It's worse than that: politically connected businesses are getting waivers from Obamacare, while their not-as-well connected competitors may not be getting waivers.

The government shouldn't be in the business of giving competitive advantages to some but not others.

A bit of nonsense from the guy in the aisle seat. I have been in management for over twenty-five years, and we have always hired people when we needed them. We certainly consider the regulatory circumstances at the time, but the bottom line is need. Few businesses can forcast more than 6 months or so right now, and everyone on staff knows it.

The established companies in any given industry typically have a hand in the writing new regulations... because it makes it harder for new companies to get started.

When I started working for lobbyists several years ago, I was confused as to why certain clients would regularly voice approval for additional industry regulation. It's because the lobbyists can usually get language put in the bill that essentially exempts their client companies and makes it harder for their competitors to function. Right now, for example, in Texas the large brewers are keeping the craft beer brewers from being able to distribute their product.

Then, their are industries that manage to create a need for themselves- these are mostly middle-men type businesses. Real estate appraisal referral companies were created because of new regulations, and beer distributors and package stores protect themselves by making sure individuals and restaurants can't buy alcohol directly from the producers.

(Our clients included a large beer company that was bought out by the Belgians, a large tobacco company, a large mortgage bank that is now part of the Evil BOA Empire...)

I don't want the government to act like his boss, but I don't want it acting like his assistant, either. If that's what he wants, he should go work for JP Morgan or Goldman Sachs. The government does whatever they want.

...and agree with PJ- I don't want the government acting like his assistant, either. (I guess we know Mr. Aisle Seat votes straight-ticket republican.)

Ahw, I don't think it's a partisan issue so much as a money issue. Watch the movie 'Inside Job' and you will see that both sides of the aisle have a long history of taking bribes.

Yeah, I know. The theory is that if you must elect a scoundrel, it's best if it's YOUR scoundrel.
The way I've typically seen it work is: Democrat proposes more regulation, Republican votes for the bill but only after enough amendments have been slapped on that it really only regulates new entries into the field- or writes the regulations so that the established companies are already in complaince. Of course it can happen both ways, especially when said established company has locations in the particular politician's district.

"I don't want the government to act like his boss, but I don't want it acting like his assistant"

I'll try to cut the guy some slack and say that he didn't mean "assistant" in that sense of the word. It was more like "assistant" as in enabler of the industry, and facilitator of what regulation is necessary in order that fly-by-night companies making unsafe products can't undercut their more ethical competitors and throw the whole industry into disrepute. Obviously, there's a potential for abuse there, and that's a good reason why the regulation should be as minimally invasive as possible.

Nobody wants to admit it, but the U.S. is now experiencing stagflation, for the first time since the Carter years. Don't forget that prior to Carter, conventional wisdom in economics was that stagflation was impossible. Yet it happened, and now it's happening again.

My personal theory on stagflation is that it results from declining productivity, which by definition is the amount of money that it costs to build a product. Ordinary inflation is sort of an interactive loop between wages and prices, driven by scarcity of resources. But in stagflation, a third factor gets introduced. It's a factor that makes the cost of building a product go up that is independent of supply and demand. What is this factor? Regulation. Increasing regulation causes businesses to have to spend money on activities that do not add value to the product. By definition, this constitutes a decline in productivity. It makes prices go up, but workers cannot demand higher wages to compensate because the value of their labor has not increased.

And what we have now is sort of the worst of all possible situations in that regard. Not only is actual regulation increasing rapidly, but the threat of unknown future regulation is causing businesses to have to spend money on CYA activities to protect themselves against the worst-case scenario. And because the amount of money at risk is so large, it's inevitable that corruption enters the picture. We've all seen the articles about how the most effective investment a company can make right now is to invest in lobbyists; things like the Obamacare waivers are the proof in the pudding. This way lies fascism.

I'll point out an example. Has anybody bought a washing machine in the past few years? If you have, you may have been shocked at several things. One, the price: retail prices of washing machines have been doubling about every seven years since 2000. Second: the disappointing performance and the maintenance headaches. You put clothes in a washer and you expect the washer to, you know, get the clothes wet. But with your new washer, it uses so little water that it's rough on the clothes, and you have to wash heavy items twice to make sure they actually get washed all the way through. And then they come out with detergent still in them because of inadequate rinsing. You read the users' manual and you see that you can't use bleach, because it's bad for the cheap plastic that the machine is made from. You have to buy special cleaners and run special maintenance cycles to avoid mold buildup because the washer won't let you do a hot wash or a wash with a proper water level. And after all this, in four years the cheap and inadequately sealed tub bearings fail, and because the tub is made all in one piece it costs more to repair than what the machine is worth.

All of this is the result of the carrot-and-stick government program known as the Energy Star program. The stick is regulation; the carrot is subsidies to companies who bow down and submit. Who in the industry is the biggest supporter of the Energy Star program? Why, it's Whirlpool, the #1 manufacturer of washing machines, and a beneficiary of hundreds of millions in Energy Star tax credits and subsidies. Due to their influence, they can make sure that the regulations are in line with the products they design, while increasing costs and difficulty for competitors who don't have that level of access. Within the last year Bosch has exited the U.S. market for laundry machines, and other competitors have either cut back on their models or reduced themselves to badge engineering -- most of the washers sold in the U.S., regardless of brand name, are made by either Whirlpool or GE.

