Jerry Pournelle:

Unemployment is over 10%. It wasn’t supposed to get that high. TARP was supposed to fix that.

Meanwhile today may be the most important vote in Congress since the days of the New Deal. If the health care bill passes, it will fundamentally convert these United States into a different kind of popular democracy, which generally means rule by a unionized bureaucracy  organized to vote. Once that much of the economy is run by government, economic recovery as many hope for will simply be impossible.

Permanent unemployment at 7% or so; median income perhaps 10% higher than it is now, but not much higher; and a long period of stagflation. Reluctance to take on new employees, and great incentive to export jobs. Is this a picture of the future? We will have to see, as Congress debates the health care and carbon tax bills.

One of the big debating points is over abortion. That is certainly in important moral point, but the creation of an enormous entitlement overshadows it. At least under this bill, illegal immigrants can’t be jailed for not buying government approved health insurance. The rest of us can be. I have no idea what happens to those my age. I gather that it pretty well eliminates the Medicare Advantage that pays most of my Kaiser dues. This all promises to be interesting.

With Detroit a ruin and manufacturing industries on the ropes, small business is the only possible engine of recovery from what they don’t call a Depression; so the Congress is going to add an 8% tax on employing people. We already have the longest period of increasing unemployment since the Great Depression; I presume we are going for a really big record setting period of increasing unemployment.

What incentives people have to invest and create new jobs in this environment is pretty murky now; with the health bill there will be fewer incentives to invest in new jobs in the US. The incentives are now to the job black market — hire illegal immigrants who don’t have to have health insurance — or to export the job if that can possibly be done.

Meanwhile the credit index is way down: people aren’t borrowing or lending, meaning investment is down. Moving money around in circles keeps Wall Street going, but next year the Bush tax cuts expire, meaning a new round of higher taxes to go with the new taxes of the health care and carbon taxes, and the new regulations. And with a trillion dollar deficit the incentive to add surtaxes is overwhelming, thus again confiscating money from the successful — money that otherwise would have been invested. Perhaps the government can invest for us with a new TARP?

Parts of the economy will thrive, but then some made good money during the Great Depression. The incentive will be to tax those who continue to do well, meaning they won’t invest either, and will spend more on tax avoidance rather than making more money. We have seen that spiral before; the remedy was to cut taxes, but that is not a politically viable incentive.