by | BUSINESS, GOVERNMENT, HYPOCRISY
As Obama keeps pushing his (non) jobs bill that looks like another stimulus package, I’m tired of hearing that the bailouts worked. One of the amazing non-stories in the country is that when the bailouts occurred, what the government was doing was taking those companies and their employees who were totally solvant (ie Ford, Chrysler, etc) and rewarding their achievement by having their competitor bailed out (GM). If there has ever been unfair competition in this country, it was then. Those companies competed unsuccessfully, and then were given government money so they could produce again. This is pure hypocrisy — and practically discrimination — toward those successful companies.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, TAXES
In an Op-Ed to the Washington Times last week (Stop Exporting American Jobs 8/23/11) Rep. Duncan Hunter assiduously notes that very little is being said about jobs moving overseas but he fails to point out the obvious reason why: our government policies are the driving force behind the mass exodus of businesses abroad. A staggering increase in regulations coupled with the the highest corporate tax rate among industrial nations form the foundation of a very anti-business climate in our current administration.
Hunter goes on to suggest that companies are being offered incentives to move overseas, but the reality is that as the government continues to meddle in business affairs, it creates more disincentives to stay here. High taxes, legislation such as Dodd-Frank, and entities such as the EPA, SEC and the NLRB contribute to the rising cost of doing business here. For many companies, moving abroad is a matter of corporate survival.
Mr. Hunter calls for putting American workers first instead of sending them away. For those legislators who insist that government is the solution – instead of recognizing that it is the problem – maybe it is time to send them away. If Congress, of which Hunter is an elected member, did its job putting American workers first by sticking to the Constitution and staying out of the free-market, perhaps our businesses would once again have the liberty to grow and thrive in our great nation.
by | BUSINESS, GOVERNMENT
It appears that Bill Gates is going the way of Phil Rizzuto and Ralph Kiner. For those of us old enough to remember, both Rizzuto and Kiner were the absolute pinnacle of professional baseball. They went on to become Baseball Hall of Famers and are regarded as two of the best baseball players of all time.Each then embarked on a subsequent career as a sports announcer – second-rate at best – for many years. Unfortunately, they’ll both be remembered for their longer period of broadcaster mediocrity than for their baseball playing superiority.
Bill Gates is following the same path. Rising to become arguably one of the most important businessmen ever to walk the earth by adding untold trillions to the value of the world economy, he is now venturing on new career in a philanthropic direction. His foundation focuses on education, but has had only mediocre results even by his own admission. And these results follow from an unwillingness to fight for his philanthropy the way he did his business.
Bill Gates and his foundation have intentionally failed to take on the most important detractor from present day education — that being the domination of public schools (or more properly government schools and the unions that run them) as well as the lack of competition in that industry. In fact, Gates provides virtually no funds for vouchers or related programs that might dislodge this cancer of public education, with the explanation that he doesn’t really want to pick a fight with the unions. Such an cowardly attitude would certainly have prevented the successes he saw in his business career. It’s a shame that Gates will likely be remembered as an individual who squandered more hard-earned, philanthropic funds than ever thought possible.
by | BUSINESS, ECONOMY, OBAMACARE, POLITICS, TAXES
The current assertion that we are in a recession because the wealthy companies haven’t put money back into the system is just plain wrong. But even our president is peddling this idea. Last month, Obama chided businesses to hire more workers. Specifically, he said “it is time for companies to step up. American taxpayers contributed to that process of stabilizing the economy. Companies have benefited from that, and they’re making a lot of money, and now’s the time for them to start betting on American workers and American products.”
The problem with such a statement is the fact that although some companies are profitable, it doesn’t mean that they can afford to increase their hiring. Yelling at businesses to do so only makes him look like a petulant child.
The reality is that Obama’s unfriendly business policies have substantially contributed to the present uncertainty in the business world regarding long-term planning. The economy works on a set of facts; the existing tax rates have been in place since 2003 and there have not been higher rates since then. Making large changes, such as tax increases– as has announced he plans to do — will most certainly affect the economy, because there will be even less capital for companies to maintain and grow their enterprises.
In addition to tax rates, increased regulation and new regulation due to Obamacare are all causes for concern to businesses. Entities such as the EPA, SEC, NLRB and Dodd-Frank all have their hand in the pot. With pressure to keep up and comply with government’s nanny state, business owners are hesitant to invest. Unless changes are made to allow companies more freedom, they will hold on to their money. Other decisions, such as not pushing a Free Trade Agreement, and an enormous increase in spending since FY2008 all feed the hesitation and money pinch that the businesses feel.
