Instead of Solving Budget Crisis, Wash. Politicians Threaten Integrity of Election Day
Updated Jan. 16, 2012
Washington state has a $1.5 billion deficit, and ample justification for implementing government and budgeting reforms.
But nearly two dozen lawmakers have something more important to do. They’re gaming the voter registration system in a disingenuous effort to win elections.
That’s right. They’re not addressing the concerns of most businesspeople and consumers – a balanced budget and government reforms.
But more on that later; for now, let’s address some background information in two examples:
Example No. 1. Perhaps you saw the May 30, 2011 headline: “Voter registration could be key to Obama in 2012.” The article indicated Barack Obama’s 2008 election hinged on his ability to capitalize on the nearly 15 million voters who were newly registered.
However, the article also mentioned that Democrats are looking at a major red flag – their party has regressed in terms of voter registrations in states won by Mr. Obama. Many Independents now disfavor Mr. Obama’s re-election. The upshot being he needs to attract more black, college students, Hispanic and women voters.
He has problems in at least three states:
- Florida – 2.6 million voters haven’t declared their party affiliation
- Pennsylvania – 500,000 unaffiliated voters
- Iowa – at least 762,000 nonpartisan voters
The article indicated several cities are in play:
- Philadelphia
- Denver (site of the 2008 Democratic convention)
- Charlotte, North Carolina (site of the 2012 Democratic convention)
And the newspaper report quoted Mr. Obama’s adviser, David Axelrod, who said voter registrations are a big priority for the 2012 election.
Example No. 2. Democrats are also worried about the Washington’s gubernatorial race. First the time in recent memory, Washington state Republicans have a solid chance to elect a governor.
Since last September, State Attorney General Rob McKenna has a six point lead in four polls pitting him against U.S. Rep. Jay Inslee. The polls include two by SurveyUSA, The Washington Poll, and Strategies 360 (D).
As of this writing, Mr. McKenna has netted $3.67 million in donations – $560,000 or 18 percent more than Mr. Inslee.
Disingenuous lawmakers
Fear by Democrats in a spirited competition to win elections is one thing, but it’s another to behave against the best interests of the electorate. A new development has failed to be adequately covered by the news media.
Twenty-three Washington House Democrats have introduced HB 2204, which would require the state’s 60 counties to accept voter registrations on Election Day after the polling is well underway – until 5 p.m. to be exact.
“What?!” you’re probably stunned. “Don’t voters have to register eight days before an election – not on Election Day?!”
Yes, you’re right.
Such a new law would have several ramifications.
It means the right to vote is no longer sacred. It games the voter registration system. It opens the door for voter fraud. It leaves no time to check the registration of new voters’ eligibility. It overburdens county election workers when they’re already straining to count votes.
Indeed, citing such concerns, the County Auditors Association and the Secretary of State oppose the bill.
Further, there’s a recent precedent to consider: Election Day registrations had 33.7 percent error rate in the April 5, 2011 election held in Milwaukee County, Wisconsin.
It isn’t too much to ask legislators to earn their pay. Stop trying to game the voter registration system. Fix the budget and institute permanent safeguards for good government and balanced budgets.
Then, it will be possible for Washington to have a healthy climate for economic development and the creation of jobs.
From the Coach’s Corner, in case you’re not aware, state lawmakers have long failed to do their jobs.
The most recent example is featured in this column: Washington: A Balanced Budget Is No Longer Enough.
“You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all the time.”
-Abraham Lincoln
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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Internet Marketing Lessons Via Rick Santorum’s Campaign
Jan. 5, 2012
Unintentionally, Rick Santorum’s presidential campaign — with inadequate branding — is providing business with Internet marketing lessons.
Perhaps you’ve noticed the inflammatory results in searching the Web for him. When you search for “Santorum,” the deprecating site of “spreadingsantorum.com” is first on Google, Bing and Yahoo. For curious voters interested in the campaign, it’s an especially disappointing search.
The derogatory site was created in 2003 by a part owner of The Stranger publication in Seattle, who was annoyed by then-Sen. Santorum’s comment about a U.S. Supreme court ruling that was favored by the gay community.
Understandably, Mr. Santorum complained to Google about the rankings – after all there are precedents. Indeed, it can be argued that Google could do something about it.
You might recall Google penalized the derogatory monkey-face depictions of Michelle Obama. There are countless security examples from when Google and the other search engines have issued a warning about a Web site when it believes a site is a security risk to users.
Until and unless Google and the other search engines take corrective measures, the Santorum campaign must focus on what it can control.
However, the campaign fails to use best practices in Internet marketing.
Its salient shortcomings:
- Failure to use SEO techniques
- A call to action without giving the right incentives – branding and value propositions
- Poor organization – lack of preparedness
Failure to use SEO
As a result of his strong showing from largely grass roots efforts, Mr. Santorum’s campaign is attracting an unprecedented number of voters who are now curious about him. They can find the right site easier when they search using the key words, “Rick Santorum.” But if they search using “Santorum,” they get the derogatory site.
