Obama uses a Joint Session of Congress for a 2012 Campaign Speech on Jobs

Posted by PITHOCRATES - September 9th, 2011

The Obama Jobs Speech was the Same Old Same Old with the Angry turned up to Eleven

The big speech was last night.  President Obama‘s Jobs speech.  After waiting with bated breath.  For him to come back from vacation.  On Martha’s Vineyard.  Where no one wants for a job.  Or anything.

What you thought of it depends on your party affiliation.  If you’re a Big Government liberal Democrat that wants to stick it to the rich, I’m sure you liked it.  If you were looking for substance, I’m sure you were disappointed.  It was just the same old same old.  With the angry turned up to eleven.

Here are some selections from the transcript with commentary (see Obama jobs speech transcript: Full text (as delivered) posted 9/8/2011 on Politico).

These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share — where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in a while. If you did the right thing, you could make it. Anybody could make it in America.

For decades now, Americans have watched that compact erode. They have seen the decks too often stacked against them. And they know that Washington has not always put their interests first.

Yeah, it used to be like that.  Until greed set in.  Government greed.  Their insatiable want of private sector wealth.  And power over our lives.  High taxes.  And punishing regulations.  These have hurt American businesses that once provided those fair shakes.  It’s President Obama and his party that have been making this a business unfriendly nation.  Giving American businesses an unpleasant choice who struggle to compete.  Either close.  Or conduct business in a country that lets them compete.

Just look at the effect of Obamacare.  All hiring is frozen.  And those who can get Obamacare waivers are.  The communist Chinese don’t have these problems.

The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy.

He says as he scolds the American people.  And our Republican representatives.  Yelling at us.  Scowling at us.  Fed up with us.  Because he is not getting his way.

Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers.

Absolutely right.  And the best thing Washington can to is to stop helping.  Their tax and regulatory policies are smothering economic growth.  You want to help?  Then get out of the way.  And let business do what business does best.  Grow.  And create jobs.  To meet demand.  That the market is demanding.  Not building what the government thinks is best.

I am sending this Congress a plan that you should pass right away. It’s called the American Jobs Act. There should be nothing controversial about this piece of legislation. Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans — including many who sit here tonight. And everything in this bill will be paid for.

That urgent is it?  Urgent.  But not so urgent to cancel your luxurious vacation on the exclusive Martha’s Vineyard?  Where the rich and famous vacation to get away from people like us.  You know, if it could wait until after Martha’s Vineyard, it can’t be that important.

Democrats and Republicans support everything in this plan?  If so why isn’t this already law?  If not important before, why is it now?  Some two and a half years into your presidency?  And some two and a half years after applying your laser-like focus on job creation?

It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for long-term unemployed.

Jobs for teachers?  There’s nothing stimulative about that.  They don’t hire workers.  And the kids they teach aren’t going to hire any workers for a very long time.  This is just more money for teachers’ unions.  Which will be funneled back to the Democrat Party via union dues.

We pay teachers with tax dollars.  Paid by the taxpayers.  This is money the government transfers from the private sector economy to the public sector teachers.  So before teachers can stimulate with this money the private sector has to lose it first.  They take a large sum of money from the private sector.  And give it to the teachers.  Less administration costs to make this all happen.  To stimulate the private sector economy.  Which means the teachers spend less money than the private sector would have if they were able to keep their money.  This is a net loss of economic activity.  And is not stimulative.

Teachers are like government.  They provide an important service.  But they are taxpayer financed.  And like anything taxpayer financed, they are a drag on the economy.

More shovel-ready construction projects?  You told us yourself there is no such thing as a shovel-ready project.  This won’t be stimulative either.  Construction projects just don’t happen overnight.  Even if you get rid of all the regulatory red tape.  Projects take months to engineer.  If you cut that short there will be cost overruns to correct all the things missed in the engineering process.  Then there’s the asbestos abatement study.  Lead abatement.  Environmental impact studies.  At best these will start hiring in time for the 2012 election campaign.  Which no doubt is the goal.

It will provide — it will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business. (Applause.) It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and if they hire, there will be customers for their products and services. You should pass this jobs plan right away. (Applause.)

If tax breaks are good for businesses then just cut tax rates.  A tax rate cut is more stimulative than a onetime tax credit.  A tax credit does not instill business confidence.  Because hiring a new employee is far more costly than any onetime tax credit.  Especially with Obamacare bearing down on small businesses.  It’s these permanent costs of current tax and regulatory policies.  These are what are keeping business skittish about expanding and hiring.  And a onetime tax credit won’t change that.  A repeal of Obamacare would probably spark some business growth.  But not a targeted tax credit.

Pass this jobs bill — pass this jobs bill, and starting tomorrow, small businesses will get a tax cut if they hire new workers or if they raise workers’ wages.