Without true business-friendly reform, entrepreneurs will look elsewhere — namely abroad — to fund their ventures where businesses are welcomed, appreciated, and cultivated.
by | BUSINESS, ECONOMY, GOVERNMENT, HYPOCRISY, TAXES
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.
by | ARTICLES, BUSINESS, NEW YORK
How come this bank gets propped up, but others don’t? Crain’s New York has the news here:
The Harlem bank raises $55 million from an investment group that includes titans Goldman Sachs Group Inc and Morgan Stanley; feds had ordered the cash infusion to save the institution.
Carver Federal Savings, the nation’s largest bank founded and run by African-Americans, has staved off possible collapse by raising $55 million in fresh capital.
The investors include Goldman Sachs Group Inc. and Morgan Stanley, which have agreed to invest $15 million each, while Citigroup Inc. and Prudential Financial have agreed to put in $10 million, according to an announcement from Carver’s parent, Carver Bancorp. American Express and three other firms are investing smaller amounts. Chief Executive Deborah Wright, who has led the bank since 1999, will remain at her post.
“I haven’t had a day this good in some time,” said a relieved Ms. Wright, who added she was “terribly grateful” for the financial community’s vote of confidence in her bank. “We have a lot of hard work ahead.”
The Harlem-based bank was ordered by federal regulators earlier this year to raise additional cash as it staggered under a hefty load of delinquent real estate loans. Under Ms. Wright’s leadership, the bank had moved from its traditional business of lending to one- to- four-family homes and into larger commercial real estate projects. That strategy backfired when the real estate market hit the skids and mortgages for low-income borrowers dried up.
Earlier this year, 12.3% of the bank’s loan portfolio was more than 90 days delinquent. The industry average is 4.9%, according to Federal Deposit Insurance Corp. data. In addition, although $74 million of its loans were well overdue, Carver had just $21 million in reserves to cover loan losses.
In February, the U.S. Office of Thrift Supervision ordered Carver to raise additional capital by the end of April or face being seized and sold to another institution—or simply dissolved. The amount Carver raised exceeds the amount demanded by regulators, Ms. Wright said.
Last month, the bank named a new chief financial officer—its fourth in the past three years—and said it hired an recruiter to find a new president and chief operating officer who would oversee lending, retail, marketing and human resources. Ms. Wright said the new executive would allow her to devote the bulk of her time to drumming up new business, adding that Carver will soon step up its marketing.
The Harlem business community galvanized to help rescue Carver, a fixture of the city since 1948. Lloyd Williams, CEO of the Greater Harlem Chamber of Commerce, said a private breakfast was held in late April at Sylvia’s Restaurant in which Ms. Wright and senior Carver officials met with former state Comptroller Carl McCall, former city Comptroller Bill Thompson, U.S. Rep. Charles Rangel and other Harlem business and political leaders to discuss ways to turn around Carver.
“It is exciting, and the community is now stepping up to the plate,” Mr. Williams said shortly after that meeting, “because they have been asked to do so in a meaningful manner.”
by | BUSINESS, ECONOMY, GOVERNMENT
The most misunderstood and misused phrase in economics and politics is that “small businesses are responsible for 2/3 of all new jobs”. This sentiment, uttered by President Obama last August, was gleaned from data produced by the SBA, which reported that small businesses “generated 65 percent of net new jobs over the past 17 years”. Since then scores of pundits, analysts, economists, and politicians have regurgitated the sound bite to meet their own specific agenda.
The problem, however, is that the definition of small business is misunderstood – and has different definitions – to different people. Obama maintains that “small businesses with fewer than 50 employees…are the businesses that usually create most of the jobs in this country”. Unfortunately, he uses this line to justify credits for small business (health care, etc). That makes for good political speech, but those businesses doesn’t make jobs. His assertion is patently untrue.
The SBA is the group who sets the legal definition of a “small business” which is one with fewer than 500 employees . Going back and using the data from them – and cited by Obama – it is clear that his threshold about small businesses – under 50 employees – is incorrect. SBA data shows that “much of the job growth (of the 65% net new jobs) is from fast-growing high-impact firms, which represents about 5-6 percent of all firms and are on average 25 years old”. Clearly then, the majority of these are not businesses with fewer than 50 employees.