In effect, however, the campaign has allowed Mr. Santorum to become a victim of political sabotage sans common SEO procedures.
Yes, the Santorum campaign has options to effectively to eliminate the adverse impact of the sarcastic site. Curiously, “spreadingsantorum.com” only has a Google page rank of 5. That’s not insurmountable for the Santorum campaign, if it employs proper SEO techniques, and understands how to win on Google.
Hint: If you can win on Google, you will on the other search engines, too. So start with how Google details its new reasoning for best Web site rankings, and successfully understand the 23 key questions Google has about your Web site.
As for the Santorum campaign, it needs to develop and focus on one site – just one site dedicated to the candidate. But it mistakenly directs Internet users to a donation form – one of two duplicate content sites (supportricksantorum.com and ricksantorum.com).
Premature call to action
The Santorum donation site sets a poor example. It only asks for money. There are no stellar branding and value propositions. Visitors aren’t readily able to learn anything about him – neither his policy positions nor his background.
All of this means the right sites show up twice – but they’re below the fold on Google.
Moreover, duplicate content hurts the cause. Two different domain names containing similar content defeat the purpose. The two sites effectively insure his Web presence is diluted – the search engines don’t know which is paramount for users.
Poor organization – lack of preparedness
With such a confusing marketing approach, the campaign inadvertently sends two unintended signals.
Firstly, it shows poor organization and lack of preparedness — note the verbiage in this Santorum tweet:
“Your great support has caused some unexpected downtime on our website! You can still support us at our temp page: ricksantorum.com”
Because the campaign instituted some redirects – the tweet sent people to the donation site. That’s a violation of best practices in marketing – never assume the voter has enough incentives before you ask for a vote or beg for donations.
Secondly, such strategies — unbranded donation page and desperate-looking tweets — leave users with the impression that he’ll fail because he’s desperate for donations.
Further, as an example of over-reaching, the campaign constantly changes the tag line that appears on the search engines. The candidate needs to be consistently repetitive with his branding and Web presence. Aside from the duplication issue and failure to imbed the donation page in one site, he needs to attract thousands of new links from good Web sites.
Whether he realizes or not, failure to take such precautions adversely impacts his credibility as a viable candidate. After all, even if he could win his party’s nomination, he’d be facing a Democrat who long ago demonstrated extraordinary Internet expertise.
Good Internet marketing lessons for business from Mr. Santorum.
From the Coach’s Corner, here’s a checklist: 14 strategies to rock on Google.
Additionally, for more resources see this portal’s marketing and tech archives, which are packed with solutions.
“Don’t blame the marketing department. The buck stops with the chief executive.”
-John D. Rockefeller
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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
President Obama Misses Mark Again, More of the Same
Sept. 9, 2011
President Obama is proposing superficial bandaids from political motivations that would accomplish little to solve the structural economic challenges afflicting the U.S.
America’s economy is barely holding together by pins and needles. It could tear completely apart with one more catastrophe. With its $447 billion plan, the Obama Administration has proven again it does not know how to stimulate growth in jobs. If the administration gets its way, a double-dip recession is inevitable — not economic recovery.
Yes, I’m all for roads and education. But I’m troubled. Why? My sense is that the administration is making recommendations for political reasons, and not economic patriotism. More on that later.
U.S. business has too little domestic demand for products. The list of concerns is long. America is no longer a manufacturing center. Television sets and computers are made in Asia. Cars and trucks aren’t selling.
Many big companies like General Motors are investing abroad and making more money there. Yes, ask GM about cars sales in China.
All of this means a stalemate in domestic job creation.
Extend unemployment insurance?
OK, 14 million Americans are jobless. Not to sound unsympathetic, but many workers are partly to blame by not adapting to the new digital age with new skills. There are countless unfilled jobs.
At what point does a helping hand become a handout?
Recessions weren’t kind to me. Long ago, my personal situation helped coin the phrase, corporate downsizing – 14 times. Yes, 14 layoffs. Yet, I always found ways for a sustainable income. It wasn’t always in my preferred industry. Sometimes, I turned to other sectors and got a sales job and worked my way back into management.
As a former mentor, famed broadcaster Del Sharbutt, once bluntly told me: “Every experience is a learning experience.” Reading between the lines, he was also telling me mental toughness was in order. What I eventually learned was that I needed an entrepreneurial spirit. Despite all the jobs, not to be gauche, but a CBS executive referred to my resume as a “rich background.” His comment spurred an even more intense entrepreneurial conviction.
That’s what America, American workers and the Obama Administration need.
The straw that stirs job creation – small business – can’t get credit and enough customers. Studies show most is not hiring nor will they for at least 18 months. Why? Again, there’s too-little domestic consumption.
Family budgets are strained. U.S. consumers are spending more but it’s more precious dollars on food and gas. Both are heavily imported. There isn’t any new drilling for oil and natural gas. So much of domestic consumer money is going abroad but it isn’t returning as a result of exports. The trade imbalance is still way out of whack.
