Tucked into the “fiscal cliff” tax package approved by Congress are billions of dollars in tax breaks that should make the new year a lot happier for businesses of many stripes, including film producers, race track owners and the makers of electric motorcycles.
In all, more than 50 temporary tax breaks were renewed through 2013, saving businesses and individuals about $76 billion. Congress routinely renews the tax package, attracting intense lobbying _ and campaign donations _ from businesses and trade groups that say the tax breaks help them prosper and create jobs.
[…] Sen. John McCain, R-Ariz., said the package is filled with “special-interest handouts” that make it difficult for him to justify his vote in favor of it.
“It’s hard to think of anything that could feed the cynicism of the American people more than larding up must-pass emergency legislation with giveaways to special interests and campaign contributors,” McCain said.
The threat of fines totaling $2,000 a year for not providing health care to full-time workers will be a great subsidy for companies that supply part-time workers. They will be in greater demand.
Workers who already work less than 30 hours a week will find lots of new competition. They are likely to be locked into their positions permanently.
Any firm with 50 employees comes under the law. So, the smart move for businesses with 50 to 60 workers is to fire them.
Economics teaches that decisions are made at the margin. What does one more unit of this or that cost? That is the key price for all of the units.
Businesses can take two approaches. First, they can cut workers who work 30 hours a week to 29 hours. Or, just to be safe, 25 hours. Second, they can fire workers who work 30 hours a week and refuse to hire replacements. Both approaches are legal. Both make economic sense.
We are in a tight job market. We have been ever since 2008. The recovery is slow. This will make it slower.
A recent poll from the Wells Fargo/Gallup quarterly survey shows that U.S. small business owners are growing “increasingly pessimistic” as the new year approaches, finding that 21 percent of small business owners’ expect to decrease their workforces in the next 12 months to a level not seen since Aug. 2003.
Wells Fargo small business head Marc Bernstein attributed the potential decline in confidence in part to the possibility of going over the “fiscal cliff,” or the automatic tax hikes and defense cuts scheduled to occur if Congress and the White House do not reach a budget deal by the end of this month.
“Business owners who navigated through the Great Recession now face more uncharted territory created by ongoing uncertainty in Washington,” he said.
“These owners know that potential federal government spending cuts and tax changes can create a ripple effect, hitting the pocketbooks of consumers and reducing spending that could hit small businesses hard,” Bernstein added.
It’s so sad to read these tweets from small business owners who are heartbroken at having to lay off employees because of Obamacare mandates. Unfortunately, now they have to suffer harassment from clueless liberals who actually think that business owners enjoy having to do this. They seriously don’t get that it’s THEIR GUY’S policies that are forcing these businesses to downsize. How stupid can they be?
Survival is nature’s most primal instinct. Whether plant, animal or human, the No. 1 objective is to survive. The same applies to the corporate world.
BizPac Review previously reported that in the days since President Obama’s re-election, companies have announced plans to lay off massive numbers of employees. Other companies are seeking different ways to cope in the coming years, especially with Obamacare and tax hikes looming on the horizon.
The Naples News reported that shortly after the president’s re-election, Papa John’s Pizza founder and CEO John Schnatter would be cutting back on employees’ hours. Similarly, at least one Applebee’s franchisee announced a hiring freeze as a direct result of another four years of an Obama administration. Other restaurants, including Olive Garden, are now following suit.
These moves have nothing to do with revenge or retaliation — they’re simply acts of survival.
The far left has now called for a boycott of both the Applebee’s franchise and the entire chain of Papa John’s restaurants. That makes sense. If they cut hours or freeze hiring, let’s just run them out of business and eliminate all their jobs.
A simple example: a restaurant needs to cover 400 hours worth of waiter service time. Assuming that the pay rate is the minimum wage of $7.25 per hour, and that the 400 hours can be covered without any overtime pay, total wages are $2880 per week, while the employers’ portion of Social Security and Medicare withholding totals $214.56. Over the course of a year, the employee costs for that 400 hours works out to 160,917.12, not an insignificant cost.
