America may be entering a new phase of economic stagnation.
While inflation dominated public sentiment in 2021 and 2022, troubling developments in the labor market offer worrying signs of what 2023 will bring.
A wave of layoffs hit tech companies this month. Amazon announced this month that it will lay off 18,000 corporate employees. At the same time, Google will cut his 12,000 jobs, Microsoft will cut his 10,000 jobs, Salesforce will lay off his 8,000 jobs, and IBM will cut about 4,000.
Smaller companies don’t get the same headlines, but they’re in a similar situation.
Job cuts are starting to affect other industries, mostly white-collar, such as finance and real estate.
Most recessions start with layoffs at the bottom and work their way up. If recent layoffs portend the start of the next recession and wider unemployment, as most company CEOs predict, it is unusual for well-paid tech workers to be among the first to be cut. That’s what I mean.
But then again, it’s unusual for prime mortgage rates to more than double from 3.25% to 7.5% in a matter of months.
When borrowing costs skyrocket, investing in long-term projects such as research and development is one of the first things companies cut budgets for.
It does not solve the problem if companies simultaneously face new and unfavorable tax treatments for their research expenditures.
Until last year, companies could deduct R&D expenses in the year the expense was incurred. This is the same as most other business expenses. However, after 2022, companies will have to spread such tax credits over five years.
Starting this year, companies are gradually losing the ability to fully and immediately deduct the costs incurred on most capital investments, such as factory machinery and office equipment. Instead, the company will revert to his 20-year depreciation schedule.
Punishing companies for installing factory equipment or researching new technologies is economic fraud. This kind of investment helps build the economy and create a better future for Americans.
Companies making such investments also don’t have to provide virtually interest-free loans to the government, especially in a high interest rate environment. The unfortunate reality is that punishing investment in research and physical capital will lead to less investment, less high-paying jobs, and stagnant economic growth.
R&D spending has steadily fallen over the past two years, despite the White House touting “rapid innovation planning to ensure everyone has access to equitable and efficient electricity options.” slowing down.
Congress and the administration lavished at least $369 billion in additional tax credits, grants, and other subsidies last year on green energy, electric cars, and other favorite climate projects of the left. But this federal spending plan, implemented through tax law, doesn’t boost research and innovation, it just crowds out more promising investments in other industries.
Such socialist government schemes don’t just move resources around, they leave fewer resources in circulation, especially in the long run, because the right investments are overlooked and never pay off.
But don’t take my word for it that the green agenda will stifle economic growth and make people poorer. Hear about the not-so-secret cabal of left-wing ecophobia at the World Economic Forum. They also talk candidly about their vision of a post-growth economy and the need to de-growth.
As US Special Envoy for Climate John Kerry explained, the only way to advance their vision is “money, money, money, money, money, money, money.”
This is not so tacit understanding of what most of us already know. That means that the environmental tax credits and subsidies already passed in the previous Congress have, at best, very little impact on global temperatures, so environmentalists will be back to shake taxpayers trillions more dollars.
One way or another, that money comes out of American taxpayers’ pockets, making it difficult for companies in other industries to get the funding they need to create the goods and services on which Americans depend.
The more money that flows into government-favored industries, the less capital companies have left in the market, and the more valuable they are to invest in everything from agricultural equipment to investments to keep food prices down to life-saving medical research. You will not be able to make investments.
More families will get discounts on their mortgages, and others will find themselves in serious credit card debt.
And the more governments continue to distort the flow of capital, the more problems they will create for the entrepreneurs and innovators who drive much of the economic growth. Workers and consumers will ultimately suffer.
The unemployment rate remains low, but that’s because millions of Americans remain on the sidelines not looking for work.Even nearly three years after the COVID-19 shutdown began, an estimated 280 Million Americans are not working.
Those in employment are working far fewer hours at significantly lower inflation-adjusted wages. The American lost his $2 trillion worth to 401(k)s last year.
It is clear that the left-wing big government tax and spending agenda continues to fail.
But the worst results can be the ones we never see. Innovative new technologies that would have changed lives will instead flood in to fund wind turbines, or enrich communities that weren’t founded because federal policies pushed capital into power. Small business. vehicle subsidies instead.
All this is just collateral damage in the Left’s battle to control what Americans buy, what they produce, and how they live.
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