Disingenuous spending
President Obama is calling for more stimulus spending. He apparently thinks spending another $140 billion on roads and schools will work. But my sense is that his proposal is aimed at benefiting the unions for political donations (see this EDITORIAL: How labor unions spend dues money).
Mr. Obama is showing he does not have Bobby Kennedy-like qualities (note this revelation: Dirty work between Obama, Teamsters). Do you recall the administration of John F. Kennedy when his brother, Attorney General Robert Kennedy, had his principled legal fight with the Teamsters in the 1960s?
Meantime, the president proposes to finance his proposed new stimulus with cutbacks in Medicare and Medicaid. It’s fallacious reasoning to think it’s best to spend more for union construction jobs while healthcare workers will lose theirs.
We already know about the devastation caused by his healthcare law. The majority of small businesses are apprehensive. Their workers and all patients face higher costs in their copayments and coverage.
Launching an infrastructure bank to lend money to local and state governments and financed privately?
Please. Government budgets at all levels are stretched too thin, as it is. Government credit ratings are backsliding. Doesn’t anyone remember the U.S. downgrade?
To expect these governments to repay the money isn’t productive, just as businesses fail when they borrow money just to stay in business. At some point, they have to repay the money, or else.
President Obama wants more business regulation – more government bureaucracy. Again, talk to the majority of businesses. You’ll get an earful.
He wants to tax the wealthy at higher rates. So how will they invest and hire workers? What’s their incentive to spend? The hospitality industry – from hotels to restaurants – is barely making it now. Sticking to the wealthy might make some people feel better, but it’s not a solution.
Payroll tax cuts won’t stimulate job growth and are a threat to future Social Security recipients for their retirement. The short-term benefit would be catastrophic for the long term.
There are more red flags, but you get the idea.
We waited weeks for President Obama to outline a new public-policy approach for economic recovery and job creation – in vain.
What we need is common-sense leadership and change from the White House, not politics. Remember the campaign promise? But nearly three years later, are we getting it? No, it’s more of the same politics. There’s no infrastructure being proposed for short-term or lasting recovery.
From the Coach’s Corner, instead of just complaining, this portal’s Public Policy section is filled with solutions.
“The problem with the federal government is that common sense is not necessarily common.”
- Terry Detrick
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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
How CEOs, Taxes and Policymakers Fail the U.S.
Updated Feb. 1, 2012
Like it or not, stagnant growth increases the possibility of a double-dip recession. We’re in a precarious position, largely, because businesspeople and consumers lack confidence in the economy – for good reasons.
Fourteen million Americans are out of work. For many available jobs, Americans lack education and skills to meet the specific needs of employers.
Still, many big businesses are slow to hire until uncertainty is alleviated. They have healthy balance sheets after paying down debt, and they’re hoarding cash.
Most small businesses don’t have adequate credit and can’t expand. They’re also angry about the healthcare law, which threatens their ability to stay in business.
Consumers are stunned by high food and gasoline prices. Mortgage debt stresses many homeowners. And they’re angry because of gluttonous Wall Street chicanery, and Congress can’t balance the budget.
Voters want lawmakers to tackle urgent economic problems. Instead, only a minority of policymakers has an adequate understanding of economic-growth principles, and they have the image of acting like a ruling class at the public trough.
After three years, the Obama Administration has produced any sound solutions.
Did I leave anything out? It’s no wonder the stock market is near bear-market levels.
Morale-busting headline
Consumers and small business owners were angered by a Bloomberg headline: “CEOs Earned More Than U.S. Companies’ Tax Bills, Study Finds.” Incredibly, the Institute for Policy Studies issued a report divulging that 25 chief executives were paid more in 2010 than their companies actually paid in federal taxes.
The report showed such companies averaged $1.9 billion in global profits. They include Boeing, Ebay, Cablevision Systems, and Verizon. What’s worse, while their CEOs were paid in the seven figures, some companies received government tax refunds.
The Institute for Policy Studies’ examples:
- Cablevision CEO James Dolan was paid $13.2 million, but the company had a $3 million corporate income tax benefit.
- EBay CEO John J. Donahoe received $12.4 million while his firm got $131 million in tax write-offs.
- Verizon CEO Ivan Seidenberg was compensated $18.1 million but his company netted $705 million in tax benefits.
The Bloomberg article also reported a study by another nonprofit group, Citizens for Tax Justice. It claimed 11 companies received $62 billion in domestic profits, but only paid a “negative 3.6 percent tax rate in 2010.”
True, the U.S. has a high corporate tax rate, but it’s negated by countless loopholes.
Job stimulus is anything but
Another disturbing headline: “Study: Half of Hired Stimulus Workers Were Already Employed.”
The federal jobs stimulus is not well-designed when the stimulus only results in job shifting. But that’s what’s happening, according to the study by George Mason University.
Even though workers have jobs, they’re hired by other firms – with the help of stimulus funds. The government would lead us to believe new jobs are being created, but 47.3 percent of the workers already had jobs.
How can new consumers’ money enter and circulate in the economy, if we’re merely moving workers around?