Most people think inflation is when "the price of everything goes up."

Cousin Dave mentions scarcity of resources, but when the price of something increases because of an increase in demand or a reduction in supply (scarcity of resources), that is not inflation.

Inflation is an increase in the money supply.

Incidentally, the U.S. money supply has tripled in three years.

What will constitute certainty? This guy is going to be paralyzed forever since regulations could change at any time. It's just a bogus excuse. He'll hire people when he has the cash flow to justify it and the need for extra people. I've heard the same argument about taxes, and that's equally stupid.

I watched the video in this article last night. It's interesting.. it comes across as something a very frustrated person dealing with SF City Planning did, but it was created by the department themselves. Has some good examples of how insane regulations just get in the way.

I've been on my neighborhood's planning group board for about 7 years now. It astounds me that anything gets done really. It's not the least bit surprising that there's so much graft and good-ole-boy dealing. Without it, it would be near impossible to actually do business and make any money.

The sad thing about our planning groups is they're officially recognized, advisory bodies to the city council (this is San Diego BTW). But in the end, we're completely powerless and they can ignore every request/suggestion from us. Which makes it all seem so futile at times.

> Inflation is an increase in the money supply.

It's a bit more complicated than that. You also need to take into account credit. The amount of credit in the economy is far greater than the amount of money. (It also raises the issue what measure of money supply - there are at least 4 out there).

> Incidentally, the U.S. money supply has tripled in three years.

The destruction of credit in the U.S. is actually greater than the growth of money supply. People and companies are going bankrupt, people are walking away from their mortgages, banks aren't lending more and reducing credit lines, etc.

"A bit of nonsense from the guy in the aisle seat. I have been in management for over twenty-five years, and we have always hired people when we needed them."

Funny, I actually own a business, and I can tell you that the hiring environment is limited in a large way by both regulatory uncertainty and uncertainty about inflation, rising costs, and the strength of the so-called "recovery", because all that stimulus money just waiting to hit the markets is going to cause a minor sh-tstorm when this all unwinds, with the value of any cash reserves that the company is sitting on expected to drop fast at the same time as market demand for their products drop. The managers in a larger business typically don't understand this, all they know is the finance guys guide them on how much they think is safe to hire. The man on the street feels it in terms of high unemployment, and a feeling of being bogged down with debt and struggling to save any money.

"We certainly consider the regulatory circumstances at the time, but the bottom line is need. Few businesses can forcast more than 6 months or so right now, and everyone on staff knows it."

Ah, the "we can't predict 100%, therefore we don't predict at all" logical fallacy. It's not true. There are certainly times when it is easier to predict what is coming and times when it is harder. We're looking at a high-risk environment right now. Risk is factored into the hiring decision-making process. When businesses perceive higher risk, they can and most definitely do scale back on hiring.

Businesses are getting a lot of criticism from Joe Public and anti-corporate interests for supposedly sitting on high cash reserves and not hiring when people need jobs. Businesses have valid reasons not to hire - regulatory uncertainty, and the fact that they generally have a better understanding than Joe Public that a cash reserve of X million today-dollars that they must spend in the future, is actually only a cash reserve of X million 2012 or 2013 or 2014 dollars, which are probably going to be worth far less unless someone with an ounce of fiscal and monetary sense and discipline gets into power and kicks out the special interests leeching money out the system to the bankers.

"It's a bit more complicated than that. You also need to take into account credit. The amount of credit in the economy is far greater than the amount of money."

Government credit is an increase in the money supply. The stuff it is spent on is ultimately paid for by taxpayer savings via inflation. Government "prints" $200,000 for Joe to buy a house. The overall money supply increases by $200,000. The money is spent mainly on building the house. Where did it come from? The purchasing power of that $200,000 is effectively divided across and subtracted from all cash and personal savings (such as Bob next door's child's college fund) through inflation.

I agree the US is likely experiencing stagflation. I suspect that, apart from the fact that the official inflation figures are blatant false propaganda, what partly happens is that deflationary forces (e.g. demand-side-drop and oversupply) help to sort of "hide" the inflationary forces at work (stimulus, credit, artificially manufactured "recovery" financed by eating into the last bit of personal savings Americans had left).

There is also of course uncertainty on monetary and fiscal policy, e.g. will there be "QE3" or won't there, will we raise the debt ceiling and by how much, will we default, will interest rates spike, will we manage to get someone in power that gets these problems under control - nobody knows, and all these unpredictables are going to have a big effect on the outcome over the next 5 to 10 years.

I like to think of inflation less as 'prices getting higher' (more abstract), and more as 'everyone getting a little bit poorer at once, but not uniformly across product types, and hitting people with more savings the most' ... this removes one level of 'abstractness' of the concept, and makes it a bit more concrete.