Wishful thinking.  Whoever came up with this is an economic simpleton.  He might as well have asked everyone to voluntary pay more for their groceries.  So the stores will hire more people with all that additional profit.  Employees are another cost of doing business.  Voluntarily increasing these costs above the market cost will only make these businesses less competitive in the market place.  Threatening their business.  And all the jobs they currently provide.

It’s not just Democrats who have supported this kind of proposal. Fifty House Republicans have proposed the same payroll tax cut that’s in this plan. You should pass it right away. (Applause.)

Yes, payroll tax cuts are good.  They reduce the cost of doing business.  And let employees keep more of their earnings.  So cutting Social Security and Medicare taxes will help.  But this will only set up higher taxes down the road.  Because these programs are going broke.  Businesses understand this.  They know it will only be temporary.  And illusionary.  For they will pay more in the future.  So they aren’t going to hire more now.

Building a world-class transportation system is part of what made us a economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads? At a time when millions of unemployed construction workers could build them right here in America? (Applause.)

No.  It didn’t.  We took over the title of economic superpower from the British before the federal highway bill.  And private industry built the railroads.  And robber barons.  Sure, government helped.  But it didn’t lead the way.

China?  Really?  Why is China building so much infrastructure?  Because they have cheap labor.  They couldn’t do what they’re doing if their labor costs were the same as ours.  And that high-speed rail system?  They’re now questioning quality and safety.

And there are schools throughout this country that desperately need renovating.

According to my calendar it’s September.  And I’m pretty sure it’s September throughout the country.  Which means what?  That’s right.  The kids just went back to school.  Which means the next round of school renovation projects will take place starting next June.  When the kids get out of school.  Not very stimulative if you ask me.  Unless you just want a lot of people working on these school renovations during the 2012 election campaign.

And to make sure the money is properly spent, we’re building on reforms we’ve already put in place. No more earmarks. No more boondoggles.

Just like you promised your $800 billion stimulus wouldn’t contain any pork or earmarks?  When it was mostly pork and earmarks?  Fool us once shame on you.  Fool us twice shame on us.

And we’ll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it will do for the economy. (Applause.)

Great.  Nothing guarantees to speed things up like making it go through a new government bureaucracy.  Which can better send money to friends of the administration.  Just like that $800 billion stimulus.

Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.

Let’s crunch some numbers.  Say you hire someone.  Pay them $30,000.  Your half of Social Security and Medicare taxes come to $2,295 for the year.  Now factor in your other costs.  State and federal unemployment insurance.  Workers’ compensation insurance.  Health care.  Etc.  Not to mention their salary.  It adds up to a lot of money.  Far more than that $4,000 tax credit.  For hiring someone they don’t need to support their current level of business.  And you know what?  A smart business owner isn’t going to do this.

The plan also extends unemployment insurance for another year. (Applause.) If the millions of unemployed Americans stopped getting this insurance, and stopped using that money for basic necessities, it would be a devastating blow to this economy.

The government has to take that money out of the private sector economy first.  Before it can pay unemployment benefits.  Someone is still spending that money.  Just a different someone.  By the time you add in the cost of administering those benefits, there is a net loss in economic activity. 

Unemployment benefits help the unemployed while they look for another job.  They don’t stimulate the economy.

The agreement we passed in July will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act. And a week from Monday, I’ll be releasing a more ambitious deficit plan — a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run. (Applause.)

Standard and Poor’s wanted to see $4 trillion in real spending cuts.  Not cuts in the out-years that will disappear in the next budget deal.  Real cuts.  If not they said they would downgrade the U.S. sovereign debt rating.  They couldn’t do it.  The best they could do was a $1 trillion tax cut over the next 10 years.  And by golly if S&P didn’t downgrade our credit rating.

And the special commission is to find another half trillion in spending cuts?  On top of the $1.5 trillion they were already looking for?  That Congress was unable to find?  And now they have to find $2 trillion?  Yeah, like that’s going to happen.  That’s a plan with but one goal.  Failure. 

With this kind of spending, a deficit reduction plan can only mean one thing.  More taxes.  Just what the economy needs.  Not.

While most people in this country struggle to make ends meet, a few of the most affluent citizens and most profitable corporations enjoy tax breaks and loopholes that nobody else gets. Right now, Warren Buffett pays a lower tax rate than his secretary — an outrage he has asked us to fix. (Laughter.) We need a tax code where everyone gets a fair shake and where everybody pays their fair share.

An executive secretary probably earns something north of $60,000 a year.  That puts her in a top marginal tax bracket of 25%.  Crunching the numbers and this executive secretary will pay $11,125 in federal taxes.  Now let’s assume Warren Buffet has a half billion dollars in investments that pay a return of 8%.  That’s a capital gain of about $40 million.  Taxed at a paltry 15% capital gains tax that’s a measly $6 million in federal taxes.  Funny.  His secretary has a higher tax rate.  But Buffet pays approximately 53,833% more in tax dollars.  I don’t know how you can say one person paying $40 million in taxes isn’t paying his fair share.

