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Obama’s Businesses and Wealth Redistribution

It is truly embarrassing for the businessmen in this country to have a president who makes such economically incompetent statements and gestures. Speaking to the U.S. Chamber of Commerce a couple of months ago, our president effectively rebuked business success. He  suggested that “if we’re fighting to reform the tax code and increase exports to help you compete, the benefits can’t just translate into greater profits and bonuses for those at the top. They should be shared by American workers”. This is a blatant example of wealth redistribution.

In a free economy, employee wages are such that an employer willingly pays whatever it takes so that the amount paid to an employee is less than what can be earned from them – i.e. they have to be able to produce. Take, for example, someone who sweeps floors. If you are in need of a floor sweeper and the benefit of sweeping is worth more than the sweeping costs, then you hire the floor sweeper. If not, then you leave the floors dirty.

The same principle has always applied – albeit on a grander scale– in the United States. We see this currently in manufacturing which is at an all time high, but the number of manufacturing employees is a lot less. Workers are so productive with technology and capital, they can be – and it’s worth it for them to be – paid more.

On the other hand, if a company pays its worker more than the worker is actually producing, then the worker will become wholly uncompetitive. It is not better for a worker to be paid more than he is worth, because at some point, he loses the capability to independently support himself. The scenario becomes not what his labor is worth – but instead that he has been given a gift. This takes away the incentive to produce and earn. It goes against what has made our country thrive, which is hard work and an investment of time and talent.

By publicly and strongly suggesting that employers unfairly and extraordinarily compensate their workers in an attempt to level the playing field, Obama has effectively shown his true colors regarding his attitude toward businesses and their operation. Private businesses in the country, unlike the government, do not have the luxury of spending without consequences. Attempting to coerce fairness instead of cultivating a free market, Obama has strongly disadvantaged this country to the rest of the world.

Debt Ceiling Consequences

 

As citizens have the capacity to invest, so do small businesses,  the backbone of our country. Yet the proposal to raise the debt ceiling will only continue the weaken our already fragile business climate. More economic uncertainty is looming and capital spending among businesses at a 35 year low according to the National Federation of Independent Businesses. While some business may spend, most will retain their cash until greater fiscal stability is realized —  instead of investing. Businesses are currently not able to count on our administration to get serious about deficit reduction.

When our country is being led by a President who insists on continued borrowing without fiscal restraint — such as a debt ceiling — then our country is in truly in deep financial trouble.  We heard in his spring speech about his proposed “triggers” to decrease spending and increase taxes if deficit targets are not met. This would merely incentivize the liberals to intentionally avoid the targets to force otherwise unpalatable tax increases. Of course, the best and easiest solution for lowering the deficit is to not allow any more debt.

Current administration plans to raise the debt ceiling without strict spending cuts only confirm the abrogation of their fiduciary responsibility in order to play politics for reelection. By refusing to reduce the deficit through spending restraint, entitlement reform and program cutting, I submit that in the coming months, Obama will proclaim the Republican efforts to reshape Medicare to be a ploy for funding continued tax cuts for the top 2% income earners. Instead of tackling our budget crisis to allow citizens and businesses the ability to spend and invest their way to back to prosperity, our President’s proposals and politicking tremendously paralyze our economic recovery effort. It is truly embarrassing to have a President who makes such economically incompetent statements.

 

Thoughts On Quantitative Easing



Something about Bernanke’s speech today at the National Press Club regarding QE2 struck me.

Administrative support for quantitative easing is just another blatant example of political hypocrisy. The rationale behind quantitative easing – that it would spur investment – was vilified by the Democrat leadership when the same strategy was applied to “tax cuts for the wealthy”.

Bernanke, Geitner, the Fed, and the liberal members of Congress all support and push QE2. They argue that purchasing huge amounts of Treasury securities will reduce long term interest rates. The effect will be stimulative because this action forces the other potential buyers to do something else with their money – invest in higher risk and more economically stimulative activity.

Yet aren’t these the same people who were against tax cuts for the highest-income earners? Their argument then was that those higher income earners would not put their tax savings for economic stimulative use. Though this is not correct (as a CPA financial and tax advisor to that very segment of the population, I can assure you that large portions of tax savings are invested), the hypocrisy here is quite staggering.

The supporters of QE2 praise lower interest rates but not lower tax margins? They laud investment as a key strategy for economic recovery – but only when it is artifically and unconventionally controlled by the government? This dichotomy is both calculated and conniving and ultimately endangers the economic future of this country.

UPDATE: THE WASHINGTON TIMES PRINTED MY LETTER TO THE EDITOR ON THIS VERY TOPIC