by | BUSINESS, ECONOMY, GOVERNMENT, HYPOCRISY, TAXES
It is truly embarrassing for the businessmen in this country to have a president who makes such economically incompetent statements and gestures. Speaking to the U.S. Chamber of Commerce a couple of months ago, our president effectively rebuked business success. He suggested that “if we’re fighting to reform the tax code and increase exports to help you compete, the benefits can’t just translate into greater profits and bonuses for those at the top. They should be shared by American workers”. This is a blatant example of wealth redistribution.
In a free economy, employee wages are such that an employer willingly pays whatever it takes so that the amount paid to an employee is less than what can be earned from them – i.e. they have to be able to produce. Take, for example, someone who sweeps floors. If you are in need of a floor sweeper and the benefit of sweeping is worth more than the sweeping costs, then you hire the floor sweeper. If not, then you leave the floors dirty.
The same principle has always applied – albeit on a grander scale– in the United States. We see this currently in manufacturing which is at an all time high, but the number of manufacturing employees is a lot less. Workers are so productive with technology and capital, they can be – and it’s worth it for them to be – paid more.
On the other hand, if a company pays its worker more than the worker is actually producing, then the worker will become wholly uncompetitive. It is not better for a worker to be paid more than he is worth, because at some point, he loses the capability to independently support himself. The scenario becomes not what his labor is worth – but instead that he has been given a gift. This takes away the incentive to produce and earn. It goes against what has made our country thrive, which is hard work and an investment of time and talent.
By publicly and strongly suggesting that employers unfairly and extraordinarily compensate their workers in an attempt to level the playing field, Obama has effectively shown his true colors regarding his attitude toward businesses and their operation. Private businesses in the country, unlike the government, do not have the luxury of spending without consequences. Attempting to coerce fairness instead of cultivating a free market, Obama has strongly disadvantaged this country to the rest of the world.
by | ARTICLES, BUSINESS, NEW YORK
How come this bank gets propped up, but others don’t? Crain’s New York has the news here:
The Harlem bank raises $55 million from an investment group that includes titans Goldman Sachs Group Inc and Morgan Stanley; feds had ordered the cash infusion to save the institution.
Carver Federal Savings, the nation’s largest bank founded and run by African-Americans, has staved off possible collapse by raising $55 million in fresh capital.
The investors include Goldman Sachs Group Inc. and Morgan Stanley, which have agreed to invest $15 million each, while Citigroup Inc. and Prudential Financial have agreed to put in $10 million, according to an announcement from Carver’s parent, Carver Bancorp. American Express and three other firms are investing smaller amounts. Chief Executive Deborah Wright, who has led the bank since 1999, will remain at her post.
“I haven’t had a day this good in some time,” said a relieved Ms. Wright, who added she was “terribly grateful” for the financial community’s vote of confidence in her bank. “We have a lot of hard work ahead.”
The Harlem-based bank was ordered by federal regulators earlier this year to raise additional cash as it staggered under a hefty load of delinquent real estate loans. Under Ms. Wright’s leadership, the bank had moved from its traditional business of lending to one- to- four-family homes and into larger commercial real estate projects. That strategy backfired when the real estate market hit the skids and mortgages for low-income borrowers dried up.
Earlier this year, 12.3% of the bank’s loan portfolio was more than 90 days delinquent. The industry average is 4.9%, according to Federal Deposit Insurance Corp. data. In addition, although $74 million of its loans were well overdue, Carver had just $21 million in reserves to cover loan losses.
In February, the U.S. Office of Thrift Supervision ordered Carver to raise additional capital by the end of April or face being seized and sold to another institution—or simply dissolved. The amount Carver raised exceeds the amount demanded by regulators, Ms. Wright said.
Last month, the bank named a new chief financial officer—its fourth in the past three years—and said it hired an recruiter to find a new president and chief operating officer who would oversee lending, retail, marketing and human resources. Ms. Wright said the new executive would allow her to devote the bulk of her time to drumming up new business, adding that Carver will soon step up its marketing.
The Harlem business community galvanized to help rescue Carver, a fixture of the city since 1948. Lloyd Williams, CEO of the Greater Harlem Chamber of Commerce, said a private breakfast was held in late April at Sylvia’s Restaurant in which Ms. Wright and senior Carver officials met with former state Comptroller Carl McCall, former city Comptroller Bill Thompson, U.S. Rep. Charles Rangel and other Harlem business and political leaders to discuss ways to turn around Carver.
