Tuesday, June 7, 2011

Insanity, Redefined

It has been said that the definition of insanity is "doing the same thing, over and over, and expecting a different result."  I think that in light of recent developments with the economy and our government's solutions to our problems we need a new definition.  I propose that we change the definition of insanity as follows,"Doing the same thing, over and over, which clearly is producing harmful results and then proclaiming that everything is as it should be."

As example 1, I take Austan Goolsbee's tour of the Sunday morning talk show circuit this last week to proclaim that the economy is in recovery and that all of the White House policies we have seen implemented over the last two and half years have been successful.  Goolsbee is one of the White House's top economic advisers, although he has announced his resignation so he won't have that job for long.  His goodwill tour was in response to dismal job numbers released in May which show that unemployment is not decreasing and for those who have been unemployed for 27 weeks or longer, unemployment has actually increased to 6.2 million or 45% of the unemployed.  Total unemployment stands currently at 13.9 million people or roughly 9.1 % according to statistics released by the Bureau of Labor.

A second source of concern for many Americans is that housing prices continue to drop.  As underwriting guidelines have tightened and Americans have continued to lose equity in their homes, more and more homes have been lost to foreclosure, short sales or strategic default.  The resale of those homes is at discounted rates.  Furthermore, new would-be buyers are having a very difficult time qualifying to purchase homes so as the inventory sits on the market the housing prices continue to drop.

Why are we in this mess?  Well an exhaustive list would probably stretch around the world. But there are definitely a few factors that are impacting heavily on the current situation.  First, the anti-business tone of all of the policies that this country has embraced prevent people from starting businesses, growing businesses and expanding businesses.  A lot of our job growth today is in the federal government sector rather than the private sector.  That means we have a lot more people to enforce the regulations which are strangling business.  And that is only going to get worse as massive agencies such as the Consumer Financial Protection Bureau get up to speed next month.  Financial services industries, community banks, small business owners involved in such industries are being decimated by the Dodd Frank Bill.  Every time that another business has to close its doors, unemployment grows or at least stays stagnant.

Excessive regulation is also the reason for the housing double dip.  If we were not experiencing unprecedented regulation of housing finance, including newly proposed national underwriting standards for mortgage loans, borrowers would be taking advantage of the low interest rates to buy homes.  By doing so, they would be clearing out a lot of inventory and the housing prices would rise.  After September 11, the economy went into shock, but the drop in interest rates motivated a lot of people to either refinance their existing home or purchase a new one.  Today, however, many Americans cannot qualify to purchase a home, and that situation is only going to get worse as the new tougher standards come into play.

Rather than sending out Goolsbee to do damage control and declare that "one month is not a trend," Washington needs to be looking at the specific problems and the specific policies which have exacerbated those problems.  The truth is that we have a war on business today in the U.S. and we see it at every level--federal, state and local.  As long as that war continues to rage, businesses are not going to thrive and the economy is not going to grow.

I spent the greater part of this morning at a City Council meeting in El Paso, Texas.  I was there to speak about a landscape ordinance which the city is pushing through requiring that developers use much more landscaping in their developments.  During the entire course of the City Council meeting, various members of City Council kept reiterating that it is time for business to pay their share to beautify the city.  When my turn finally came, I commented that the regulations impact small businesses dramatically since business owners will have to pay more in rents and more to buy properties and more to maintain those properties.  The ordinance includes excessively high fines for non compliance and makes violation of the ordinance a Class C Misdemeanor.  I objected to this as well, since although various members of our city council have stated publicly that El Paso should have an open dialogue about whether to legalize drugs, they have no problem criminalizing shrubbery.

We were told today that the purpose of the ordinance is to beautify the streets so that they will be more attractive to pedestrians who are walking along the sidewalks on their way to public transportation--which in El Paso is the city bus system.   And, just before voting in favor of the ordinance by a 6-2 majority, one Councilman said that he was tired of everybody claiming that regulations would put small businesses out of business--everybody meant me since I was the only person who objected to the ordinance  His tone said "How dare you come here and bother us with your talk about protecting business when we are going to do what we want to do anyway."  He could be a posterboy for what is wrong with this city and what is wrong with this country.

I might add that in El Paso, we feel very proud because our unemployment rate right now is the same as the national average--roughly 9.1%.  The reason we feel very proud is that historically our unemployment rate is 2% higher than the national average.  Our city despises businesses and business owners, and it always has.  And so we remain a poor city lamenting that nobody takes us seriously when the problem is that we attempt to pillage the businesses that choose to come here.  We will celebrate the trees as an  accomplishment while pretending that the small business owners who cannot afford the new rents and therefore do not get a foothold here would not have succeeded anyway.  And if we do file criminal charges against some poor sap who could not afford to replace his landscaping that died (yes, failure to replace dead landscaping is a violation of the ordinance) we will feel righteous, but we will never apologize for consistently maintaining an unemployment rate that is considered unacceptable everywhere else in the United States.

That, folks, is insane.

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