As a Biz Coach, these are frustrating developments.
Clearly, what needs to occur is widespread economic patriotism:
- The tax code has to be rewritten and simplified to eliminate the unpatriotic tax write-offs.
- Public policy has to become productive – money for jobs and has to be invested for economic development, not wasted.
- Voters have to elect representatives who understand basic economics and who will work for the common welfare of this great nation.
- Parents should encourage their children to take advantage of educational opportunities when they first start school.
- Workers should understand inertia doesn’t work – they need to adapt so that their skills match employers’ needs.
When progress is made in these areas, confidence in the free-enterprise economy will return.
From the Coach’s Corner, here’s more:
Federal Reserve Typifies What’s Wrong with Economy
Does the Federal Reserve Understand Small Business?
Only Fiscal Sobriety Will Prevent Further Fiscal Chaos
“You can always count on Americans to do the right thing — after they’ve tried everything else.”
- Winston Churchill
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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Manufacturing Jobs Might Return to U.S. as China’s Labor Costs Rise
June 13, 2011
Will federal, state and local governments change public policy to take advantage of a development in China?
A recent study by a world-class consulting firm offers hope to regions in the United States beleaguered by high unemployment – the firm predicts labor issues in China mean U.S. firms will be less-inclined to offshore jobs.
As some U.S. states develop reputations as low-cost manufacturing centers and China’s wages increase, offshoring of jobs is expected to decline in five years, according to an international consulting firm. That’s the essence of a study by The Boston Consulting Group (BCG).
The firm’s report: “Made in the USA, Again: Manufacturing Is Expected to Return to America as China’s Rising Labor Costs Erase Most Savings from Offshoring.”
As usual, BCG offers enlightening insights.
“With Chinese wages rising at about 17 percent per year and the value of the yuan continuing to increase, the gap between U.S. and Chinese wages is narrowing rapidly,” said the firm’s press release. “Meanwhile, flexible work rules and a host of government incentives are making many states—including Mississippi, South Carolina, and Alabama—increasingly competitive as low-cost bases for supplying the U.S. market.”
That’s thanks to a labor-shortage issue.
“All over China, wages are climbing at 15 to 20 percent a year because of the supply-and-demand imbalance for skilled labor,” said Harold L. Sirkin, a BCG senior partner. “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015. As a result of the changing economics, you’re going to see a lot more products ‘Made in the USA’ in the next five years.”
It’s a complex issue, but BCG further explained the rationale.
“After adjustments are made to account for American workers’ relatively higher productivity, wage rates in Chinese cities such as Shanghai and Tianjin are expected to be about only 30 percent cheaper than rates in low-cost U.S. states,” stated the press release. “And since wage rates account for 20 to 30 percent of a product’s total cost, manufacturing in China will be only 10 to 15 percent cheaper than in the U.S.—even before inventory and shipping costs are considered.”
Cost advantages in China will lessen
“Products that require less labor and are churned out in modest volumes, such as household appliances and construction equipment, are most likely to shift to U.S. production,” according to BCG’s Web site. “Goods that are labor-intensive and produced in high volumes, such as textiles, apparel, and TVs, will likely continue to be made overseas.”
Sirkin, who authored “GLOBALITY: Competing with Everyone from Everywhere for Everything,” advised U.S companies to examine all the labor costs.
“They’re increasingly likely to get a good wage deal and substantial incentives in the U.S., so the cost advantage of China might not be large enough to bother—and that’s before taking into account the added expense, time, and complexity of logistics,” said Sirkin.
BCG said the reversal has started.
“Caterpillar Inc., for example, announced last year the expansion of its U.S. operations with the construction of a new 600,000-square-foot hydraulic excavator manufacturing facility in Victoria, Texas,” the press statement indicated. “Once fully operational, the plant is expected to employ more than 500 people and will triple the company’s U.S.-based excavator capacity.”
Caterpillar acknowledged why.
“Victoria’s proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project,” said Gary Stampanato, a Caterpillar vice president.
Two other companies change course
“NCR Corp. announced in late 2009 that it was bringing back production of its ATMs to Columbus, Georgia, in order to decrease the time to market, increase internal collaboration, and lower operating costs,” said the consulting firm. “And toy manufacturer Wham-O Inc. last year returned 50 percent of its Frisbee production and its Hula Hoop production from China and Mexico to the U.S.”
U.S. unions, of course, have been an obstacle.
“Workers and unions are more willing to accept concessions to bring jobs back to the U.S.,” noted Michael Zinser, a BCG partner who leads the firm’s manufacturing work in the Americas. “Support from state and local governments can tip the balance.”
Mr. Zinser said U.S. executives need to look a bigger wage-cost picture.
“If you’re just comparing average wages in China against those in the United States, you’re looking at the problem in the wrong way,” Zinser cautioned. “Average wages don’t reflect the real decisions that companies have to make. Averages are historical and based on the country as a whole, not on where you would go today.”
Another factor is labor shortage.