If health insurance costs $10,000 per year per covered employee, the weekly health insurance cost, if the 400 hours are met by ten full-time employees, is $1,932 per week. If, on the other hand, the restaurant can employ 20 waiters, each working 20 hour per week, while wages and taxes would be the same, insurance costs would be zero, and the business saves that $1,932 every week. You don’t think that’s significant? Not having to pay health insurance on ten employees, with an assumed individual cost of $10,000 per employee, is a cool $100,000 subtracted from the costs of doing business, and that’s an additional $100,000 added to the bottom line. For a small business, $100,000 can easily be the difference between profitability and losing money.
Our friends on the left need to see that, and understand that.3 Somehow, I don’t think that they will.
Liberals foisted an unpopular policy on a nation, the majority of which did not want. The liberals did not adjust their policy after the shellacking of 2010. Now that businesses are having to respond to the hard laws of math, the same liberals want to boycott those businesses rather than re-think their terrible policies. There is no reaching or negotiating with these people.
Honest question: Do liberals ever do anything collectively that helps businesses? Does the community based reality ever recognize reality, or are the rest of us just left to cope with their childish tyranny?
I honestly think these businesses should target Democrats first for their layoffs and cut hours. It’s only fair, since they voted for this nightmare while their conservative friends and co-workers tried to warn them.
“Lord, please forgive me and anyone with me in Murray Energy Corp. for the decisions that we are now forced to make to preserve the very existence of any of the enterprises that you have helped us build. We ask for your guidance in this drastic time with the drastic decisions that will be made to have any hope of our survival as an American business enterprise.”
In this news interview he explains his painful decision:
“I explained to them a month ago that if Obama gets in office that the regulations for Obamacare are gonna hurt our business, and I’m gonna have to make provisions to make sure I have enough money to cover the payroll taxes, the additional health care I’m gonna have to do, and I explained that to them and I said you do what you feel like in your heart you need to do, but I’m just letting you know as a warning this is things I have to think of as a business owner.
“Well unfortunately…we know what happened and I can’t wait around anymore, I have to be proactive. I had to lay off 22 people today to make sure that my business is gonna thrive and I’m gonna be around for years to come. I have to build up that nest egg now for the taxes and regulations that are coming my way. Elections do have consequences, but so do choices. A choice you make every day has consequences and you know what, I’ve always put my employees first, but unfortunately today I have to put me and my family first, and you watch what’s gonna happen. I’m just one guy with 114 employees — well was 114 employees — watch what happens in the next six months. The Dow alone lost 314 points today. There’s a tsunami coming and if you didn’t think this election had consequences, just wait.”
Higher Taxes – Both parties had planned to increase taxes. Since they both favor a large and active government, no matter which party won, higher taxes are on the way. This means higher income taxes and quite possibly an additional new tax system that is based on a value added tax (VAT). That means entrepreneurs will be keeping less of the wealth they create. It also means that the cost of compliance with increase, possibly dramatically.
Inflation – Inflation is not coming, it is here. Neither party seems to have the courage to address this silent beast. Prepare for more inflation and higher interest rates.
Healthcare — ObamaCare will hit small business owners hard over the coming years. It will hit hard in terms of costs and in terms of the uncertainty it creates in terms of what it all will really means. Remember that most of the details are not in the legislation, but will be put into law over the coming years by unelected bureaucrats. Even if Romney had won, he would only have tweaked ObamaCare. And this would only have happened if he had the legislative support to do so, which is questionable.
Regulation — We will see a continued increase in regulation of businesses and the economy. Again — the cost of business is going up.
You can go to DailyJobCuts.com for continually updated lists of layoffs and business closures.
Liberals are trying to blame the layoffs on “greedy,” supposedly heartless businesses owners who only care about profit. They refuse to acknowledge that their own policies are responsible, and that profits are necessary to drive jobs and growth.
These businesses tried to hold on at least until the election to see if a new president could relieve their crushing regulatory and tax burden. Now they see the handwriting on the way and know that they have no other choice. It’s a sad day in America, and the innocent will suffer.
Millions of Americans will now become unemployed and underemployed as a direct result of Obamacare and other job-killing policies.
Thanks alot, Democrats! So much for your claims of being the “compassionate” party of the working class!
