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?
Federal Reserve Typifies What’s Wrong with Economy
Updated Feb. 1, 2012
There’s a troubling schism in U.S. politics, monetary policy and management of the economy.
Sure, at first blush, I agreed with a former GOP presidential candidate who raised eyebrows with his criticism of sacred cows. Rick Perry said Social Security is an “illegal Ponzi scheme” and he equates the Fed’s monetary policy with treason. He’s since self-destructed with his political approach.
He took a lot of heat for it before he dropped out of the race. Google his name and you’ll see 20,600 search results – mostly condemnation and sarcasm.
Cliff Schecter, an author and liberal PR activist, wrote a sarcastic blog for Al Jazeera, “Beware of Rick Perry, the French cuff cowboy.” Mr. Schecter advised Democrats to minimize Mr. Perry’s chances for the high office – to ridicule him: “That he’s as fake as a three-dollar bill, all hat and no cattle, or to put it in a language Perry can understand – he’s Blazing Saddles, not The Unforgiven.”
Aside from such silly rhetoric, what about the facts?
Granted, Social Security is indeed a lifeline for millions of Americans. But it’s been well-documented that Congress has played games with the payroll-tax fund, and diverted billions of dollars to underwrite other underfunded initiatives.
Consequently, there has been an upsurge in published reports about Social Security running out of money. Of near-term consequence, to conserve cash flow, Social Security has been late in mailing checks to retirees the past two months.
The shenanigans with Social Security do make it a Ponzi scheme.
Federal Reserve mismanagement
As for the Federal Reserve, it gets worse. Bloomberg published a shocking story: “Wall Street Aristocracy Got $1.2 Trillion in Loans from Fed.”
In a nice piece of forensic financial reporting – only made possible by a series of Freedom of Information appeals – Bloomberg reporters Bradley Keoun and Phil Kuntz revealed how the Fed secretly gave the financial institutions the outrageous loans totaling more than a trillion dollars in public funds. They examined nearly 30,000 pages of secret documents.
The reporters found the Fed furtively funneled $107.3 billion to Morgan Stanley, $99.5 million to Citigroup, and $91.4 billion to Bank of America. Nearly $300 billion – $298.2 billion in public funds were doled out from Aug. 2007 through Aug. 2010. Moreover, the secret bailouts were three times larger than what was publicly acknowledged by the other controversial bailout, the Troubled Assets Relief Program (TARP).
That’s right. The $1.2 trillion was in addition to the $160 billion in the TARP bailout funds.
Ironically, in 2006, and just before the secret loans, Bloomberg reported Citigroup and Bank of America garnered $104 billion in profits.
Fifteen of the borrowers were European banks.
These huge sums of money totaled 25 times more than the $46 billion loaned by the Fed just after the 9/11 crisis.
The Fed’s justification for the secret loans: To prevent a depression.
However, for a different perspective, consider:
“While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed,” wrote the reporters.
More Fed failures
Other indications of poor discernment at the Fed include:
Fed dissenter: Economy’s biggest problem is distrust of Washington …. In this piece written by Peter Schroeder on thehill.com, the headline appears to be accurate. He quoted Richard Fisher, the president of the Federal Reserve Bank of Dallas.
In a mind-boggling statement, Mr. Schroeder cited Mr. Fisher’s opinion: “…businesses have ample access to credit from banks, but that a growing distrust of the nation’s political institutions is keeping them on the sidelines.”
It’s true about the mistrust of Washington. But the rest is preposterous. The big banks’ chicanery during that period helped cause the problem and the financial downturn – for dubious reasons, 38 percent in credit-card interest rates charged to small businesses and individuals – plus, canceled credit lines and denials in loan applications.
As a result of the resulting poor credit, many businesspeople simple do not qualify for loans. That’s the reason for relatively little in loan demand. In a column, I posed this question: Does the Federal Reserve Understand Small Business? The answer is absolutely not.
My sense, for many months, has been: The Legal War on Wall Street Chicanery Isn’t Finished.
You might recall another Fed-bailout beneficiary was Goldman Sachs. Investors were shocked by a published report, Goldman Sachs CEO hires criminal defense lawyer.
Meantime, despite all this secretive wheeling and dealing, this business portal has repeatedly warned about the dangers from public policies and mismanagement as we head toward a double-dip recession.
While writing this piece, I received an email from a frequent reader who complains about the “ruling class” of public officials who continually tax and waste resources. He sent a link for an ABC News video that shows waste by the Fed. You won’t believe what you see.
So instead of sarcasm about presidential candidates who question the Fed and other sacred cows, let’s get pragmatic and take off the blindfolds. It’s time for sober discernment and productive action.
From the Coach’s Corner, here’s more about the poor stewardship of the economy:
Only Fiscal Sobriety Will Prevent Further Fiscal Chaos
Do We Really Honor the Declaration of Independence?
After Taking Us for a Ride, A Vacation Is Warranted for Obama
“It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Henry Ford
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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?
