Thursday, July 22, 2010

VDH's Private Papers:: The Psychology of Recession

by the great Victor Davis Hanson in the National Review Online

I asked a businessman two weeks ago why he said that he was neither hiring nor buying new equipment. He started in on “rising taxes.”

“But wait,” I interrupted. I pointed out that income-tax hikes haven’t taken effect. The old FICA income caps are also still applicable. Healthcare surcharges haven’t hit us yet.

He countered with “regulations” and “bailouts.” I said, “Come on, get specific.” He offered up “cap and trade” and “the Chrysler creditors.” I parried with more demands that he tell me exactly how the federal government has suddenly curbed his profit margins, or how his electric bill had gone up since January 2009, or whether he had lost money on any investment because the government had violated a contract.

Exasperated, he talked now instead of more cosmic issues — the astronomical borrowing, the staggering national debt, and the new protectionism. I pressed again, “But aren’t interest rates historically low? Inflation is almost non-existent, isn’t it? New products are still comparatively cheap? Rents and new business property are at bargain-basement prices?”

This give-and-take went on for ten minutes; but you get the picture. Private enterprise is wary, hesitant, even frightened, but nevertheless hard pressed to demonstrate in concrete fashion how Obama has quite ruined them in just 18 months.

So why are a lot of cash-solvent financial firms, banks, and manufacturing companies not hiring, not expanding, and not buying new operating equipment as they did in past bottoming-out recessions?

Answer here.

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