“In the U.S., we have highly skilled workers in many of our lower-cost states. By contrast, in the lower-cost regions in China it’s actually very hard to find the skilled workers you need to run an effective plant,” added Doug Hohner, another BCG partner who focuses on manufacturing.
China will continue as a major player in manufacturing U.S. products, but Mr. Hohner offers these forecasts:
- First, investments to supply the huge domestic market in that nation will continue.
- Second, in the absence of trade barriers that prevent offshoring, Western Europe will continue to rely on China’s relatively lower labor rates since the region lacks the flexibility in wages and benefits that the U.S. enjoys.
- Third, even though other low-cost countries—such as Vietnam, Thailand, and Indonesia—will benefit from companies seeking wage rates that are lower than China’s, only a portion of the demand for manufacturing will shift from China. Smaller low-cost countries simply lack the supply chain, infrastructure, and labor skills to absorb all of it.
Public policy
My sense is the big question is whether government will start doing the right thing in public policy? Oops, that goes for unions, too, and the ostensible political motivations of the National Labor Relations Board (NLRB).
A brouhaha comes to mind – the issues over Boeing launching a manufacturing plant in South Carolina. For years, state government and union political activity gave the aerospace giant no option, but to look for a better locale-alternatives to build the 787 Dreamliner.
An editorial in a Tacoma, WA newspaper, The News Tribune, made a salient comment: “The NLRB complaint – which alleges that Boeing retaliated against its workers for striking when it choose to expand in South Carolina rather than Washington – appears to be little more than an attempt to assuage battered union interests.” (The right way to win Boeing jobs for Washington state)
In a similar editorial, NLRB complaint against Boeing needs critical look, The Seattle Times cited President Obama’s rhetoric about generating jobs.
“Really a president does not create manufacturing jobs. He creates policies that may encourage companies to create jobs — companies like Boeing, which has now had the creation of 1,000 jobs in South Carolina second-guessed by Obama’s National Labor Relations Board,” wrote the editorial writers.
“In its complaint, the NLRB is attempting to reverse a U.S. investment by the nation’s No. 1 exporter 17 months after the company decided to make it — after the money has been spent, after the equipment is set up and after 1,000 workers have been hired. In South Carolina, assembly of the first 787 is scheduled to begin this summer. For the government to demand now that the company move everything to another state shows no sense of practical reality,” the newspaper asserted.
Agreed.
Let’s hope BCG is right and the manufacturing jobs return. But more than political rhetoric, we need competence in government. If the right public policies are implemented, political and economic liberties will improve for everyone – not just the unions’ leadership.
To visit the BCG Web site: www.bcg.com
From the Coach’s Corner, here are related public-policy columns:
Job Creation: Will Public Officials Listen to Intel’s CEO?
Solutions for 3 Dangers to Small Business, Travelers’ White Paper
Common Sense for Washington State Pension Reform
“I don’t make jokes. I just watch the government and report the facts.”
-Will Rogers
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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complementary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Economic Climate for Small Business – Has Obama Misread the 3 Ms?
Sept. 8, 2010
Using the 3 Ms as criterion, it’s report card time for the “summer of recovery,” as predicted by President Obama last June. From the perspective of most small businesspeople, the three Ms can be defined as the mandate, moment and mood. Based on his strategies, has Mr. Obama misread his 3 Ms?
Clearly, after President Obama’s election nearly two years ago, the nation appears uncomfortable with his strategies for hope and change. There are worries about the economy and dissatisfaction with the nation’s leadership coupled with a huge lack of confidence – Americans see too little action – too late.
Consider President Obama’s recent Gallup Poll ratings:
- Job approval – 42 percent (only 39 percent among Independents)
- Economy – 38 percent approval rating
- Obama on Healthcare reform – 39 percent approval.
- Country – right direction – 32 percent say yes.
Why such bleak approval ratings? Well, when it comes to Main Street, the Obama Administration has a tin ear.
Bailouts, heavy spending, healthcare overhaul, and cap-and-trade legislation have been the misguided priorities for the Obama Administration. He has not been confused with President Lincoln. As a result, Mr. Obama has been off-target with assessing strengths, weaknesses, opportunities and threats. He has accomplished little regarding the economy and job creation, as the 9.6 percent unemployment rate is poised to climb higher.
His message is also off-base – really missing the target. The nation’s confidence is sinking. He needs to understand why President Roosevelt was widely respected during the depression years.
Admittedly, his proposed tax breaks are welcome – accelerated write-offs for investments in plants and equipment – and tax credits for research. Companies could deduct investment expense in one year instead of the current provision for three to 20 years. But they will not yield a quick fix for struggling businesses.
The tax breaks should have been proposed 20 months ago – businesses do not have an incentive to take risks, and they will not add to their payrolls. Even for a beleaguered construction industry, Mr. Obama’s proposed $50 billion spending for roads, railways and runways is seen as a political payoff to unions.
Government policy should be focused on alleviating uncertainty for employers – not creating chaos. For businesses to increase spending, it starts with confidence. So, they’re not likely to buy machinery or high-tech, which would create jobs.