After Taking Us for a Ride, A Vacation Is Warranted for Obama
Aug. 20, 2011
Frankly, I don’t understand the brouhaha over the Obama family’s vacation, decadent or otherwise. Critics who called on President Obama to cancel his Martha Vineyard vacation have been misguided.
Aren’t they over-reacting?
True, the timing of his vacation could have been better. Much of the country is suffering. World markets are in chaos. A check of history does reveal other presidents have canceled vacations during similar crises.
The well-to-do location also raised eyebrows of consternation. For one thing, Martha’s Vineyard does not have racial diversity. Even the Tea Party has more racial diversity. More noteworthy, nor does Martha’s Vineyard have economic diversity. The average American cannot afford the $50,000 per week price tag of Mr. Obama’s favorite vacation retreat – not to mention the huge amounts of money paid for security.
In contrast, President Clinton went camping in Wyoming, President Reagan went home to split firewood, and President Roosevelt served hot dogs to the Queen of England. Those symbols of leadership inspired Americans during critical times.
The feeling of President Obama’s critics is that he advocates certain principles, but his actions speak differently. I concur.
By now, you realize the headline and lead paragraphs in this piece are facetious.
No, I’m not a Republican. Nor am I a Democrat. As a Biz Coach columnist, count me also as an average American with a Cherokee Indian heritage, an Independent and a champion of the underdog — someone who is deeply worried about the direction of this country.
The spending is out of control. The risk of a double-dip recession is quite high. So what do we get now? We get an ill-advised bus-PR gimmick with only hints about a new jobs plan.
Yes, Mr. Obama’s bus tour has really taken us Americans for a ride — an abysmal, bumpy ride. As a former columnist at Belo Web sites and one who supported his small-business platfom during his campaign — a Biz Coach column followed by a press release — I feel betrayed.
Incompetent economic policies
Actually, since his inauguration, President Obama has been leading us astray. Instead of focusing on the faltering economy, he gave us a dysfunctional health law, which has been one of the reasons small business has not hired workers. He advocated a plan to confiscate your retirement funds. And don’t forget about his unproductive environmental policy in Cap and Trade.
As a result, a recent Gallup Poll indicates Mr. Obama has a 26-percent rating for his handling of the economy. Americans aren’t confident about his policies with good reason – the policies and Americans aren’t working.
His rhetoric has suggested he will deliver an effective policy to create jobs and to ease the onerously high unemployment rate. He’s been wrapping himself in the American flag – issuing an ultimatum to opponents to support his secret jobs plan. He implies opponents of his ineffective policies are unpatriotic. Sure.
His bus tour was another indicator of incompetence – the type of economic-policy ilk that Americans suffered under President Carter. To state Mr. Obama is providing leadership is in reality an oxymoron. His so-called leadership is leading us down the wrong road.
The two Darth-Vader looking black buses cost $1.1 million – each – from Prevost, a Quebec-based manufacturer. Reportedly, the Secret Service made the purchase. If I were Canadian, I’d expect my government not to miss a chance to buy Canadian. Likewise, as a U.S. citizen concerned about jobs, I expect this administration to buy American.
Yes, it’s true all White House vehicles are black. However, instead of being a source for optimism, the black-colored buses are a reminder – the black mirrors the economy and morale of most Americans.
Obama behavior fails to match goals
For a president who claims he’s concerned about jobs for American workers, he’s committed a terrible PR gaffe – economically, environmentally and patriotically.
To send a message about job creation, appropriate action is indicated. But it’s not happening. No one will convince me that American bus manufacturers are incompetent. There’s at least one American bus manufacturer that’s able to meet security requirements to protect a U.S. president.
In fact, a cursory search on Google reveals three interesting American bus manufacturers:
- Warren Buffett’s Berkshire Hathaway owns Forest River, a bus builder in Elkhart, Indiana – in business since 1903. Mr. Buffett just might have the resources to build such a bus.
- General Motors Ventures LLC is investing $6 million in Proterra Inc., a well-known manufacturer of zero-emission buses. Locations: Golden, Colorado and Greenville, South Carolina.
- How about American Coach in Decatur, Indiana? Talk about a missed opportunity for PR. American Coach’s line of products: American Revolution, American Eagle, American Tradition and American Heritage. Any of the names would have been a PR coup of epic proportions.
(Note: If you work for a U.S. bus manufacturer excluded in this column, my apologies for my oversight. Please let me know. I’ll gladly add you to this list.)
One final example of Mr. Obama’s tone deafness: Not only did he miss an opportunity to put Americans to work building his buses, he missed another golden opportunity to show the No. 1 symbol of patriotism — the American flag.
There were no American flags anywhere on his buses. None.
So, I disagree with the critics of Mr. Obama’s vacations. I now believe he should enjoy long, decadent respites. When he’s not working, Americans are better off. They have a better chance of getting back to work.
From the Coach’s Corner, here are two resource links: economic analysis and short-term economic forecast.
You might also wish to read Does the Federal Reserve Understand Small Business? Here’s a menu of other public policy columns.