Apparently Obama thinks the problem with our economy is too few bureaucrats trying to control the private sector, and not enough centralized control in the hands of a few elite ruling class “intellectuals” like himself:
President Barack Obama signaled if he wins a second term he would appoint a Secretary of Business to oversee newly-consolidated government agencies, including the Small Business Administration, and predicted “a war” will break out within the Republican Party after the Nov. 6 election.
“We should have one Secretary of Business, instead of nine different departments that are dealing with things like giving loans to SBA or helping companies with exports,” Mr. Obama said in an interview that aired Monday on MSNBC. “There should be a one-stop shop.”
Mr. Obama blamed Congress for such consolidation not happening during his first term because lawmakers have been “very protective about not giving up their jurisdiction over various pieces of government.”
“I know the president is trying to figure out some way to suggest he has new ideas,” said Romney, repeating as he often has on the trail that roughly 23 million Americans are out of work or underemployed. “He came up with the idea of creating a Department of Business. I don’t think adding a new chair in his cabinet will add more jobs on Main Street.”
If he truly understood what has been keeping businesses from creating more new jobs, he would task this new Secretary with eliminating red tape, cutting the most burdensome and useless regulations, opening access to the resources we already have, and stopping his own President from pushing for higher taxes.
Instead, the only problem the President came up with was that with nine departments, the process for distributing small business loans and export subsidies was too complex.
Got it? It’s too hard for the government to give money away with all these different departments. Why not just have one for doling out the cash to businesses?
Was it too hard for Solyndra to get the half-billion dollars it took from taxpayers—a half-billion the taxpayers will never get back? Was it too hard for A123 to qualify for a $250 million loan from the government—$130 million of which it used up before declaring bankruptcy? Was it too hard for Goldman Sachs to figure out Wall Street? Should there have been an easier way to get it the $90 million guaranteed loan for its subsidiary Cogentrix of Alamosa?
No — a thousand times, no. As much as Democrats like to aggressively peddle the line that “Mitt Romney wants to take us back to the policies that got us here in the first place,” as if tax cuts and deregulation were somehow the prime movers of the financial crisis, the fact is that too much big government is what really got us here. Operating off of political motives, the feds creating adverse incentives and convoluting free-market signals were the recession’s greatest catalysts, and Obama’s biggest overstep into the business world so far with Dodd-Frank is already inducing mega-uncertainty and depressing private investment. But heck, by all means, let’s just keep right on piling up the bureaucracy and engendering even more mechanisms for the federal government to stick its nose into private business. What could go wrong?
First President Obama said “the private sector is doing fine.” Then he lectured business owners, “you didn’t build that.” Now he wants to extend the government’s auto-industry takeover across the board. Mr. Obama simply cannot understand how the economy can function without government’s firm guiding hand.
At a campaign stop in Pueblo, Colo., on Wednesday, Mr. Obama touted the alleged success of his government-backed takeover of two-thirds of the domestic car business. “The American auto industry has come roaring back,” he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.”
The Obama administration ritually flaunts the General Motors bailout as its model of success, but “government motors” is actually a cautionary tale. The bailout cost taxpayers around $100 billion, which means the government coughed up around $780,000 for every American GM job that Mr. Obama claims he “saved.” The feds hold 500 million shares ofGM stock, which has plummeted almost 45 percent since its initial public offering.
Believing in GM’s resurgence is only possible through creative accounting. GM counts a car as “sold” when it arrives at a dealership, not when it is in the hands of a consumer. The increased “sales” the administration brags about are surplus cars sitting in dealer lots, a practice known as “channel stuffing.” In a healthy economy, dealers have approximately a two-month inventory on hand; GM now has over double that. So long as GM pumps out cars that are “bought” by dealers, Mr. Obama can continue to claim things are looking up. Of cars that are actually driven off the lot, many are being bought by the majority stockholder: the government. In June, government purchases of GMcars went up 79 percent. This is a Ponzi scheme, not an economy.
Let’s say that you own a business. And let’s say that as a person of faith, you decide to use the profits from that business to support, at least in some small part, traditional marriage. Now let’s say that your political opponents find your position stunning and launch a boycott against your business.
