Atlas is Shrugging

Today’s unemployment report rang false in my ears as it was reported that 652,000 people suddenly stopped looking for work.  This is no small number of people and in fact, it is enough of a disappearance of people looking for work to bring the headline unemployment rate down to 9.5% from 9.7%.  Oh, how those politicians love their headline economic numbers when they stand up to make a speech.

Just to bring this number into perspective, 652,000 people would fill 1,146 Boeing 747’s to maximum capacity.  Somehow all of these people have just up and disappeared.

In 1957 Ayn Rand published a book called ‘Atlas Shrugged.’  According to a 1991 survey by the Library of Congress and The Book of the Month Club, this book was cited as being second only to The Bible as having made a difference in American reader’s lives.  This is no ordinary book as the forces at work central to the plots conflict are none other than our current day debate about the level of control the government has over business and society.  The setting of Rand’s book is indeed a world in which big government and a rising level of control, taxes and regulations are nationalizing private business.

As the book progresses a few central characters emerge including one John Galt.  ‘Who is John Galt?’ becomes a common sarcastic phrase uttered by the working masses meaning ‘What’s the point?’ and ‘Why bother?’  As the government encroaches upon private enterprise, the nation’s business leaders and creative geniuses begin to disappear under mysterious circumstances.  These disappearances might be compared to 652,000 people that just suddenly stopped looking for work in one month’s time.  These disappearances begin to bring the economy to a screeching halt.

The mysterious John Galt turns out to be a person that is leading a secret strike against the government machine that is using the ‘law’ and what has become perceived as ‘right’ to basically confiscate the fruits of people’s labor.  As these productive forces in the economy stop working so does the economy.  Less people are employed as these businesses, bereft of their leaders and innovators, begin to fail.  The government, being nothing more than an entity that derives revenues by taxing these businesses and workers, starts to suffer as the lower level of economic activity means less revenues to tax.

Today’s disappearance of 652,000 people looking for work sounds to me like 652,000 less salaries to levy an income tax on.  While I do not believe these people are secretly on strike, I do think they cannot find employment.  Either the government is fudging the numbers for a better headline unemployment rate or the way in which the government is handling the economy is wrong.

Small businesses employ 50.9 percent of the nation’s non-farm work force and over the past decade have generated 60 to 80 percent of net new jobs.  Small businesses are owned by private individuals and if their business is successful their business profit is their income.  A successful business owner will hire more employees if they see an opportunity to expand and they have the capital to invest in expansion.  This is how jobs are created by small businesses – with reinvested profits that come out of the small business owners ‘salary.’

What happens when these profits are appropriated by the government through higher taxes?

Right now millions of small business owners are today’s John Galts.  They see higher taxes coming and less income, less capital to hire new employees and they are saying ‘Why bother?’

They shrug and we lose 652,000 tax paying workers.

Either the government is wrong about higher taxes or lying to us about today's number. You pick.

 

Friday July 2, 2010 - 10 p.m.