Should we keep tax loopholes for oil companies? Or should we use that money to give small business owners a tax credit when they hire new workers? Because we can’t afford to do both. Should we keep tax breaks for millionaires and billionaires? Or should we put teachers back to work so our kids can graduate ready for college and good jobs? (Applause.) Right now, we can’t afford to do both.

This isn’t political grandstanding. This isn’t class warfare. This is simple math. (Laughter.)

This is nothing but political grandstanding and class warfare.  And rather Orwellian.  In Nineteen Eighty Four, they just changed the meaning of words to control the people.  Such as slavery is freedom.  But changing the meaning of words doesn’t change what slavery is.  It’s still slavery.  No matter what you call it.  And political grandstanding and class warfare is political grandstanding and class warfare.  Even if you say it isn’t.

Now it’s time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama and Colombia and South Korea -– while also helping the workers whose jobs have been affected by global competition.

America can’t compete with China because Chinese labor is cheaper.  So to make American products more competitive the president wants to subsidize our high cost of labor.  With American tax dollars.  Spread the higher cost of U.S. goods throughout the American economy.  Leaving everyone with less money for their own personal needs.  So we can keep Big Union working.  And supporting the Democrat Party.  Which will only increase government spending.  Our deficit.  And our debt.

To subsidize Big Labor they’ll have to pill that money out of the private sector economy first.  So you subtract X from the private sector economy.  And give X to Big Union.  Less an administration fee, of course.  Meaning that there will be a net loss of economic activity.

If we provide the right incentives, the right support — and if we make sure our trading partners play by the rules — we can be the ones to build everything from fuel-efficient cars to advanced biofuels to semiconductors that we sell all around the world.

The free market doesn’t need government incentives and support.  They did fine and dandy in the old days without any government help.  And making our trading partners play by the rules?  If you could do that they would be playing by the rules already.  There’s nothing you can do to make China stop undervaluing the yuan.  Unless you want to throw up protective tariffs on Chinese goods.  Of course they’ll retaliate.  Which will only make everything more expensive for the American consumer.  Besides, we already tried this.  Just before the Great Depression.

You really want to talk about the government picking winners and losers (i.e., incentives and support)?  Really?  After the Solyndra bankruptcy?  And the FBI raid on their executive homes?

Well, I agree that we can’t afford wasteful spending, and I’ll work with you, with Congress, to root it out. And I agree that there are some rules and regulations that do put an unnecessary burden on businesses at a time when they can least afford it. (Applause.) That’s why I ordered a review of all government regulations.

Didn’t Al Gore already reinvent government?  To root out wasteful spending and regulations?  Yeah, he did.  Or tried.  Turns out that’s a lot easier said than done.  Especially when you don’t really mean it.  I mean, come on, the Left lives and dies for these costly regulations.  They’re not just going to sit idly by and let them get repealed.  Not when they fund Democrat candidates in elections.

But what we can’t do — what I will not do — is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades.

Really?  So you’re not going to let anyone do what you did?  Like Rahm Emanuel said, “You never want a serious crisis to go to waste.”  When you used the worst recession since the Great Depression to pass your stimulus?

Basic protections are one thing.  But your regulatory zeal has shut down this economy.  Just ask the Gulf oil workers.  If you can find any.  Because they aren’t working on rigs in the Gulf anymore.  Thanks to you.

We all remember Abraham Lincoln as the leader who saved our Union. Founder of the Republican Party. But in the middle of a civil war, he was also a leader who looked to the future — a Republican President who mobilized government to build the Transcontinental Railroad — (applause) — launch the National Academy of Sciences, set up the first land grant colleges. (Applause.) And leaders of both parties have followed the example he set.

The seeds of the first transcontinental railroad were sowed back in the 1830s.  Lincoln became president in 1861.  The NAS was established by an Act of Congress.  Land grant colleges came into being in with the Morrill Acts of 1862 and 1890.  First introduced in 1857.  Abraham Lincoln wrote the Emancipation Proclamation.  But he did not create these other acts of Congress.  Congress did. 

And the transcontinental railroad?  That was Congress, too.  And one of the most corrupt Congresses in history.  The incentives and support Congress gave encouraged them to build track on ice.  Zigzag to cover as much land as possible to claim the mineral rights beneath. And when east and west finally met, they kept building track.  Parallel to each other.  To keep collecting money for track mileage laid.  And the cost overruns made a lot of Congressmen wealthy.  No, this railroad was not America’s finest hour.

How many jobs would it have cost us if past Congresses decided not to support the basic research that led to the Internet and the computer chip?

The government Internet (DARPA) was nothing more than file sharing and email for scientists.  If private enterprise and entrepreneurs didn’t step in that’s what the Internet would still be. 