So far, no harm, no foul. It may be irritating that your political opponents choose to make your personal political predilections the basis of a crushing economic attack. But it’s their right.
But now let’s say your political opponents are in government. And let’s say they use the power of their office to shut down your business — not because you violated any law or broke any regulation, but because they don’t like your position on traditional marriage.
This would be fascism.
Fascists deny that democracy should decide whether or not you have a right to engage in business. They suggest, instead, that political actors, armed with a vague sense of the general will, ought to enforce that vague sense rather than the law.
Mao Zedong fervently supported this notion; in his “Little Red Book,” he asked where “correct ideas come from.” His answer: him. And only politically correct ideas could be tolerated.
Welcome to Barack Obama’s America.
Two of Obama’s closest political allies, Mayor Thomas Menino of Boston and Mayor Rahm Emanuel of Chicago, came out last week in favor of banning Chick-fil-A from their cities. Chick-fil-A’s President and Chief Operating Officer, Dan Cathy, is a supporter of traditional marriage; the company has given money to groups that support traditional marriage politically.
This, in the minds of Menino and Emanuel, is a grave sin in need of rapid repentance. “Chick-fil-A’s values are not Chicago’s values,” said Emanuel of a city in which dead people vote and live people dodge bullets. “I was angry to learn on the heels of your prejudiced statements about your search for a site to locate in Boston,” Menino wrote to Cathy. “There is no place for your discrimination on Boston’s Freedom Trail and no place for your company alongside it.”
Now, neither Emanuel nor Menino can legally bar Chick-fil-A from their cities. But this attitude — that businesses are worthy of government bans simply for failing to tow the liberal line — now infuses the Democratic Party.
It’s why President Obama’s allies at Media Matters consistently team up with him to launch devastating boycotts against conservative business people. It’s why those public relations assaults are invariably well coordinated with government actors who suggest that force of law be used to punish those conservative business people.
There was a time, within living memory, when the achievements of others were not only admired but were often taken as an inspiration for imitation of the same qualities that had served these achievers well, even if we were not in the same field of endeavor and were not expecting to achieve on the same scale.
The perseverance of Thomas Edison, as he tried scores of materials for the filament of the light bulb; the dedication of Abraham Lincoln as he studied law on his own while struggling to make a living — these were things young people were taught to admire, even if they had no intention of becoming inventors or lawyers, much less president of the United States.
Somewhere along the way, all that changed. Today, the very concept of achievement is de-emphasized and sometimes attacked. Following in the footsteps of Barack Obama, Professor Elizabeth Warren of Harvard has made the downgrading of high achievers the centerpiece of her election campaign against Senator Scott Brown.
To cheering audiences, Professor Warren says, “there is nobody in this country who got rich on his own. Nobody. You build a factory out there, good for you, but I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers that the rest of us paid to educate.”
Do the people who cheer this kind of talk bother to stop and think through what she is saying? Or is heady rhetoric enough for them?
People who run businesses are benefiting from things paid for by others? Since when are people in business, or high-income earners in general, exempt from paying taxes like everybody else?
At a time when a small fraction of high-income taxpayers pay the vast majority of all the taxes collected, it is sheer chutzpah to depict high-income earners as somehow subsidized by “the rest of us,” whether through paying for the building of roads or the educating of the young.
Since everybody else uses the roads and the schools, why should high achievers be expected to feel like freeloaders who owe still more to the government, because schools and roads are among the things that facilitate their work? According to Elizabeth Warren, it’s because it is part of an “underlying social contract.”
Conjuring up some mythical agreement that nobody saw, much less signed, is an old ploy of the Left — one that goes back at least a century, when Herbert Croly, the first editor of The New Republic magazine, wrote a book titled “The Promise of American Life.”
Whatever policy Herbert Croly happened to favor was magically transformed by rhetoric into a “promise” that American society was supposed to have made — and, implicitly, that American taxpayers should be forced to pay for. This pious hokum was so successful politically that all sorts of “social contracts” began to appear magically in the rhetoric of the Left.
The Romney camp needs to shout these points from the rooftops. The average American who is too busy working and raising a family to pay close attention to politics is likely unaware of the depth of Obama’s scandalous cronyism, and they deserve to know!
