009

Economic Policy Bi-Products

You have to wonder if the powers in Washington have any idea what they are going. Seriously.

On the one hand, President Obama implores Congress to pass a $800+ BILLION "Stimulus Bill" that has little hope of stimulating anything, but more government spending. Because, for anyone that knows anything about Congress, he has effectively created a new baseline. Baselines are never cut. And, interestingly enough in the Orwellian speak of Congress, not increasing it enough from year to year is called a "budget cut." For example, if you only increase the baseline 1%, when inflation is 3-4%, it's considered a "cut" to our friends in Congress. And, within this spending Bill, that is larger than the combined amount spent on the wars in Iraq and Afghanistan, all the people in the nation are now responsible for covering the irresponsibility of state and local governments that can't pay their bills -- based on their overspending. But, somehow, someway, this "stimulus bill" is supposed to create jobs.

But, on the other hand, President Obama signed into law today the Lilly Ledbetter Fair Pay Act. Now, while on its face people may say, this is wonderfully fair. But, for anyone that has run a business, you immediately understand the ramifications of such an act. He has effectively unionized the private sector. Every person a large or small business hires will effectively have to be paid an equal amount, or you could be sued.

Now, if you haven't run a business, let me clue you in: All employees are not equal. All employees are not equally productive. It doesn't matter if they are in the same department or do the same job. There is always one more productive than the other. One that you can't do without, and one that you are willing to keep for a particular pay. There are even some that you really don't want to keep, but the cost of re-training another to do the job may outweigh his/her lack of production, so you eat the cost.

As I stated in the post below, the more government intervention, the less business is interested in hiring. But, with this new wrinkle, businesses right now could be out of compliance. They could be sued today. And, in these economic times, the cost of the current and potential lawsuits will force companies to outsource labor. They will shed jobs. New workers will be Temps. You pay a bit more, but you won't have to deal with health-care issues, potential lawsuits, etc. etc. Companies will keep their core employees that they can't do without, and fill extra positions with independent contractors. Downsizing is inevitable.

Sooner or later, people will come to understand that "feel good" policies of "fairness" only hurt the very people they are designed to help.

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