The computer chip?  Funny. I thought that was Texas Instruments and Fairchild Semiconductor.  Which was ultimately based on the transistor.  Invented in 1947 by John Bardeen, Walter H. Brattain, and William B. Shockley of Bell Labs.  Who replaced vacuum tubes with semiconductors everywhere.  Except in high-end audio amplifiers.

What kind of country would this be if this chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do? (Applause.) How many Americans would have suffered as a result?

Actually they’d probably be a lot better off.  As far as a return on investment, Social Security is one of the worst retirement investments out there.  Why?  Because it’s not an investment.  Your money goes into the Social Security trust fund.  Where it ‘waits’ for your retirement.  But before you do, the government takes that money and spends it.  Leaving an IOU in the trust fund.  This is no IRA.  No 401(k).  No mutual fund.  It’s not even a savings bond.  In fact, if you die before you collect, all that money you paid in is kept by the government.  It doesn’t go to your heirs with the rest of your estate.  Like an IRA, a 401(k) or a mutual fund would.

But Social Security has been a real success.  For the government.  Because it has made generations of people dependent on government in their retirement.  Who live in fear of losing their benefits.  And will do anything to keep those benefits coming.  Even if it means screwing their own children.  And their grandchildren.  They’re so frightened by the Democrats that they will vote Democrat.  No matter how much the Democrats steal from future generations.

I don’t pretend that this plan will solve all our problems. It should not be, nor will it be, the last plan of action we propose.

That’s right.  You never want a serious crisis to go to waste.  And they will milk this for all it’s worth.  Stimulus.  Bailing out the UAW pension funds (i.e., the auto bailout).  Financial reform.  Obamacare.  Everything they’ve always wanted.  But could never get through the normal legislative process.

The Problem with Barack Obama is that he’s a Keynesian who wants to Grow the Government

Once again the professor scolds those who don’t agree with him.  And offers more of the same.  Which has already failed to reverse the worst recession since the Great Depression.  And it’s not going to work this time.  How do we know this?  Because if this stuff worked it would have worked the first time.

And it would be nice to see the plan before our representatives pass the plan.  For as CBO said before, you just can’t score a speech.  We need to see the numbers.  And the leaps of faith.  But I guess it’s hard to quantify soaring rhetoric.  Especially when you’re offering the same thing.  That you’re trying to make sound different this time.

The problem with Barack Obama is that he’s a Keynesian.  With one slight difference.  Keynesian stimulus is supposed to be temporary.  Whereas Obama’s stimulus gets added into the baseline budget.  Making his stimulus spending permanent.  His number one goal isn’t growing the economy.  It’s growing the government.  That’s why his polices don’t help the economy.  But they sure have grown the government.  And in Obama’s book that’s mission accomplished. 

But he sure would like a second term to continue the fun.  But I just don’t see that happening.  For I can’t see how he can fool that many people into believing that they’re better off after four years of his policies.

www.PITHOCRATES.com

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Small Businesses create the Jobs but Wall Street provides the Campaign Cash

Posted by PITHOCRATES - June 13th, 2011

Small Companies drive Economic Recoveries 

Jobs.  They’re everything.  Without jobs there is no economic recovery.  And jobs don’t come from the big corporations or Wall Street banks.  They come from small business owners.  And things have been looking pretty bleak for them for awhile now (see Small businesses, crucial to growth, face challenges by Scott Patterson posted 6/13/2011 on USA Today).

Through the 12 months ended in March of last year, 505,473 new businesses started up in the U.S., according to the latest data available from the Bureau of Labor Statistics. That’s the weakest growth since the bureau started tracking the data in the early 1990s. It’s down sharply from the record 667,341 new businesses added in the 12 months that ended in March 2006.

Weak start-up growth has dire implications for jobs because small and midsize businesses have driven employment gains in the U.S. for years. Between the recession that ended in late 2001 and the start of the most recent recession in late 2007, businesses that employed fewer than 500 workers added nearly 7 million employees, according to data collected by payroll provider ADP, which tracks employment trends.

Meanwhile, businesses that employed 500 or more cut nearly a million positions over the same period, often because they sent jobs overseas. Smaller companies — think local restaurants, gas stations and mom-and-pop grocery stores — are far less likely to send jobs abroad. That’s why they are crucial to the recovery, economists say.

Small companies drive recoveries.  A lot of which are LLCs or S Corporations.  Which don’t pay corporate income taxes.  Earnings pass through to the owners.  Who report these earnings on their personal income tax returns.  Even if they leave their earnings in their business for a future rainy day.  Or a future investment into the business.  So these owners ‘earn’ a lot of money.  But probably leave most of their earnings in their businesses to grow them.

When people talk about raising the taxes on the wealthy, those earning over $200,000, it increases the taxes on people who aren’t necessarily wealthy.  Such as these small business owners.  Increasing their taxes only hinders their economic growth and job creation.  Fewer jobs mean decreased economic activity.  And prolonged economic recoveries.  So raising taxes on those who make $200,000 or more is never a good thing to do during bad economic times.  You want to cut taxes then.  Not raise them.