President Obama’s record of rewarding political donors with taxpayer dollars and plum administration posts is facing a new round of scrutiny thanks to GOP challenger Mitt Romney’s effort to make it a central issue of the campaign.
“[President Obama] thinks it’s his right to give taxpayer money to those who have supported him financially,” former Gov. John Sununu (R., N.H.) said Tuesday on a conference call hosted by the Romney campaign. “It’s insulting to hard-working entrepreneurs who really do create jobs.”
The most publicized instance of so-called “crony capitalism”—investing taxpayer dollars in firms tied to political donors—is the failed solar panel company Solyndra. The Fremont, Calif., firm was the first to receive a taxpayer-backed loan guarantee from the Department of Energy (DOE) in September 2009, worth more than $530 million. The funding for the loan was allocated in the controversial stimulus package passed earlier that year.
Obama bundler George Kaiser was a major stakeholder in Solyndra through his Kaiser Family Foundation, and made several trips to the White House in March 2009 to meet with senior administration officials. In July 2009, Kaiser bragged about securing face time with “all the key players in the West Wing of the White House,” as well as his “almost unique advantage” when it came to steering taxpayer funds toward his pet causes.
“There’s never been more money shoved out of the government’s door in world history, and probably never will be again, than in the last few months and in the next 18 months,” Kaiser told members of the Tulsa Rotary Club. “And our selfish parochial goal is to get as much as it for Tulsa and Oklahoma as we possibly can.”
Although things did not pan out for Solyndra—the company filed for bankruptcy in September 2011—Kaiser can expect to see a better return on his investment than American taxpayers. As part of an agreement to restructure Solyndra’s loan agreement in 2010, Obama’s DOE granted priority status to private investors like Kaiser with respect to the first $75 million recovered in the event of the firm’s bankruptcy, a move that many suspect violated federal law.
Between regulations, Obamacare and the endless recession, small business owners are just holding their breaths to see what’s going to hit them next. If the Democrats get their way, it’ll be Taxmaggedon in January.
I was President Obama’s college classmate at Columbia University, Class of ’83. Almost every one of my classmates were openly socialist or Marxist, with many of these leftist radicals calling for an end to capitalism and “bringing down the system” by destroying the U.S. economy with entitlements, debt, and crisis.
That’s why I have predicted in thousands of media interviews from the first days of Obama’s presidency that Obama is a radical, with a deep-seated hatred of business owners, a desire to demonize us and destroy America’s faith in capitalism, and a plan to bring down the system by overwhelming our economy with debt and crisis — just as we all learned and discussed at Columbia in our college days.
[…] Obama said words that made me sick to my stomach and brought tears to my eyes. Words so vile they are an affront to every American business owner and a reminder of his true beliefs — a deep-seated hatred and resentment toward capitalist business owners. Obama said that we business owners owe our success to government. He actually said that if you’ve built a business, you don’t get the credit. It’s government who has been by your side. You need to give government the credit.
Obama believes government helped me every step of the way as a businessman? Really? Honest to God? With that kind of thinking, I think it’s now safe to say Obama has come out of the closet. Either he’s a Marxist hell bent on demonizing wealthy business owners and destroying capitalism, or perhaps he’s high on that drug he enjoyed so much in his youthful days.
Because the reality is that government has hurt me, every step of the way. Government has NEVER helped me. But Obama is right about one thing — government is always by our side. Unfortunately it ruins everything it touches.
Here’s a synopsis of what government has done for me:
They’ve stolen my hard-earned money that I could have used to expand my business, or start new ones, or invest in stocks and real estate. Instead it went to government in the form of taxes, fees, licenses and workers compensation.
Don’t forget the rules, regulations and mandates that made it difficult or near impossible to start a business in the first place.
Or the accountant and tax lawyer bills that could have been put to use creating jobs.
Or the IRS audits that stole valuable dollars and hours that I can never get back — even though every one of them ended up with me owing not a dime. But the damage was already done to an innocent man.
Or the millions my public company spent on complying with ridiculous bureaucratic boondoggles like Sarbanes Oxley — thereby wasting millions of dollars that could have instead created jobs and shareholder value for my investors.