“It is exciting, and the community is now stepping up to the plate,” Mr. Williams said shortly after that meeting, “because they have been asked to do so in a meaningful manner.”
by | OBAMACARE, POLITICS
During the health care debates last year, there had been much talk and support on the Left for the concept of a “public option” in the bill. The rationale behind this, according to the federal government, was that there is not a sufficient free market for health insurance in some parts of our country.
Accordingly, they deemed it their job to get consumers the best coverage at the best price, by offering a competing a public option, seemingly on par with private insurers.
I believe the promulgation of the public option was deceitful. There was never going to be an equal footing, as the Government would severely limit the range of allowable insurance and then use its financial and political muscle to gain customers, as acknowleged by Senator Chuck Schume, among others. Nevertheless, it had so much support that it was included in most of the drafts of the health care bill.
Reflecting on the merits of the public option argument as we debate how to reign in our excessive government spending, my question is this: if this “public option” was viewed as a necessity in terms of competition and cost, why should there not be a “private option” in every area that the Government – federal, state, local – has staked out an unnecessary monopoly for itself?
Other than National Defense and the Criminal Court Systems, there appears to be no reason – other than creation of a power base to enable the bloated government salaries that we see today – that the private sector should not be given an opportunity to compete on a level playing field.
Based on the government’s rationale, there should be a “private option” in virtually every area of public service.
by | ECONOMY, TAXES
As citizens have the capacity to invest, so do small businesses, the backbone of our country. Yet the proposal to raise the debt ceiling will only continue the weaken our already fragile business climate. More economic uncertainty is looming and capital spending among businesses at a 35 year low according to the National Federation of Independent Businesses. While some business may spend, most will retain their cash until greater fiscal stability is realized — instead of investing. Businesses are currently not able to count on our administration to get serious about deficit reduction.
When our country is being led by a President who insists on continued borrowing without fiscal restraint — such as a debt ceiling — then our country is in truly in deep financial trouble. We heard in his spring speech about his proposed “triggers” to decrease spending and increase taxes if deficit targets are not met. This would merely incentivize the liberals to intentionally avoid the targets to force otherwise unpalatable tax increases. Of course, the best and easiest solution for lowering the deficit is to not allow any more debt.
Current administration plans to raise the debt ceiling without strict spending cuts only confirm the abrogation of their fiduciary responsibility in order to play politics for reelection. By refusing to reduce the deficit through spending restraint, entitlement reform and program cutting, I submit that in the coming months, Obama will proclaim the Republican efforts to reshape Medicare to be a ploy for funding continued tax cuts for the top 2% income earners. Instead of tackling our budget crisis to allow citizens and businesses the ability to spend and invest their way to back to prosperity, our President’s proposals and politicking tremendously paralyze our economic recovery effort. It is truly embarrassing to have a President who makes such economically incompetent statements.
by | BUSINESS, ECONOMY, GOVERNMENT
The most misunderstood and misused phrase in economics and politics is that “small businesses are responsible for 2/3 of all new jobs”. This sentiment, uttered by President Obama last August, was gleaned from data produced by the SBA, which reported that small businesses “generated 65 percent of net new jobs over the past 17 years”. Since then scores of pundits, analysts, economists, and politicians have regurgitated the sound bite to meet their own specific agenda.
The problem, however, is that the definition of small business is misunderstood – and has different definitions – to different people. Obama maintains that “small businesses with fewer than 50 employees…are the businesses that usually create most of the jobs in this country”. Unfortunately, he uses this line to justify credits for small business (health care, etc). That makes for good political speech, but those businesses doesn’t make jobs. His assertion is patently untrue.
The SBA is the group who sets the legal definition of a “small business” which is one with fewer than 500 employees . Going back and using the data from them – and cited by Obama – it is clear that his threshold about small businesses – under 50 employees – is incorrect. SBA data shows that “much of the job growth (of the 65% net new jobs) is from fast-growing high-impact firms, which represents about 5-6 percent of all firms and are on average 25 years old”. Clearly then, the majority of these are not businesses with fewer than 50 employees.
Small businesses under Obama’s definition tend to share similar characteristics: they typically have a more localized market, lack of abundant and available credit and capital, and lower volume of sales than their larger small business counterparts. As such, these businesses lack the necessary qualities to create the type of job growth that Obama references.