Big companies can borrow at lower interest rates. Even though small businesses comprise the lion’s share of the nation’s economic engine for job creation, most small businesspeople feel as though government has declared war on them. Many have suffered severely and have lost their positive credit ratings – making it impossible for them to borrow at decent rates. That’s a shame.
Small Business Administration (SBA) figures show small companies represent 99.7 percent of all employers, and employ more than 50 percent of the private-sector workforce. The SBA says account for 44 percent of payrolls, and more than 50 percent of the nation’s non-farm gross domestic product. They comprise 97.3 percent of exporters, and are responsible for 13 times more patents per employee than big companies. But the patent-application process takes more than half a decade (see this column: “Is the U.S. in Danger of Becoming Second-Rate in High Tech?”)
Just like during the Bush Administration, the SBA in the Obama tenure has decimated government-contract opportunities for small businesses. Twenty-three percent of all federal government contracts must be allocated to small businesses. This year, the Obama Administration admitted it failed to achieve the goal, even though it claims to have given $96.8 billion in government contracts to small business. Or did it? No.
A study released in June by the American Small Business League (ASBL) concludes that a whopping 60 percent of the top 100 contracts resulted in welfare for big companies.
To name names: Boeing, British Aerospace, Dell, General Electric, Honeywell International, Lockheed Martin and Raytheon all received corporate welfare – government contracts intended for small entrepreneurs.
Small businesses are getting a raw deal in other ways. Consumers have been so hammered, they can’t buy goods and services – even if they want to do so. Financial reform did nothing to help consumers and small businesses long pillaged by predatory credit card companies. New cars and trucks continue to be parked at dealerships.
Because this isn’t a nurturing economic climate, there’s also been a decrease in self-employed businesspeople. Recent Labor Department figures show there are 8.68 million self-employed persons. That’s down 13 percent from four years ago, December 2006, when there were 9.98 million people working for themselves.
It’s small business that creates jobs in this era of corporate-bailout largesse. However, small businesses are being choked because they can’t get credit and they’re facing a slump in demand.
They’re also facing a health reform law that favors bigger companies. Other government-forced paperwork will increase. Plus, every company must produce a Form 1099 to each vendor when annual purchases total more than $600. The SBA says employers with 20 or less workers now have to spend 45 percent more of their hard-earned resources to stay in compliance with federal mandates. IRS audit hours for small firms are up 30 percent in just five years. You guessed it – audit hours for their big-company peers are down by a third over the same period.
Summer of recovery? No. Every economic report has delivered bad news. President Obama has misread his 3 Ms.
The bottom-line: Small businesses want a healthy economy. They want to hire workers when feasible. But they do not feel expansion of government, high taxes and new regulations will help them succeed.
Small-business success is our best hope. Public policy should reflect this reality. Mr. Obama should emulate President Lincoln in deciding policies, and Franklin Roosevelt for delivery of the right message to inspire confidence.
From the Coach’s Corner, from a more macro perspective, it’s also been alarming to watch American officials scold the Germans for not spending enough. But it’s Germany with the healthiest economy in Europe.
An article in Forbes explains it well: “The U.S. Killed The Summer Of Recovery – We did it by framing the wrong problem,” by scholar Thomas F. Cooley.
Why Startups Get a Reprieve from Financial ‘Reform’
Updated May 24, 2010
As House and Senate conferees debate their differences on the financial regulatory reform bill before Congress, the angel investment community and entrepreneurs are celebrating – thanks, in part, to two Seattle attorneys.
At first, it appeared no one was listening. The financial regulatory reform bill was advancing through the U.S. Senate. But Sen. Chris Dodd’s bill was flawed. It threatened job creation by restricting startups and angel investors.
Thankfully, the provision hurting startups was deleted by amendment just before passing the Senate.
“It would have hurt angel investing and would have wiped us out,” says attorney Joe Wallin, a partner in the Seattle office of Davis Wright Tremaine, www.dwt.com.
He and another Seattle attorney, Bill Carleton, a member of McNaul Ebel Nawrot & Helgren, labored with others to kill the provision affecting startups and their ability to attract angel investors for job creation. It resulted in an amendment, SA 4056, which was co-sponsored by Senators Maria Cantwell and Patty Murray (D-WA) and others including Sen. Dodd.
“Congratulations to Marianne Hudson of the Angel Capital Association, and Dan Rosen of the Seattle Alliance of Angels!” exclaimed the attorneys in a statement. “Thank you Senators Murray and Cantwell!”
So the bill would have mandated that unemployment would continue as a bigger economic threat than it needs to be.
“Over the next three years, the economy must create nearly 13 million jobs to bring unemployment down to 5 percent – still higher than pre-recession levels,” wrote economist Dr. Peter Morici in an Op Ed column on this site. “That requires 360,000 jobs every month and economic growth at 5 percent a year.”
And credit lines for small businesses as catalysts for new jobs are still not widely available via the normal pipelines.