A huge concern for small businesses, says the NFIB’s Dunkelberg, is lack of clarity about what will happen in the next year in Washington. With another round of elections coming up and rancorous debate on Capitol Hill, businesses are unsure about what policies will be enacted by the government.

“There’s just a huge amount of uncertainty. And when you’re uncertain, you don’t make bets,” he says.

Small businesses don’t have big budgets.  Or piles of cash.  So they’re very conservative with their capital.  And one thing conservatives hate is uncertainty.  Because decisions they make today will have lasting consequences years later.  Meaning decisions today may require a lot of cash tomorrow.  If they are uncertain how much employee costs will be next year they are reluctant to hire this year.  If they are uncertain what regulatory laws they’ll see next year they will be reluctant to expand their business this year.  Etc.  Increasing uncertainty only hinders their economic growth and job creation.  Fewer jobs mean decreased economic activity.  And prolonged economic recoveries.  So you don’t want an activist government changing regulations and policies during bad economic times.  You want limited government with a ‘hands-off’ approach to the economy.  Where ‘less is more’ should be the government’s mantra.

Bad Government Policies cause Deflationary Spirals

Cuts in the tax rates help because they provide a recurring benefit.  It’s not a one-time tax credit.  A cut in the tax rate decreases uncertainty.  Something business owners like.  And can use to make decisions that can have long-term consequences (see Summers calls for new boost to U.S. economy by Jeff Mason and Caren Bohan, Reuters, posted 6/13/2011 on The Globe and Mail).

Former White House aide Larry Summers on Sunday urged expanded tax cuts on U.S. workers’ wages, warning that America’s economy was at risk of years of Japan-style stagnation without a further boost…

“Fiscal support should be continued and indeed expanded by providing the payroll tax cut to employers as well as employees,” Mr. Summers wrote.

“Raising the share of the payroll tax cut from 2 per cent to 3 per cent would be desirable as well.”

During the 1980s Americans feared Japan.  The Japanese government was partnering with business.  It had a name.  Japan Inc.  And there was huge economic growth.  Democrats pointed to the Japanese and argued that the U.S. needed to reverse Reaganomics and do what the Japanese were doing.  Make an America Inc.  Have more government involved in business.  For when the Japanese did their economy took off to the stratosphere.  They were buying landmark properties in the U.S.  National Lampoon magazine featured a cover with a Japanese CEO who was presiding over the United States of America, noted as a wholly owned subsidiary of the Honda Motor Company.  If America didn’t follow her lead soon there would be no America left.

The Big Government people in America were having a serious case of Big Government envy.  But then the Japanese crash came.  The growth wasn’t real.  It was a bubble.  And what do bubbles do?  They pop.  As it did in Japan.  Where they suffered a deflationary spiral during the 1990s. 

Mr. Summers and former White House economist Christina Romer were in the camp arguing that the recession that followed the financial markets meltdown of 2008-2009 was a unique event that required aggressive stimulus to avoid a long period of stagnation similar to Japan’s “lost decade” of the 1990s.

Former White House budget director Peter Orszag was among those who cautioned against a further big stimulus that was not coupled with deficit reduction in later years, as he warned of the danger of ballooning debt and deficits.

The secret to a healthy U.S. economy had always been home ownership.  So government policies tried to put as many people into homes as possible.  Easy financing and subprime mortgages made the dream come true to anyone who wanted it. And they bid housing prices up into the stratosphere.  Then the dream turned into a nightmare.  The housing bubble popped.  Housing values plummeted.  And they still are.  Many are under water in their mortgages.  Or are going through foreclosure.  So there are parallels with Japan’s Lost Decade.  Including their ballooning debt and deficits.  For the U.S. debt and deficits (as a percentage of GDP) are almost as bad as hers.  And soon will surpass hers.  Making the parallels to the lost decade eerie to say the least.

In the interview, Mr. Summers listed several factors that contributed to the slowdown: the fallout on the global economy from Japan’s earthquake, concerns in European debt markets, high oil prices and a deceleration in China’s rate of growth.

But he also said the U.S. economy is in a “cycle that has some of the characteristics of what happened in Japan” following the bursting of its asset bubble and that’s why it has struggled to regain its stride.

“The economy isn’t as strong as I expected last winter,” Mr. Summers. He said that in post-bubble recessions, such as Japan’s in the 1990s and the Great Depression of the 1930s, there is a tendency to assume any pickup in growth means a return to normal growth but recoveries in those cases take much longer.

Come to think of it, there are some eerie parallels between the current U.S. crisis and the Great Depression.  Another wicked deflationary spiral.  And record long-term unemployment.  You’d think with a couple of wicked deflationary spirals on the books the Americans would have learned a thing or two about monetary policy and government intervention.  But no.  Guess something else even more important must be on their minds.