Even more frustrating is the fact that Obama wants to raise taxes on those earning 250K or more. To the average household, 250K sounds like a high-income threshold. What he doesn’t tell you is that this effectively also raises taxes on small businesses, the very group he purports to want to help. Most small businesses file as sole proprietorships, LLCs, and Scorps, and by doing so, pay taxes at individual rates. In the realm of business, 250K is not a lot. Raising the margin for those earning over that amount will raise tax rates on small business owners, thereby reducing their profit margin to reinvest in their company or create new jobs.
Either Obama is clueless about small businesses and job creation, or he is lying. Either way, one thing that is not misunderstood is his incompetence.
by | ECONOMY
It occurred to me recently that new spending bills in NY city should require an “economic impact study”. Just as construction projects necessitate an environmental impact study in order to assess the pros and cons and to find out the true cost, the same process should be applied to economic legislation.
To illustrate my point: Mayor Bloomberg passed an ordinance in NYC outlawing smoking in bars. He enacted this so people would not have to work in a smoking environment, but his constituents should have the right to know what the economic cost was in terms of reduced tax revenue! If there had been an economic impact study on this or any similar legislation, the taxpayer would have had the opportunity to see any fiscal advantages and disadvantages of such a feel-good proposal before it was made into law.
An another example, domestic household help in New York State has recently become subject to virtually the same employer rules as large companies are, and many people do not get employed because of this obstacle. The unemployment rate among low-wage earners is disproportionately high due to legislation that strangles our economy under the guise of “regulation”, “fairness” or other similar government disingenuous justification.
A final example, my favorite, involves the little discussed change of the name of the Triborough Bridge to the Robert F. Kennedy Bridge. Might the taxpayers of NYC have gone up in arms if they had been told of the tens of millions of dollars of cost incurred for that change to take place — from a name that described the purpose of the bridge to a name that has had no meaningful history with the city?
Conducting an economic impact study on potential law would provide a way to keep taxpayers informed, politicians accountable and reckless spending under control.
by | SOCIAL SECURITY
The foremost problem with trying to fix Social Security right now is not money. It is dishonest politics. Our system has deteriorated so much that as soon anyone signals any fiscally prudent idea, cries of “you are starving old people” begin. This tactic has stifled any substantive debate that could be solving the crisis we face with Social Security.
Ever since President Bush proposed privatizing Social Security, the Democrats have prevented honest discussion by knowing that any solution is going to have some pain in it.They pull the emotional card and start preying on our vulnerabilities. Their solution has been to propose nothing, wait for the Republicans to make suggestions, and then demagogue it as a means to discredit it.
I propose that – as a matter of principle and proper political behavior – there should be no deriding of a proposal unless a solution is proposed as well. This would allow debate to ensue and hard questions to be resolved. The media would do well to realize that lively reporting on an attack without reporting the hypocrisy of the attacker, is not competent reporting.
President Obama violates this honest way of doing business and legislating. He has already waved his dismissive hand over the privatization solution, by disingenuously asserting that such a proposal would “[tie] your benefits to the whims of Wall Street traders and the ups and downs of the stock market”, even going so far as to suggesting, “people can lose everything”.
But this is simply untrue. Social Security investments would by construction be conservative compared to other investment options already available. Any private account solutions would restrict allowable investments, similar to the way they are presently and successfully limited for IRAs, 401K and section 529 plans. Rational balanced portfolios would be a required alternative, rather than unrestricted speculation. It is often cited that a stock market crash similar to that of 2008 could decimate one’s privatized Social Security retirement — but this could not be further from the truth. Given the long multi-decade span of investing and the long span of receiving the benefits slowly after retirement, it can be shown that none of these investment strategies could ever have performed as poorly as Social Security has.
President Obama inflames the debate by making erroneous statements, but then he does not even have a better solution to propose — and he is our President. Such poor leadership exemplifies why his current approach to this monumental problem is not working. Delaying the day of reckoning makes it that much more difficult to fix the problem.
by | ECONOMY
Medicare is completely unsustainable in its present form and the Democrats are not doing anything to fix it. There needs to be a major change to the way it works but the Democrats are unwilling to acknowledge this fact or provide any solutions – only attacks. In doing so, the Democrats are saying they don’t care if they destroy Medicare; they want to keep the way it is – which will surely hasten the demise of the program within ten years.