Small businesses under Obama’s definition tend to share similar characteristics: they typically have a more localized market, lack of abundant and available credit and capital, and lower volume of sales than their larger small business counterparts. As such, these businesses lack the necessary qualities to create the type of job growth that Obama references.
Even more frustrating is the fact that Obama wants to raise taxes on those earning 250K or more. To the average household, 250K sounds like a high-income threshold. What he doesn’t tell you is that this effectively also raises taxes on small businesses, the very group he purports to want to help. Most small businesses file as sole proprietorships, LLCs, and Scorps, and by doing so, pay taxes at individual rates. In the realm of business, 250K is not a lot. Raising the margin for those earning over that amount will raise tax rates on small business owners, thereby reducing their profit margin to reinvest in their company or create new jobs.
Either Obama is clueless about small businesses and job creation, or he is lying. Either way, one thing that is not misunderstood is his incompetence.
by | BUSINESS, POLITICS, TAXES
The truth about Obama’s remarks:
#1) ON TAX BREAKS FOR THE WEALTHY: “And if we truly care about our deficit, we simply cannot afford a permanent extension of the tax cuts for the wealthiest 2% of Americans. Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break. It’s not a matter of punishing their success. It’s about promoting America’s success”.
FACT: The highest-income earners are the greatest investors. Investment is much more stimulative than consumptive spending; raising the tax margin punishes the earners and the economy – while theat extra revenue will go straight to the government. These top 2% earners also provide nearly 50% of small business income in this country; by targeting them, Obama is also hurting businesses.
#2) ON FIXING THE TAX CODE: “Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world”
FACT: This is purely populist rhetoric. Accountants and lawyers do not eliminate tax liabilities. And it is not so much lobbyists as it is legislators pandering for votes who put in provisions intended to help their own individual special interests. This happened in the 1986 Tax Act under Ronald Reagan, when tax rates from 50% to 28% in exchange for a large number of deductions and writeoffs. However, the ink was barely dry when Congress used that as an opportunity to jack the rates up from 28% to 39.6% — which lasted until the Bush tax cuts pushed them back a little bit.
#3) ON A FEDERAL FREEZE FOR FIVE YEARS: “I am proposing that starting this year, we freeze annual domestic spending for the next five years. This would reduce the deficit by more than $400 billion over the next decade, and will bring discretionary spending to the lowest share of our economy since Dwight Eisenhower was president”.
FACT: Obama’s federal freeze comes after he has increased our spending 25% in two
years. We need to go back to FY2008 and start from there.
#4) ON JOB CREATION: “We’ll invest in biomedical research, information technology, and especially clean energy technology – an investment that will strengthen our security, protect our planet, and create countless new jobs for our people”
FACT: “Invest” is just code for increased government spending. Here’s an example of the government picking industry winners and losers, something they have no business – or qualifications – doing. This policy will result in a net job losses – taking away from market directed companies in order to subsidize activities that cannot justify investment by the free market. A better and more impacting idea would be to give businesses research credits that companies could use and develop on their own.
#5) ON CLEAN TECHNOLOGY: “Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling. So tonight, I challenge you to join me in setting a new goal: by 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas”.
FACT: There is no clear consensus on the best type of clean energy. This only means continued uncertainty in the business markets, which will hamper the rate of recovery.
by | BUSINESS, NEW YORK, TAXES
A recent Op-Ed in the New York Post by John Faso, discusses the shrinking population in New York State and its implications for the future.
Faso surmises that New Yorkers are fleeing the state — most famously Rush Limbaugh — because of high taxes and dismal job prospects. Our state is nearly bankrupt and has been increasingly burdensome and hostile to businesses in recent years. The population decline means a loss of two more seats in the House of Representatives. More importantly, this means that New York is no longer as powerful as it has been in terms of policy.
Faso reminds us about the challenges we as New Yorkers face and what we can do to surmount them.
by | BUSINESS, TAXES
In an attempt to placate voters, President Obama signed into law the new $ 30 billion small business bill full of lending and tax credits, which he misleadingly calls tax cuts. This program will only provide some minor and temporary benefits to businesses and will hardly impact our much-needed economic recovery. Unlike politicians who only plan for the next election, businesses engage in long-term planning. The only sensible program would be to extend the Bush tax cuts for the long haul, so that businesses and higher income earners can invest. Unfortunately, our president is unwilling to pursue such a measure.
http://www.reuters.com/article/idUSN2710251620100927