Obama’s Number One Priority

But we know the president cares.  He has said so.  And is on top of it.  He is working hard with a laser-like focus on job creation.  As we enter our second Recovery Summer with record long-term unemployment.  But the White House is a flurry of activity.  With all that activity focused on the number one priority on the president’s agenda (see Obama Seeks to Win Back Wall St. Cash by Nicholas Confessore posted 6/12/2011 on The New York Times).

A few weeks before announcing his re-election campaign, President Obama convened two dozen Wall Street executives, many of them longtime donors, in the White House’s Blue Room.

Mr. Obama, who enraged many financial industry executives a year and a half ago by labeling them “fat cats” and criticizing their bonuses, followed up the meeting with phone calls to those who could not attend.

The event, organized by the Democratic National Committee, kicked off an aggressive push by Mr. Obama to win back the allegiance of one of his most vital sources of campaign cash — in part by trying to convince Wall Street that his policies, far from undercutting the investor class, have helped bring banks and financial markets back to health.

Yes.  Campaign cash.  His number one priority.  But not just any cash.  Wall Street cash.  Because small business owners just don’t have that kind of cash to buy favors with.  So it’s Wall Street that will get Obama’s attention.  Because they’re important.  Not small business.  The job creators.

Still, there is skepticism. One Democratic financier invited to this month’s dinner, who asked for anonymity because he did not want to anger the White House, said it was ironic that the same president who once criticized bankers as “fat cats” would now invite them to dine at Daniel, where the six-course tasting menu runs to $195 a person.

The donor declined the invitation.

With record long-term ‘Great Depression’ unemployment, it’s nice to know somebody can afford $195 a person six-course tasting menu.  It’s good to know that the worst economy since the Great Depression isn’t so bad everywhere.

Obama’s Policies favor Wall Street, not Small Business

Small business owners are facing uncertainty that is paralyzing them.  While the U.S. is going through a deflationary spiral similar to the lost decade in Japan.  And the Great Depression.  While suffering through record long-term unemployment.  Meanwhile the White House is cozying up with Wall Street again for campaign cash for 2012.  The same people they blame for the subprime mortgage crisis, giving us the worst recession since the Great Depression.  But then bailed them out.  The only people who benefited from QE2.  When Wall Street investors did well investing money they borrowed for ‘free’ from the Fed.  To say this administration is sending mixed messages is the understatement of the year.

And the message to small business owners?  Besides blaming them for the continued recession (for not borrowing money to hire new people)?  We want to raise your taxes.  Nothing mixed about that message.  It’s coming through loud and clear.  Which is why new business startups are the weakest since record keeping started in the early 1990s.  And the worst recession since the Great Depression lingers on.

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Obamacare and H.R. 2 – The Perfect Match

Posted by PITHOCRATES - January 19th, 2011

When Healthcare Insurance becomes Welfare

Well, the Republican controlled House passed H.R. 2 (Repealing the Job-Killing Health Care Law Act).  But the Democrat controlled Senate is vowing to defy public opinion.  Harry Reid won’t even bring it up to a vote.  Probably because he’s afraid some of his Democrat colleagues worried about reelection in 2012 may vote to repeal it. 

So they’re rolling out the usual sob stories.  Repealing the bill will kill kids.  Plunge the country into a depression worse than FDR’s Great Depression.  You know, the usual stuff (see House votes on repeal of healthcare law by Michael A. Memoli, Washington Bureau, posted 1/19/2010 on the LA Times).

The move by House Republicans has spurred a vigorous defense of the law by many Democrats and the Obama administration, even as they were reluctant to do so in the fall campaign. They cited emotional stories of constituents who are benefitting from the law — particularly children who can no longer be denied insurance coverage for preexisting conditions.

Repeal, Democrats said, could cause more than 5 million Americans with preexisting conditions to be denied coverage, and add $230 billion to the deficit in the next 10 years.

Think for a minute why insurance companies exclude preexisting conditions.  Better yet, let’s say you own an insurance company.  You make money by collecting insurance premiums.  You pay claims out of those paid premiums.  Now, the key for this to work is that more people have to pay premiums than collect claims.  If not, you will run out of money and go out of business.  See?  It’s business.  Your income (paid premiums) has to be greater than your costs (claims).  Ergo the exemption of preexisting conditions.  If you didn’t exclude them, people would only buy insurance when they’re sick and need benefits.  Costs (claims) would be greater than your income (premiums).  And your insurance company would go out of business.

Allowing preexisting conditions.  It sounds nice.  In a touchy feely caring kind of a way.  But it will kill the insurance industry.  Then the government will have to step in and make healthcare insurance welfare.  Supported by an ever growing tax burden.  Like in every other nation with nationalized health care.  So they’re being a bit disingenuous by pulling on the old heartstrings.  Then they just flat out lie.

