The dictionary defines laissez-faire this way. In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies.
The phrase is French and literally means “let do”, but it broadly implies “let it be”, or “leave it alone.”
We need more of this in our economy right now. Our economy is screaming for more transactions between individual parties (such as employers and employees) without intervention from government. Private companies have money to expand and to hire, but they’re reluctant to do that. There is too much uncertainty about the future. The medical nightmare inflicted on us by one of the least respected elected bodies of men and women in the history of mankind, already threatens to suck the money out of our pockets and limit our opportunities for adequate health care. One thing that is certain at this time is that we don’t have all of the details about how much more this nightmare will scare us, hurt us and limit our medical options.
Employers aren’t sure how this painful infliction will affect their expenses per employee in the future. With this unknown why increase the headcount. The new financial reform bill, 2300 pages of pain voted for by this same least respected elected body of men and women in the history of mankind. How the new agencies and new responsibilities granted to existing agencies will affect business and employers and the financial institutions employers depend on, is unknown. More uncertainty to cause potential employers to avoid hiring more people.
Now let’s discuss the end of the Bush era tax cuts. That will add a nice increase to everyone’s tax burden. The down side of not hiring new employees is a loss of potential business and income for the company. Not knowing how much of the possible increase in income the company will have to pay in additional taxes, makes it easier for a company to avoid hiring and avoid increased business.
Bureaucrats have trouble accepting that as a fact. Why make money when you don’t know how much of it you can keep? Do you want to take risks in an attempt to earn money when you are uncertain how much of that you can keep. Increased tax burden is a reason to avoid income. Reduce the return of an investment and many investors may not invest.
High taxes, uncertain potential changes, and a new election in the not too distant future are enough reason for businesses to stay where they are and minimize risk.
The bureaucratic tendency to soak the rich affects businesses as well as individuals. Small businesses are owned and operated by people who enjoy success. Success means they make money. Confiscate their success and they’ll avoid success until the wrong kind of bureaucrats are voted out of office. Many business people today have hopes that the tax and spenders who are currently in office will be out soon.
Higher taxes, more regulation and uncertainty in the new medical nightmare and the new financial regulations will have a negative impact on business. Decision makers will be reluctant to expand or maintain their positions.
Laissez-faire, leave it alone, stay out of the way, or better yet free market forces will all work to enhance business. It creates an environment to allow new jobs and expansion. The burdens of government are a limiting factor in business. The more they help us, through taxes and regulation the more business suffers.
Laissez-faire works every time it’s tried, just like the free market. Let the free market work its magic and minimize the help of government.