“Obama spent the TARP to bail out Wall Street banks, GM and his pals at the United Autoworkers but left the 8,000 regional banks to sink or swim,” Dr. Morici added. “Cash strapped, those banks can’t lend enough to small and medium-sized businesses, which create most new jobs.”
That’s another reason why a heavy economic burden falls on startups and others in the angel ecosystem. SA 4056 was imperative for the financial regulatory reform bill.
“It could have reduced funding for small companies by probably $10 billion per year,” Mr. Wallin adds. “Small companies are the source for new jobs.”
In a March 28, 2010 column, “How Sen. Dodd’s Financial Reform Would Hurt Financing of Startups,” I quoted Ms. Hudson of the Angel Capital Association, who forecast the bill would prevent up to “77 percent of accredited investors” from investing in new firms. In that column, Mr. Wallin explained why the financial regulatory reform bill contained flaws.
“Before companies could accept money from investors they would have to file paperwork with the SEC and wait 120 days,” Mr. Wallin told me in that interview.
“If the SEC didn’t review the filing and conclude that the filing qualified for the federal securities law exemption, companies would have to file paperwork with the states in which the investors lived and wait for the states to determine that the sale of the securities qualified for the securities law exemption,” he explained.
After the reprieve for startups, to confirm what’s been at stake, the attorney cites data from the University of New Hampshire Center for Venture Research. The report is entitled, “The Angel Investor Market in 2009: Holding Steady but Changes in Seed and Startup Investments.”
Even in a down economy, of course, we’re talking big numbers.
“Total investments in 2009 were $17.6 billion, a decrease of 8.3 percent over 2008 when investments totaled $19.2 billion,” wrote Jeffrey Sohl, director of the school’s venture research center.
“However, a total of 57,225 entrepreneurial ventures received angel funding in 2009, a reserved 3.1 percent increase from 2008 when 55,480 entrepreneurial ventures received angel funding. The number of active investors in 2009 was 259,480 individuals, virtually unchanged from 2008’s 260,500 individuals,” he added.
He said the average deal size was reduced by 11.1 percent in 2009.
“Software accounted for the largest share of investments, with 19 percent of total angel investments in 2009, followed by healthcare services/medical devices and equipment (17 percent), industrial/energy (17 percent), retail (9 percent) and biotech (8 percent). “Industrial and energy investing is a significant increase from 2008, reflecting a growing appetite for green technologies,” he said.
He indicated 54 percent of the exits stemmed from mergers and acquisitions. Forty percent involved bankruptcies.
So, all is well as normalcy returns to the startup-funding process. But one has to wonder why all this political maneuvering was necessary.
From the Coach’s Corner, the Silicon Valley has some good news following another law firm’s survey: Venture funding improves for some startups.
Sen. Cantwell Is Right to Question Risky Derivative Dangers, Geithner
Updated July 15, 2010 – 3 p.m.
An influential U.S. senator, Sen. Maria Cantwell (D-WA), worked to regulate the perilous use of derivatives by Wall Street bankers, and criticized the Obama Administration in the process. But her derivative strategy worked. The sweeping financial reform legislation will regulate the risky, intangible instruments.
This means derivative trading now faces regulation, and financial institutions will have to set up a fire wall by moving their derivative departments elsewhere.
“This isn’t about poking the White House, it’s about getting capital flowing to small businesses,” Sen. Cantwell said in an interview with Les Blumenthal, a reporter for McClatchy’s Washington state newspapers.
She helped lead the fight against investment bankers, who were bailed out by taxpayers only to shell out big bonuses and who are at it again. Instead of extending credit to business, Wall Street is back to the old tricks of playing risky derivative games that helped lead to Wall Street’s meltdown and the global-financial disaster.
She’s also had a testy exchange with Treasury Secretary Timothy Geithner over the failed efforts to bail out community banks and the associated credit issues faced by her Washington state constituents and other American businesses and consumers.
“We are trying to keep the focus on what needs to be done to get credit flowing and avoid another bubble,” Sen. Cantwell also said. “Do I wish the White House team was more attuned to these issues? Yes.”
Yes is right. It’s commendable that she’s become outspoken about regulating Wall Street’s behavior.
If she’s successful, we’ll see job creation – the only way out of this mess. I’ve been harping about this and asking for answers to questions for an extended period of time starting with this column, “Is it Time to Police Pay at Wall Street Banks?”
And she was right about voting against the reappointment of Fed Chair Ben Bernanke. Few in Congress seem to understand Main Street issues and his tardy, tepid handling of the Great Recession at the Fed.
Firewall partnership
Sen. Cantwell partnered with Sen. John McCain (R-AZ), the former GOP presidential candidate, to bring back the commercial/investment banking firewall. This will prevent risk-taking by commercial banks that exacerbated two downturns in the 1930s and the most-recent financial chaos. The two worked together on the Senate Commerce Committee.
Cash flow and credit are critical for operating a business. With too-few funds available in loans, businesses have been failing or, at least, suffering from bad credit as a result of not having access to capital.