Don’t forget the bills passed by government that literally wiped out multiple businesses that I owned (multiple times).
Yes, Obama has a point. Government is always there by my side — stealing my money, robbing me blind, redistributing what I earned into the hands of people not willing to work as hard or as smart as me, distracting me with thousands of pages of regulations, limiting my options, wiping out jobs and destroying shareholder value.
It’s a tough time to be a business owner and entrepreneur in America. Surveys show small business owners are struggling, and they are not expanding or hiring because of tax and regulatory uncertainty. Federal agencies, from Health and Human Services to the Environmental Protection Agency, are regulating them to death. And just last week, President Obama announced his latest economic plan was to hit job creators with a tax increase.
The President’s plan to raise taxes on earnings above $200,000 ($250,000 for joint filers) would hit 1.2 million small-business employers who pay their taxes through the individual income tax, known as flow-through businesses. These businesses that are creating jobs earn almost all—91 percent—of the income earned by flow-through employer-businesses.
The new tax increase could be equivalent to one employee per small business. According to calculations by The Heritage Foundation’s Center for Data Analysis, the average American with $250,000 or more in income can expect an average $24,888 tax increase next year under Obama’s proposed policies. That $24,888 figure is often enough for a salary. So the President could be putting about 1.2 million jobs—perhaps even more—at risk with this tax hike.
Hitting private job creators while advocating more stimulus spending and government jobs. That’s the President’s plan for the economy.
Obama has never started or managed a business or had to make payroll. He once described his brief stint working in private sector as spying ‘behind enemy lines’. As David Limbaugh observes, he doesn’t surround himself with anyone who has significant private sector experience:
Obama has few people with business experience in his administration. He has no former CEOs in his Cabinet, and there is almost no top-level private-sector experience among his inner circle of advisers. Time magazine’s Fareed Zakaria, a liberal and a big fan of Obama’s, admits that even the business leaders who voted for Obama believe he is, “at his core, anti-business.”
Mr. Obama has no business talking about business. He has never created anything substantive and doesn’t understand those who have made it their life’s work. This president only invented the stories and people he made up for his purported autobiography, assuming somebody else didn’t make that happen.
The president is obviously clueless about what it takes to start a business from scratch, having never done anything remotely like that, since his career has consisted entirely of suckling at the government teat.
But having done it myself a few times, perhaps I should take a stab at enlightening him, and those who unfortunately think like him. The process is quite different from being a well-connected campaign donor who tosses together a green energy scam like Solyndra and can depend on government largess to fund it as a kickback for services rendered.
First, you need to take a look at the marketplace and develop a skill, a service, a product, or an idea that people are willing to pay for. Some people obtain these by working for others, figuring out how to do what the company they’re now working for does better, saving up some of their hard-earned money, rolling the dice, and stepping off into space without the safety net of a guaranteed paycheck. Others develop something over time as a part-time income until they feel they have enough business developed and enough of a rep to go it alone, or in partnership with others.
No matter the case, it involves risking all of your assets in exchange for a shot at financial independence. People deny themselves as they squirrel away capital, hit their credit cards, or borrow the money, usually on their homes.
It is one of life’s solemn and sometimes scary moments when someone pushes a loan application or an equipment or office lease at you, and you’re wondering if you’re going to end up being a failure.
You’ll always wonder in the beginning whether you did the right thing.
If the business is to be successful, you work long, hard hours, with no guarantee that anything will come of it. If you run a store, you have to be concerned with things like inventory, shoplifting, and cutthroat price-cutting from your larger, already established competitors. If you run a service business, you work with no guarantee you’ll be paid for your efforts until the deal closes and your client’s check clears the bank.
In the beginning, unless you start out with a boatload of money, you do everything, and if you screw up, it comes out of your pocket — no one else’s. Aside from the actual day-to-day work your business entails, you do the books, you keep the records and pay the fees government requires, you answer the phones, you make the decisions on advertising and marketing, you chase down new business, you deal with vendors and do the ordering (an art in itself), you deal with sales reps seeking to sell you things you usually don’t need, you pay the bills, and you sweep up.
