FUNDAMENTAL TRUTH #43: “If business ain’t selling, business ain’t hiring.” -Old Pithy

Posted by PITHOCRATES - December 7th, 2010

The Greediest People are in Government

A lot of people don’t understand business.  No big surprise considering that most people get their education from the public school system.

Our teachers ingrain it into us from the earliest days of our schooling.  Business is bad.  And they’d be even worse.  If it wasn’t for government.

Business is all about profits.  Not people.  Business is greedy.  Government takes more of our money than business does but government is never greedy.  Just business.  Funny how that works.  The lesson we learn?  If you’re really greedy and want a lot of money, be in government.

Government Earmarks and the Airport for Nobody

We deal with business on our own free will.  We choose to buy what they’re selling.  It’s a little different with government.  They take our money.  And if we don’t cough up enough of it, they’ll seize our assets.  Even send us to jail.  A business just won’t do that.  No matter how greedy our teachers tell us they are.

And more times than not, we don’t want what government is selling.  Earmarks.  Such as the John Murtha Airport in Johnstown, Pennsylvania.  The ‘airport for nobody’.  An airport nobody needs and few use.  But dump trucks of taxpayer dollars find their way to the John Murtha Airport.  Why?  Because Murtha was a member of the U.S. House of Representatives.  And that’s what representatives do.  Raise our taxes.  And take our money home to their districts.

Yet business is bad.  And government is good.  Go figure.

Government Spending Disrupts the Free Market

During good economic times, people say business is greedy.  They’re making their employees work overtime instead of hiring more employees.  During bad economic times, people say business is greedy.  They’re causing a recession by not hiring more employees. 

Businesses hire employees.  That’s key.  The more they hire the better the economy will be.  And you just can’t say that about government.  Because when they hire more people, it doesn’t stimulate the economy.  It just increases our taxes.  Leaving us with less money to stimulate the economy with.

Some people will say that government spending does stimulate the economy.  That’s what Keynesians say.  But they’re wrong.  When government spends money, they’re just spending our money.  And when they spend more we spend less.  The spending nets out.  But it disrupts the free market.  Millions of taxpayers will spend less at millions of small businesses.  Who will then sell less.  And hire less.  Maybe even lay off some employees.

We Spend Less when We Earn Less

Are these small business owners greedy?  No more so than you are.  Consider this.  Let’s say you and your spouse both work.  You make a comfortable living.  You can afford to hire a landscaping company to cut your grass.  You can hire a lawn maintenance company to fertilize your grass.  You take your car once a week to where they hand wash it.  You and your spouse sign up for ballroom dance lessons (while a sitter watchers your kids).  Now let’s say one of you gets laid off.  What do you do?

Well, if you’re like most other people, you cut expenses.  You let your landscaping contractor go.  Your lawn maintenance company, too.  You tell the people at the carwash that they can’t wash your car anymore.  You tell your dance instructors that you don’t need them anymore for lessons.  And you let your babysitter go.

Because of you some people have lost their jobs.  Are you greedy?  Or are you just adjusting your expenses to be in line with your sales revenue (i.e., your income)?  When you go from 2 paychecks to 1, you simply can’t afford to spend money like you used to.  And it’s the same for a business.

A Business Spends Less when they Sell Less

In business cash is king.  They use it to pay their employees.  Their employee benefits.  Their suppliers.  The interest on their debt.  Even their taxes.  If a business doesn’t have enough cash to pay these, they may not be a business much longer.  To be successful, then, a business must master their cash flow.

Making this more difficult is the fact that a business has to spend cash often BEFORE they get paid.  They pay employees, employee benefits and taxes often before the customer pays for the product or service of these employees.  Of course, before a customer pays they have to buy what a business is selling first.  If the business is not a ‘cash’ business, this can add even more time between the cash going out and the cash coming in.

So when economic times aren’t good and businesses are not selling, businesses aren’t spending.  They try to get by on less.  They hold onto their cash.  As long as possible.  Because they are uncertain of what the future holds.  But one thing they do know is that the future will take cash. 

Hiring People doesn’t Stimulate anything but Costs

So why doesn’t a business just hire more people during a recession?  Wouldn’t that stimulate the economy by giving people more money to spend?  Well, let’s say a restaurant hires a new cook.  The business pays the cook a wage and a benefit package.  Let’s say it adds another $1,000 per week to the business’ cash flow.  But it’s a recession.  Hiring the new cook doesn’t change the number of people coming into the restaurant to eat.  It just costs the business more.

The new cook will have more money to go out and stimulate the economy with.  But what good does it do for the restaurant owner?  Unless the new cook spends at least $1,000 per week buying meals at the restaurant (which is not likely to happen), the owner loses money by hiring the new cook.  His or her cash flow will only get worse.

This is why businesses don’t hire people during bad economic times.  Because no one is buying what they are selling.  Hiring people will only make a bad situation worse.  It will put a greater financial burden on a business that is already struggling to get by on what little cash they have.   

 Businesses and Taxpayers Stimulate Best

But our public schools still teach us that business is bad.  And government is good.  Even though it is business that creates jobs and hires people.  And it’s government that raises taxes and kills jobs.

To create jobs you need to help business make a profit.  Tax cuts are a good way to start.  With fewer taxes to pay, a business can use that cash elsewhere. With fewer taxes to pay, a taxpayer can spend that money elsewhere.  You let businesses and taxpayers keep more of their money and they will do good things.  This is how you stimulate the economy.  And how you create jobs. 

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