Efforts by the Obama Administration and Small Business Administration to provide more loans are to be commended. However, they are way too-little and too late. Most afflicted small businesses now have poor credit because of the cash cutoffs and they won’t qualify for any the funding.
Credit card regulations were too late, too.
Nothing has been done to help repair the credit of the millions of small businesspeople and consumers who were victimized by the credit card companies – domiciled in a handful of states that permit predatory behavior – their rapacious interest rate hikes for bogus reasons and slashed credit lines.
Sen. Cantwell also indicated her disappointment that the Obama Administration twice reneged on promises for action on the proposed firewall between commercial and investment banks.
“Their economic team is not living up to what they said they would,” she explained to Mr. Blumenthal.
Hmm. Broken promises? That’s not what America needs, but we can appreciate Sen. Cantwell’s candor and successful efforts.
From the Coach’s Corner, on another somber note regarding credit: Customers of the hospitality industry are ostensibly the No. 1 target of hackers, here’s the article.
Will the Locke, Obama Trade Plan Work?
Updated Sept. 17, 2010
There are new developments to boost U.S. exports, which would enhance the nation’s economy. The Obama Administration has re-launched its plan to create 2 million jobs and dramatically increase exports – more than seven months after it was announced in February of this year.
In addition, Congress has held hearings on the manipulation of the Chinese currency, yuan. The same week Commerce Secretary Gary Locke visited Seattle to pitch the trade plan, Chinese officials vowed to increase trade with Washington state during a trade mission by Washington Gov. Chris Gregoire.
But will these developments solve the nation’s trade deficit? The trade plan is well-intentioned but is unfeasible, according to one of the nation’s most-widely quoted economists, Dr. Peter Morici. Ironically, the Obama Administration trade push follows some recent heavy criticism from the economist. (Note: This Web site regularly publishes his Op Ed commentaries.)
“The Administration is correct to target China and India but these initiatives don’t address the reasons U.S. businesses don’t sell enough in those countries,” says the economist in referring to China’s currency manipulations and other trade-protectionist practices.
Dr. Morici speaks from experience. He was the chief economist at the U.S. International Trade Commission in the Clinton Administration and currently teaches business at the University of Maryland.
Mr. Locke has implemented the administration’s five-year plan to double exports and create jobs.
It also seeks to accomplish these goals:
- Promote free trade
- Provide more credit for small to medium sized business
- Enforcement of international trade laws
“The Commerce Department initiative merely consists of redoubling existing efforts and not addressing the fundamental issues – the undervalued Chinese yuan and high tariffs, and other regulatory barriers that block U.S. exports in much of Asia,” argues Dr. Morici.
“Of course, these initiatives are helpful and could increase net exports by several billion dollars; however, those will not double exports, which now total $1.7 trillion or appreciably reduce a trade deficit of $440 billion caused by $2.1 trillion in imports,” adds the economist. “The trade deficit is likely to grow in 2010 and drag on the economic recovery.”
There are no published cost estimates but it is a multi-billion dollar plan.
It would increase “…Export-Import Bank funding for small businesses from $4 to $6 billion; boosting Commerce Department personnel that assist exporters at U.S. embassies and consulates in China and India; and strengthening enforcement of trade laws and agreements,” Dr. Morici indicates.
“China is the larger and faster growing market, and maintains an undervalued currency that makes Chinese products artificially cheap, whether at the Wal-Mart or competing with U.S. exports in China,” he explains. “It imposes huge tariffs and administrative barriers to U.S. exports. Conditions are not much better in India.”
Dr. Morici says the U.S. imports $330 billion in goods from China but only sells $88 billion in products to the Asian power.
“Without a revaluation in the yuan large enough to end China’s persistent purchases of U.S. dollars, the bilateral deficit is simply not coming down,” he asserts. “Without strong U.S. action to offset China’s currency market intervention, which exceeds $400 billion a year, China simply is not going to change its currency and trade policies, and the U.S. unemployment will stay close to 10 percent or higher.”
I’ve quoted Dr. Morici over the years and sometimes his views conflict with my free-market philosophy. However, he’s right in that something needs to be done to persuade China.
Moreover, what seems to have been lost in the discussion about the Obama Administration’s trade plan is a fundamental concern: Relatively little is manufactured in the U.S. any more. Consumer products are made abroad. Even Boeing jet parts are made elsewhere.
As a management consultant, I recall Mr. Locke, as Washington’s governor from 1996 to 2004, was innovative and practical. He was the nation’s first Chinese-American governor.
As a Biz Coach columnist, I’ve praised him because he implemented two valuable policies that ostensibly are not used today – he wanted consulting projects to be accountable with benchmarks for returns on investment and he implemented priorities in government budgeting instead of just taxing and spending.
So, if anyone in the Obama Administration is astute enough to assess the problems, he’s the one. Let’s pray he’s successful in strategy and implementation.
America is heavily in debt to China. That threatens our national security, and our individual economic and political freedoms. Unless, the Obama Administration is successful in trade, someday soon America’s official currency will be the yuan.
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