Assuming that this story is not apocryphal, this guy isn't fit to run a company if he can't make needed decisions in the face of modest regulatory uncertainty. There are no major regulatory changes outstanding that a decent manager can't account for, and at least at the federal level, divided government means no major changes are coming down for at least a couple of years.

Changes in the law and other circumstances are inevitable in life and business. If you can't hack that, go work for the government. Otherwise, do your homework and try to make good decisions, and when those don't work perfectly, try to learn why not. But don't be a wuss and blame your inability to make a decision on some low-probability chance the government might act differently, when that has always been the case.

But don't be a wuss and blame your inability to make a decision on some low-probability chance the government might act differently, when that has always been the case.

Posted by: Christopher

So which is it? a low probability, or a certainty?

Lobster, your take on this is similar to mine. I've been trying to study up on some of this stuff and am still trying to get my head around fractional reserve banking. It's hard to make sense of - probably because it truly doesn't make sense. At any rate, I see two possible outcomes.

1) QE stops. The stock market would crash, and the U.S. government would simply be forced to cut its spending by about half. This hurts the 59% of Americans who are getting a government check of one type or another. The people with 401Ks see a repeat of the 2008 crash and aren't happy either. Everyone's mad.

2) The print/borrow/spend cycle continues, and eventually we experience Weimar-style hyperinflation. The USD loses its world reserve currency status. You might still be able to use dollars to buy locally produced items, but then think how much the USA imports. Other countries won't take worthless dollars for their goods, so we'd have to use something else, like one that's based on a basket of currencies. Would we still get paid in dollars? How many dollars would it take to buy a unit of currency that is recognized elsewhere in the world? Other countries that have experienced this found themselves using more than one type of currency. You're probably okay if you are still young, working, and get paid in the new currency. If you're too old to work and have your savings in dollars, you're completely hosed.

Option #1 would take political will that neither the American people nor its politicians have. So that leaves us with Option #2. Especially since most Americans simply can't fathom Option #2 happening.

I'm laying low for the next five years or so. I paid off my home and don't have any debts, so when I work the amount of money I make is a lot more than I need. Then I take time off and spend my excess cash on time off, enjoying life. My IRA is now very small. When the shit hits the fan, I won't have as much to lose. I'll wait until after the reset button gets hit before I put any effort into accumulating wealth or savings for my old age. From where I sit right now, trying to do so in the meantime is a complete waste of time and effort.

But don't be a wuss and blame your inability to make a decision on some low-probability chance the government might act differently, when that has always been the case.

There are a lot of facts missing so that calling someone a wuss is out of line. Is he doing software support for U.S. car part manufacturers? Is he in the health care industry? Long term care? Food processing? Chemical processing? Aviation?

Each of these industries are facing random changes based off the whim of some faceless bureaucrat writing regulations based on bad laws. Just look at the panic button proposal a few entries from here.

And it sometimes takes an act of Congress to repair those situations.

Other regulations, such as the tax code, encourage American employers to send their jobs overseas, along with the payroll taxes and income that could be reaped to support our own society and infrastructure.

The court ruling recognizing corporations as having the same rights to contribute to political campaigns help the process along, and the government-to-industry career path of the employees of our regulatory agencies keeps the skids greased for our wealthy corporate masters.

Borders: open. Coffers: empty. Population: unemployed. Government: corrupt to the core.

CEOs: still getting millions in pay and bonuses.

Eh, who cares. We won't fight it. Never have, never will. Let's go watch a WWII movie and pat ourselves on the back for saving those cowardly French people! Stupid socialists.

There are a lot of facts missing so that calling someone a wuss is out of line.

Perhaps so. But as written, it appears as though this guy isn't hiring, despite his business doing well, because of some nebulous fear of potential new regulations that might make his work force more expensive, not because of the real fear of proposed regulations that would make his work force more expensive. You can't be a successful entrepreneur and think that way.

There's always a chance things will go badly in a business because of something you don't expect now. You anticipate what you can, build up a financial cushion when you are able, and make the best decisions you can with information at hand. But you can't be overly concerned with what Mr. Rumsfeld might call the "unknown unknowns" or you will be paralyzed. In this case, if you're holding back on hiring that is needed to grow your business just because of some abstracted fear of regulation, you're probably in the wrong line of work. Entrepreneurs must be able to make decisions in the fact of uncertainty.

I'm not saying that regulations can't be a pain, or cost money. They do.

However, it's a cop out for someone to say he won't grow a business he claims to be successful because he *might* face some new regulation. I understand that business always wants less regulation, and it's great if a businessman finds a willing stenographer like Prof Carter who is more than happy to help get the message out without questioning what impending regulation is so troubling. But dealing with the regulatory structure is something any business founder signed up for when he incorporated or filed a DBA.

We'll stop those pork barrel earmarks, except for all the pork barrel earmarks, of course.

Today's outrage, front and center:

http://www.cnn.com/2011/POLITICS/05/28/mysterious.fund/index.html?hpt=T1