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Post Election Consequences To American Jobs, Healthcare, Economy, Investments and Inflation Issues

November 19, 2012

Now that the election is over, businesses and the economy have reacted to the results.  It seems that since the make up of the government is the same, there has been a loss of confidence in a quick recovery.

Although the republicans only control 1/2 of 1/3rd of the governmental makeup, it  gives the left controlled Senate and Whitehouse the whipping boy they need to deflect the blame of not getting anything anything done (like a budget).  Sequestration now looks more and more likely and while not optimal, at least it is the most defined plan that is likely to happen.

Companies are making adjustments now that they know that the healthcare mandate is going into effect.  Instead of making investments into growth, they are holding off on hiring (except for lawyers to interpret the legal ramifications) and cutting workers back to part time to avoid healthcare overhead and not making investments because of the growing regulations and tax increases.  Their cash positions have been increasing due to this caution,  so should there be a break in the regulation, they could invest quickly.

According to the WSJ:

U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.

Half of the nation’s 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.

Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009. Corporate investment in new buildings has declined.

At the same time, exports are slowing or falling to such critical markets as China and the euro zone as the global economy downshifts, creating another drag on firms’ expansion plans.

Corporate executives say they are slowing or delaying big projects to protect profits amid easing demand and rising uncertainty. Uncertainty around the U.S. elections and federal budget policies also appear among the factors driving the investment pullback since midyear. It is unclear whether Washington will avert the so-called fiscal cliff, tax increases and spending cuts scheduled to begin Jan. 2.

Companies fear that failure to resolve the fiscal cliff will tip the economy back into recession by sapping consumer spending, damaging investor confidence and eating into corporate profits. A deal to avert the cliff could include tax-code changes, such as revamping tax breaks or rates, that hurt specific sectors.

Likewise, banks have a huge cash resources due to lending constraints (also this is where a lot of the stimulus money wound up). If the housing market picks up, they could make a lot of loans.  There is just too much doubt and un-suredness out there as to what the government is going to do to them next.  They don’t want another mortgage bubble, but were forced into making bad loans due to the Community Re-Investment Act.

The winning campaign spent four years demeaning the rich, Wall Street and success in business.  No wonder businesses and the rich are wary of the Whitehouse policies.

Inflation not looms as a legitimate concern due to quantitative easing (money printing or fiat money) which  inevitably leads to higher costs due to the devaluation of the dollar.  That combined with higher transportation costs due to fuel prices point to a higher cost of goods sold and lower margins.  This is economics 101.

If we could stop this uncertainty with respect to the government regulation and tighten the monetary policy, the economy could pick up steam in a hurry.

While the current administration is both anti-petroleum and anti-coal, the discovery of shale oil now positions the US as potentially the largest petroleum exporter in the world.  This is ironic given Obama’s disdain for fossil fuels, but the boom is being produced on private lands, so only a tax could slow this down.  It is one of the better pieces of news for America economically speaking and could create many jobs if they would unleash the potential.  As an example, building the Keystone pipeline would not only create jobs, but would help make us energy independent from terrorist countries and lower costs at the pump.  I don’t think that this is the agenda though.  The goal has been to drive investments to alternative energy sources, but they have been less than successful.

Economies are typically cyclical, so it should recover on it’s own despite meddling by the Fed and the government.  It now is just a matter of how fast a recovery could be.  If the government would get out of the way, we could be the economic giant we have been

Nevertheless, right after the election here is what we have so far:

JOBS AND OBAMACARE

GE Healthcare cuts

Denny’s cuts hours to part time and adds 5% surcharge for Obamacare

Stryker Medical Services (donated $2 million to th Obama re-election campaign) cuts 1170 jobs. Note: Estate tax going up with Fiscal cliff, Stryker donors to lose millions in estate taxes.

Hostess goes out of business, 18K jobs lost because of Unions

Wake Forest Baptist Medical Center cuts 7% of staff

1 million construction jobs have been lost (albeit not all after the election for this one)

Complete list of layoffs due to Obamacare

Daily Job Cuts

COST INCREASES

Denny’s to add surcharge to pay for Obamacare

Papa Johns adds surcharge to pay for Obamacare.  Massive support for them on Support Papa Johns Day

Fast food, McDonalds, KFC and others will come up with Obamacare surcharge

STOCK MARKET

World Stock Markets down after election.  Dow Jones loses big.

RETIREMENT

Government exploring taking over private retirement savings accounts, 401K’s and IRA’s

You get what you vote for and so we’ll all just have to deal with it.  The fact that some states are balking, delaying or suing to get out of the healthcare costs will just slow down the growth rate, unless they win.  Then it would be a big win for everyone.  Costs are so high in the northeast and California that you see what is happening to them, rich people have no choice but to pay taxes or move.

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