“Democrats have made a firm commitment that we would judge every proposal that comes to the floor by whether it creates jobs, strengthens the middle class, and reduces the deficit. The repeal of patients’ rights fails on all three counts,” House Minority Leader Nancy Pelosi (D-San Francisco) said before the vote.

The Economically Challenged:  Nancy Pelosi and her Constituents

What they call deficit reduction is a huge tax increase and a gutting of Medicare.  But raising taxes doesn’t create jobs.  If it did we would never cut them during bad economic times.  We cut them because lowering taxes creates jobs.  Even Obama admitted this in the big compromise to extend the Bush tax cuts.

When you kill jobs you crate unemployment.  With fewer people working there are fewer people paying taxes.  This is one of the reasons why we have record deficits now.  We have record unemployment rates that just go on and on and on with no end in sight.  (The other is the explosive government spending corresponding with this fall in tax revenue).  Making this problem worse will add to the deficit, not reduce it.

Higher taxes and unemployment and a reduction of Medicare benefits is not going to help anyone in the middle class.  It’s going to make their lives that much harder.  So Pelosi is wrong on all three counts.  Of course, it’s hard to blame her.  It must be the water in her district.  Makes people economically challenged.  For her constituents all think like she does.  At least the 80% or so that keeps voting for her.  No, passing H.R. 2 will be the best thing to happen to the middle class since the 2010 midterm elections.

Obamacare is so Good that it Insured the Uninsured – Even before it was Passed

And the lies keep coming.  This from Karen G. Mills, administrator of the Small Business Administration, on January 18, 2011.

Every day America’s entrepreneurs and small-business owners are finding more ways to access affordable health care insurance because of the Affordable Care Act. We have some very important data recently, which is that after years of dropping coverage, the number of small businesses offering health insurance to their workers is actually going up. This is according to the Kaiser Family Foundation: nine percent more small businesses with less than 200 employees provided coverage in 2010 compared with 2009, and for those with less than 10 employees, the expansion in coverage was even bigger. It was 13 percent.

Funny.  Because small business (and unions) have been asking for Mini-Med plan waivers.  Because the cost to comply with Obamacare would otherwise force some 1.5 million people off of their current health care plans.  So how does Ms. Mills reconcile this fact with the rosy statement above?  Why, you lie about polling results (see Small business and the health care repeal by Glenn Kessler posted 1/19/2011 on The Washington Post).

Mills, to her credit, cited her source, the Kaiser Family Foundation 2010 annual survey of Employer Health Benefits. And her statistics are correct. It’s just that they have nothing to do with the new health care law.

First, the survey was taken between January and May of last year, so much of the data was collected before the law even passed… Second, the Kaiser report specifically says the analysts were puzzled by the shift in small business figures, but were pretty sure it did not mean more firms were signing up to provide health insurance to their employees… “A possible explanation is that non-offering firms were more likely to fail during the past year, and the attrition of non-offering firms led to a higher offer rate among surviving firms.”… A third problem is that the data set for small firms is too small to be significant.

So the administrator of the Small Business Administration, Karen G. Mills, is making less than honest statements.  She’s saying that polling data shows Obamacare is already having a positive impact on small business.  With the poll numbers taken before the passage of Obamacare, this is just impossible.  It would appear that Ms. Mills, the Small Business Administration, is not a friend of small business.  Because she lied about the poll results.  Put the two together and one must conclude that Obamacare is not good for small business.  If not, why would she lie?

Yes, Nancy, Let’s Pass H.R. 2 to Find out what’s in It

Remember how they passed Obamacare.  Quickly.  With backroom deals (the Louisiana Purchase, the Corn Husker kickback, etc.).  And, of course, without reading it.  Nancy Pelosi said they’d have to pass it to learn what was in it.  Why?  Because they were afraid that if people knew what was in it the people would pressure their representatives and senators to not pass it.  What other reason could there be?

But in the new spirit of civility, let’s extend an olive branch to Nancy Pelosi.  Let’s follow her advice.  Let’s pass H.R. 2.  Then let’s see what will happen.  If the recession turns into depression, if the deficit continues to grow, then we’ll concede that she was right.  Then we can reinstate Obamacare.  Increase taxes.  Gut Medicare.  Ration health care.  And make this nation the liberal paradise they so long for.  But first let us pass H.R. 2 to see what’s in it.

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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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Look Out – Here Comes the Middle Class Tax Hike

Posted by PITHOCRATES - September 25th, 2010

A Little Business Primer

Who hires more people?  Big corporations?  Or small businesses?  Some may be surprised to learn that small business provides the majority of American jobs.  Little guys taking a risk.  Doing something they love.  Are good at.  They earn a living.  And provide jobs with benefits for others.  Not too shabby.