In exchange for these fun-filled 15- to 18-hour days, you might make a profit after a few months and be able to start paying your bills out of the proceeds.
If you do all these things well, your business is one of the minority that survives its first year, and you’ve made enough money to expand a bit, you may be able to hire employees. Yes, at that point you actually might need to supervise and direct others aside from yourself. Make the right hiring decisions, and ideally, you begin to make more money as you put a business team together. Make the wrong one, and aside from losing money, even coming in to work can become hell.
It is a lie premised on Marxism. It really is. It is not hyperbole to say it. Prior to Marx, people did not clearly think of economics as class divided and did not think of the collective overriding the individual. Certainly the thinking was there sociologically, but not crystalized in economics.
As Daniel Henninger noted in the Wall Street Journal recently, “There is no theory anywhere in non-Marxist economics that says growth’s primary engine is a social class. A middle class is the result of growth, not its cause. Barack Obama not only believes in class-based growth but has built his whole growth strategy around it.”
[…] This begs the question: does the President think government policies got him where he is?
The implication of Barack Obama’s statement is that we owe something to the government. The implication is that people succeed because of the collective conducting its actions via government. Most entrepreneurs would tell you they succeed in spite of the government. Barack Obama views it differently.
He clearly believes we all owe our success to government.
Does he not attribute his success to his parents and, more particularly, his grandparents? What about teachers at his private school? Or was it government policies?
Few people would ever acknowledge it. Most people know intrinsically that it was, contrary to what the President believes, their hard work and ideas that got them were they were. No one denies that others played roles in their lives, but the people who played roles were, in fact, people. The President clearly believes that individuals give back to society by paying into government. But people give back all the time through volunteerism, charitable contributions, raising families, and their own individual work product.
No one denies there is a role government plays, but most people — the President notwithstanding — are more likely to view their lives as their lives, not the government’s. They view their accomplishments as their accomplishments while acknowledging others who helped them.
The President seems to have taken Oscar acceptance speeches literally. Everyone thanks their agents, parents, directors, etc. But it was the actor’s hard work that won them the award. The President seems to think the Oscar needs to be chopped into bits and divided between everyone who played a role or, better yet, handed over to the government to be redistributed.
Henry Ford did not rely on the government. The first roads built in the nation were roads built of necessity, not by government. The Model-T did not come out of DARPA, but a man’s mind. And that man then put his idea to work, employing other people, who made and sold a product, generated a profit, and paid taxes into the system.
President Obama believes the rich should pay more in taxes because, in his mind, they have benefited more from society. The reality is the opposite. Society has benefited because of these people. They have profited not by pillaging society, but by providing good to society. They have given back.
Another stimulus-backed solar panel maker, one the president touted in a weekly radio address, is filing for bankruptcy. The administration’s green-energy efforts continue to grow a deeper shade of red.
After receiving some $70 million in federal loans, Abound Solar, a Colorado-based firm that was developing thin-film solar panels, has announced it will follow an earlier Obama administration green energy failure, Solyndra, into bankruptcy.
Like Solyndra, Abound’s bankruptcy is a bitter echo of the hype generated by President Obama in his weekly radio address exactly two years ago when he touted his push for a clean energy economy. Abound Solar, he said, would manufacture advanced solar panels at two new plants, creating more than 2,000 construction jobs and 1,500 permanent jobs at plants in Indiana and Colorado.
Abound apparently wasn’t even helped by last July’s $9.2 million Export-Import Bank loan to support exports of thin-film solar photovoltaic modules to Punj Lloyd Solar Power Ltd., a company in India building a 5-megawatt solar project located on a 62.5-acre site near the village of Bap.
Three years ago, when Obama’s Department of Energy started approving roughly $16 billion in federal loan guarantees for solar energy companies, the DOE agreed to put taxpayers’ money behind startups that were working on ways to make solar panels cheaper. Two, Solyndra and Abound, have now gone belly-up.
The other two solar manufacturing companies with loan guarantees, SoloPower and 1366 Rechnologies, have not actually borrowed any taxpayer money so far. This is probably a good thing as solar energy’s promise is eclipsed by a real energy boom in oil and natural gas from shale. It is also fortunate for taxpayers that Abound drew only $70 million out of a $400 million line of credit.
