A quick economic rescue is not likely in the US says Investment Solutions chief economist Chris Hart, the US president paying mostly lip service to voters and business
The US has announced a $447billion jobs plan that’s going to involve tax cuts for workers and small businesses, but the end effect is unlikely to pull America out of a second recession.
That’s the view of Investment Analyst, Chris Hart, speaking on Summit TV.
“There are tax cuts for small businesses,” said Mr Hart, “but there aren’t regulatory cuts.”
They don’t want to cut down the protection Americans have enjoyed for a long time, adding that the number of rules and regulations which now dominate American business is seriously affecting growth.
“It goes from the sublime to the ridiculous where they regulate almost everything down to the size of a loaf of bread,” he said, “so there can’t be that much relief with R40billion in compliance costs.”
Mr Hart said that an enormous amount of money was being spent on compliance by companies, people effectively working for the government rather than the other way around.
“There’s a lot of detail that’s missing in Mr Obama’s plan,” said Mr Hart.
Issues the Obama government is grappling with is how to help home owners across the US, and prevent teachers getting laid off with the budget cuts.
“The plan looks to be reasonably uncontentious – in other words there is something in it for everyone, and a nice big fat compromise that in itself is often a sub-optimal solution anyway.”
Mr Hart felt that the plan would be passed at some stage, but in a different form.
“There is going to have to be some grand-standing and there could be some improvements – but there is going to be a little bit of robbing Peter to pay Paul because it has to be neutral on the budget where spending here is going to have to be taken away from somewhere else.
Mr Hart felt that what was going to be cut could be contentious, but also said that spending by Washington to create jobs and prosperity was a misnomer.
“Government spending typically has a much lower multiplier than investment spending by business – when governments spend money that reduces the amount of money that’s then available in the investment sector of the economy.”
Mr Hart said the unintended consequences of government spending were not often appreciated.
