Obama the Job-Destroyer

From the New York Post:

So, despite all the money spent on stimulus, the economy continues to lose jobs and unemployment remains at a staggering 10 percent. That grim news appeared to catch the Obama administration by surprise last week -- but it shouldn't have.

The number-crunchers at the Treasury Department have been celebrating what appears to be the end of the Great Recession as told through rising GDP, higher business profits and a buoyant stock market. But owners of small businesses -- the usual engines of economic growth -- are still refusing to hire back workers as they normally do when the economy turns up from a sharp decline.

Talk to them, and they'll gladly tell you why: Having weathered the recession, they now fear the administration will choke off the nascent recovery and increase their costs through higher taxes to pay for the myriad of programs President Obama has in store for us, including the hyperexpensive health-care overhaul.

If the president wasn't so busy looking to score cheap political points when he met with the heads of the big banks last month, he'd have listened to their warnings on this very issue. At one point, JP Morgan CEO Jamie Dimon politely interrupted Obama's monologue on how the banks should be lending more to small businesses to explain that many businesses simply don't want to borrow to expand their operations and hire more workers.

"Jamie basically said the demand for loans is way down because businesses, particularly those that are making money and can qualify for loans, simply don't want to borrow," said one person with direct knowledge of the conversation.

And they're not borrowing because they don't know just how high their tax bills will be when the president gets done implementing all his "hope" and "change."

That's what stock analyst Peter Sidoti is discovering. Sidoti's firm supplies research on so-called small-cap companies, ones the stock market values at $300 million to $2 billion. With typical payrolls of 100 to 2,000 employees, these are the very definition of the "small businesses" that provide many if not most of the nation's new jobs.

Of the 600 companies Sidoti and his team cover, "There hasn't been one bankruptcy," he tells me. How did they survive the recession? By cutting costs and hoarding cash, not expanding their business and hiring more people, even as the economy now is starting to recover.

During other recoveries, Sidoti says, firms like these would be hiring workers in droves as demand picks up for goods and services. This time around, they're not -- because "they don't know what their costs are going to be." And those costs are, of course, higher taxes.

He recalls a conversation with the CEO of one company he covers, Monroe Muffler, who said his average cost per worker is $35,000 a year, but he isn't going to expand his workforce much more if he has to pay another $8,000 a year in higher taxes, thanks to the new health-care plan and other government initiatives.

"This is a huge problem," Sidoti explains. "Unemployment is at 10 percent and all these businesses see are higher costs in the future from health care and other policies -- so they are hoarding cash. They're making money, but why logically would any businessman use this money to expand if he doesn't know what all his costs will be because of the expansion of these government programs?"

The issue is strikingly similar to what the banks face. As we're all aware, the banks are making big money and waiting to pay out bonuses in the coming days. But the cash isn't coming from lending the money out. Instead, the banks are cutting costs, hoarding cash and investing some of it in low-risk bonds.

Businesses are doing the same even if the economy "grows" according to official statistics. Why risk expanding operations and hiring workers amid a wild boom in government that will lead to massive tax hikes when you can make money simply by doing nothing or laying people off?

All of which translates into a jobless recovery -- the economy appearing to grow while unemployment remains unnaturally high -- unless of course, you work in government.

Charles Gasparino, CNBC on-air editor, is author of "The Sellout," about the Wall Street meltdown.