In a January report, Sheryl Attkisson of CBS News counted at least 12 clean-energy companies that were having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five had filed for bankruptcy: the junk bond-rated Beacon Power, Evergreen Solar, SpectraWatt, AES subsidiary Eastern Energy and the now-infamous Solyndra. Now we have a sixth — Abound Solar.
If the Federal government had done the smart – and constitutional – thing, they would have allowed GM to face the bankruptcy court just like any other company that mismanages their business. The taxpayers wouldn’t have lost a dime, and GM would have either been restructured or gone under, paving the way for better competitors to take their place.
The Treasury Department estimates that taxpayers will lose $23 billion on the auto bailout. Sherk and co-author Todd Zywicki find that none of these losses came from saving jobs, but instead went to prop up the compensation of some of the most highly paid workers in America. They write:
We estimate that the Administration redistributed $26.5 billion more to the UAW than it would have received had it been treated as it usually would in bankruptcy proceedings. Taxpayers lost between $20 billion and $23 billion on the auto programs. Thus, the entire loss to the taxpayers from the auto bailout comes from the funds diverted to the UAW.
The Obama campaign is touting the bailout in Michigan this week, crowing about saved-or-created jobs. What the bailout actually saved was the UAW’s heavily padded compensation packages; what it created was a massive taxpayer loss.
The UAW was a significant factor in the automakers’ decline: It had raised Detroit’s labor costs 50 percent to 80 percent above other automakers, such as Toyota and Nissan. In 2006, General Motors paid its unionized workers $70.51 an hour in wages and benefits. Chrysler paid $75.86 an hour. Added to mistakes by management, these labor costs were a major reason the automakers went bankrupt.
However, through the bailout, the Obama Administration insulated the UAW from most of the sacrifices unions usually make in a bankruptcy—at taxpayer expense.
GM and Chrysler owed billions to a trust fund they had created to provide UAW members with gold-plated retiree health benefits. In bankruptcy, these funds should have been paid proportional to other unsecured creditors. Instead, while the Administration paid other creditors only a fraction of what they were owed, it gave the UAW trust fund assets worth tens of billions—including partial ownership of both companies. The U.S. Treasury should have received these assets.
Bankruptcy law also enables reorganizing companies to improve their post-bankruptcy situation by renegotiating union contracts to competitive rates.
If the UAW had been treated normally under bankruptcy law, the automakers’ average labor costs would have fallen to the same levels as the foreign-based carmakers, approximately $47 an hour. While this is still 40 percent higher compensation than the average manufacturing worker, it would have reduced UAW members’ standard of living. And the Administration wouldn’t allow that. So while the UAW accepted huge pay cuts for new hires, the Administration kept the pay structure of existing UAW members at GM intact.
As a result, even after the reorganization, GM still has higher labor costs ($56 an hour) than any of its foreign-based competitors.
The average American worker—whose taxes paid for the bailout—earns $30.15 an hour in wages and benefits. Few Americans have the ability, as UAW workers do, to retire in their mid-50s before they can collect Social Security. Fewer still receive retirement health benefits in addition to Medicare, as UAW workers do. Yet their tax dollars went to subsidize UAW pay and benefits.
Had the government treated the UAW in the manner required by bankruptcy law, taxpayers would have broken even. The program would have amounted to bankruptcy financing instead of an outright bailout. The Administration could have kept the automakers running without losing a dime.
The Department of Energy is awarding $54 million for energy projects that should help manufacturing companies be more energy efficient. If your immediate response is, “If these technologies are going to lower a business’s costs, why aren’t they investing their own money?” then you’re asking the right question.
Bailed-out General Motors is receiving $2.7 million to “develop an integrated super-vacuum die casting process using a new magnesium alloy to achieve a 50% energy savings compared to the multi-piece, multi-step, stamping and joining process currently used to manufacture car doors.” If General Motors wants to partner with a national laboratory or a research university to invent a manufacturing process for car doors that achieves dramatic energy savings and reduces costs, that’s wonderful. Go for it. But use your own money.