These people start their own construction company.  Buy a restaurant (from a lunch counter to a fancy place with table cloths and a wine steward).  Captain a fishing boat.  Move up from fixing cars in a backyard to operating a three-bay service garage.  Open a multi-chair hair salon.  Run a landscaping business (and snow removal business in the winter).  Sell ice cream to tourists from an independently owned Ben & Jerry’s on the strip.  Or buy and operate a McDonalds, Pizza Hut, Dunkin’ Donuts, Kentucky Fried Chicken, Taco Bell, etc.

These are not fat cats running fortune 500 corporations.  They’re no Donald Trump.  So they keep things simple.  And yet protect themselves.  They operate as an ‘S’ corporation.  This is sort of a hybrid between the regular ‘c’ corporation and a partnership.  There’s limited liability (you limit your losses to only what you invested into your business).  And there’s no business tax on earnings like in a partnership.  All earnings are distributed to the shareholders (which could be just one person).  And taxed as personal income. 

I Will Not Raise Taxes on Anyone Earning Under $250,000

Sounds good.  Stick it to the rich fat cats.  But who else makes more than $250,000?  I’ll give you a hint.  Reread the previous section.

A small business owner operating as an ‘S’ corporation is likely to earn more than $250,000.  But they’re not fat cats.  Far from it.  Let’s pick a number.  Something you think is fair for a business owner’s salary.  Someone who probably has his or her house mortgaged to the hilt.  Works 7 days a week and puts in on average 80 hours each week.  If they could earn, say, $75,000 working for someone else, would you begrudge them earning, say, $100,000 working for themselves?  For the sake of the argument, let’s say you don’t.  That’s less than half of the $250,000 tax threshold.  The small business owner, the generator of American jobs, should be safe from any Obama tax hike, right?  Wrong.

As a business struggles to grow, a business owner plows most of their earnings back into their business.  To buy a new copier.  Replace a furnace.  Buy new software.  New computers.  A network for your computers.  Inventory tracking.  A new delivery truck.  Decals for your new delivery truck.  Building signage.  A ‘yellow pages’ ad.  New telephones.  A new website.  New invoicing software with a custom-designed invoice form.  Etc.  But before you can spend this money, you have to earn it.  And, once earned, an ‘S’ corporation small business owner pays taxes on it.  Even if they invest it back into the business.  So, the higher the tax rate, the less they can grow.  And the fewer jobs they can create.

The Obama administration keeps bitching about the greedy bankers and big corporations who are sitting on their cash.  (And they sit on their cash for good reason.  They already have excess capacity.  So there’s no reason to expand.  Because there’re no markets to expand into).  The one area, though, where there may be expansion possibilities is in small business.  Raising taxes on those earning over $250,000 per year, though, will kill small business growth.  Kill jobs.  And prolong this recession.  So why do they persist in attacking the ‘rich’?  Because in terms of voters, they’re less of them than those earning under $250,000.

Playing the Numbers

The Bush tax cuts expire at the end of this year.  If Congress doesn’t extend them, taxes will go up and the economy will tank even further.  And Obama will have violated his no tax rate increase for anyone earning less than $250,000 pledge. 

But there will be no vote before the midterm elections.  (See Congress Punts on Taxes by Martin Vaughan and John D. McKinnon at the Wall Street Journal on line.)  The Republicans want to extend them across the board.  This is a problem for Democrats.  If they do, it endorses George W. Bush’s economic policies and discredits their own.  And angers the liberal base.  They would rather extend the cuts only for the middle class.  This, however, won’t help the small business owners (i.e., the job creators).  So the Republicans are opposing this as it will not help the economy. 

Let’s look at the numbers.  Note the chart at the bottom of the Wall Street Journal article referenced above.  Especially the fine print.  It reads, “2008 tax year, an additional 25% of filers are in the 0% rate category.”  In other words, 25% of the voters pay no federal income taxes.  If you add that figure to the sum of the top three ‘Pct. of filers’ in that chart it equals 95.1%.  In other words, approximately 95.1% of voters earn $140,550 or less.  Only 4.9% of the voters earn more.  Hence the class warfare.  And after stirring up the masses (the 95.1%) to hate the rich (the 4.9%), they have no choice but to keep on hating.  I mean, they can’t tell the 95.1% that they were wrong, can they?  Especially when the poll numbers are moving against them.

So, of course, the Obama administration sticks to the time-honored playbook.  And attacks the rich.  In hopes of persuading enough of the 95.1% to forget about results and to just vote their hate.  We call it playing the numbers.  There’s only one problem.  Most of the 95.1% work for the 4.9%.  So if you make it too costly for the 4.9% to expand and create jobs, they won’t.  They may even cut back.  And the 95.1% are the ones who will suffer.  They may see a reduction in their benefits.  Work longer hours (because their boss can’t afford to hire a new employee). They may even lose their job.  And their house.  They may not like that.  But at least they can find solace in their hate.

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