April 15, 2008

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What Washington Isn't Telling You

About the Recession

by Glenn Shepard

Since today is tax day in the U.S., I thought this week would be a good time to talk about the place where our federal tax dollars go.

Last week the U.S. Department of Labor reported that the unemployment rate

has climbed to 5.1%, which is the highest it's been in a while. This added to fears that we're headed toward a recession.  Maybe we are, maybe we're not. Only time will tell.

But here's the real truth that few people are telling you, because it's not in their best interest for you to know. (Lucky you. You've got The Glennster to shoot you straight).

We are NOT presently in a recession. A recession is a decline in GDP (gross domestic product) for two or more consecutive quarters. That has NOT happened.

The reason so many Chicken Littles are trying to convince you the sky is falling is because it advances their careers if you believe them.

One group of those Chicken Littles is the media. Television, newspapers, and all other forms of news are competing with each other for ratings.

As the old saying goes, "If it bleeds, it leads". No one would buy a newspaper with a headline that read, "Everything is fine. Nothing to worry about".

Another group of those Chicken Littles is politicians. Yes (surprise), the very "leaders" (and I use that term loosely) that want you to believe that they only care about you, and that they're going to take care of you, have a conflict of interest with you.

Both the Democrats and Republicans are guilty.

Democrats would dearly love for you to believe that we're in a recession and that it's George W. Bush's fault. This would help their chances of getting Barrack Obama or Hillary Clinton into the White House in November (if they don't kill each other before then).

Yes, our economy has slowed down. And yes, the unemployment rate is up. But here's the rest of the story they aren't telling you.

The truth is that the average unemployment rate during the 1990's was 5.8% according to The Department of Labor's Bureau of Labor Statistics.

Another truth is that anyone who wants to work can find a job. What the politicians and media doesn't bother to inquire about is how many of those who are unemployed are sitting at home for 26 weeks, drawing unemployment benefits, and enjoying a mini-vacation.

Oh, they'll tell you they want to work. But actions speak louder than words, and their actions - or lack thereof - contradict what they say. Many of these folks are sleeping late, sending out two or three resumes a week, and waiting on their lazy rear ends for the perfect job to fall in their lap. 

(FYI...If you're unemployed and really want to work, then looking for a job should be your full time job. You need to be handing out resumes door to door, 10 hours a day. You WILL get job offers if you do.)

One reason for our slowing economy is soaring fuel prices. When Nancy Pelosi and the Democrats regained control of Congress about a year and a half ago, she vowed to bring down the price of gas. Instead, it has skyrocketed. The truth is that politicians can not control gas prices. It was not the Republicans' fault that gas prices were high in November 2006, and it is not the Democrats' fault that it's high now.

Another reason for our slowing economy is the subprime mortgage crisis. What no politician will say out loud is that this was the result of irresponsible people buying homes they couldn't afford, and getting adjustable rate mortgages when the rates were already at a 40 year low.

If doing the same thing over and over again and expecting a different result is the definition of insanity, then getting an adjustable rate mortgage when rates are at a 40 year low is the definition of stupidity. (When rates are at a 40 year low, which direction do you think they're likely to move in during the next few years?) By the way, I warned Work Is Not for Sissies subscribers back in July 2005 not to get an ARM because of this.

It's easier for the politicians to bastardize the "evil mortgage companies" that made these risky loans. No question about it, these companies did some unscrupulous things. But so do drug dealers. If we buy into the concept that these poor, poor homeowners are all good people who were victimized by these mean companies, then we might as well argue that poor, poor drug addicts are all good people who were victimized by mean drug dealers. It comes down to personal responsibility.

The politicians (including the President and Congress) who want to "help" these people stay in houses they can't afford are not helping. Baling them out would only treat the symptom, not the problem. The problem is that these people had a long pattern of making poor financial decisions. We know this because they had subprime mortgages.

Bailing out the lenders was just as stupid, but at least they're suffering the financial losses. Neither the Republicans or Democrats are helping these homeowners; they're being enablers by shielding them from the consequences of their poor personal choices. Oh, and let's not forget, you and I are paying for them.

Then there's this ridiculous "2008 Economic Stimulus Package". Washington decided that taxpayers should receive a check of $300 to $1200 to "stimulate" the economy.

The White House has issued a "Fact Sheet" on how this "Bipartisan Growth Package Will Help Protect Our Nation's Economic Health".

What they didn't tell you is that this is not a gift. It's only an advance against future tax refunds you might receive. In other words, it's a loan.

While I fundamentally oppose this concept on all levels, let's assume for the sake of argument that getting every taxpayer to spend this check would "protect our nation's health" as the White House puts it.

You know darn well that millions of Americans will use this money to pay off debt, or put it in savings. That's a great idea, but it doesn't serve the purpose for which it was intended. If Washington wanted to make sure everyone spent it, they could have sent out Visa cards preloaded with $300 to $1200, that could only be used at establishments that accept credit or debit cards, and set the card to expire within 60 days.

Why a president with a Harvard MBA couldn't figure this out is beyond my comprehension.

So why should you know all this as a manager, and why should you care?

Because when people are constantly bombarded with messages of doom and gloom, they get scared and worried.

When people's outlook on life in general is pessimistic, morale suffers. When morale suffers, productivity suffers.

The good news is that when people are scared and worried, they look to leaders for strength. You are an authority figure in your employees' lives, and you could be the only voice of reason they know.

The politicians and the media are counting on the American public to be too lazy or too stupid to think for themselves. Ultimately, it doesn't matter if you're a Republican, Democrat,  Libertarian, or anything else.

What does matter is that people think for themselves and make good decisions. They can't do either of these until they know the real facts.

Empowering your employees to think for themselves and make good decisions in their personal lives will help them think for themselves and make good decisions at work.

To Your Success,

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