“A major source of objection to a free economy is precisely that group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.”
-Milton Friedman
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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?
Does the Federal Reserve Understand Small Business?
To answer the question, I have a simple one-word answer: No. It appears at least one of the Federal Reserve’s 12 districts does not have a practitioner’s understanding of small business.
Small business is really the straw that stirs the drink in the nation’s ability to increase the number of jobs in this country.
According to Small Business Administration (SBA) figures, small businesses make up more than 99 percent of all employers and employ more than half of all workers. Another SBA stat stands out: Small businesses have created 64 percent of all jobs in the last 15 years.
But small businesses have really suffered during and after the Great Recession.
So why is it that a 2011 study by the Federal Reserve Bank of New York draws the wrong conclusions as to why small business employee rolls dropped a lot more than big-business employment in the recent recession?
The Fed’s study concludes that a drop in consumer demand triggered the cutbacks. Huh?
Fortunately, a blog by Dr. Scott Shane nailed the reason.
“I think two factors – reduced access to credit and the concentration of small businesses in the worst hit sectors of the economy – play a bigger role than the Fed researchers acknowledge,” he wrote.
I like his work, and have quoted him previously (Is the U.S. in Danger of Becoming Second-Rate in High Tech?). Dr. Shane is an entrepreneurial scholar – the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University.
The Fed was right about the loss of small-business employment rolls — 10.4 percent among companies with fewer than 50 employees. And Dr. Shane agreed. As Biz Coach, a business-performance consultant, I see it every day. Small businesses did lose more jobs than their bigger counterparts during the Great Recession. So, we’re in agreement on the job losses.
“Businesses with fewer than 50 employees accounted for 28 percent of the 121 million Americans employed in the private sector in 2008, the latest Small Business Administration figures show,” wrote Dr. Shane. “That’s too much employment in small businesses for policymakers to find a way to fix the job problem without getting the smallest companies to boost hiring.”
He’s right again.
“Small businesses are underrepresented in two sectors that have weathered the downturn relatively well: exporters and those in research-and-development-intensive industries,” he wrote. “And small businesses account for much more of the employment in the sectors hardest hit by the downturn.”
As an example, he cites construction.
“While total employment fell only 4.4 percent from 2007 to 2009, employment in construction dropped a 19.4 percent. With so many small businesses in construction, this has meant heavy job loss,” he explained.
“The Fed researchers also play down the importance of tightened credit markets in accounting for the losses, arguing that most of the decline in borrowing by small businesses during the recession came from a decrease in demand for loans – not a reduction in supply,” he asserted.
He cites figures from the National Federation of Independent Business: “In March 2009, at the depth of the recession, only 29 percent of small business owners reported that their borrowing needs were being met, down from 40 percent back in February 2007.”
Dr. Shane points out home-price declines adversely impacted small business credit.
“A 2007 survey by Barlow Research Associates shows that one-quarter of small business owners use the equity in their homes to fund their businesses,” he wrote. “And research by Kean University professor Samuel Bornstein shows that many of the loans used to tap that equity were the Alt-A, adjustable-rate and interest-only mortgages at the toxic heart of the crisis…”The decline in housing prices sucked a large amount of small business credit out of the system.”
Dr. Shane indicated home equity loans for small businesses decreased $25 billion.
“If policymakers want to counteract the job losses in small business, they need to do more than say that the cause is decreased demand,” he concluded. “Rather, they need to stimulate the small business heavy industries that were badly damaged by the recession and keep credit flowing.”
Amen. Naturally, it follows that new strategies for small business credit are needed. However, now there’s a bigger problem.
My sense is that the small business credit situation – in the aggregate – won’t qualify such firms for loans. The chicanery by big banks led to reduced credit limits and they got away with charging 38 percent interest on business credit cards for dubious reasons.
From the Coach’s Corner, here’s a resource link:
11 Strategies to Keep your Small Business Floating above Water
“Dreams come true if you survive the hard times!”
-George William Curtis
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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?
How Economic, Political Freedom Got Boost from Two Reproaches
Updated – Feb. 1, 2012
The healthcare debacle is going to the U.S. Supreme Court, in part, thanks to ruling by an Atlanta federal appeals court and the Standard and Poor’s downgrade of the U.S. credit rating last August. In reality, they were positive developments. The two evens represent reproaches to the federal government’s behavior and performance.
While sustaining the bulk of the so-called reforms, thankfully, the 11th Circuit Court of Appeals ruled that Congress unconstitutionally required Americans to buy health insurance or pay a stiff fine. Most businesspeople feel differently about the law (How Healthcare Law Would Affect Small Business, and Healthcare Reform Increases Costs to Workers, Study).
Despite disingenuous claims by the Obama Administration, S&P’s downgrade was justified. In pandering to political cronies nearly all in Congress from both parties, has spent an obscene amount of money on unwarranted hometown pork and earmarks. Politicians must now stare at a huge red flag.
Another reason why the court’s health-law ruling is encouraging:
One of the opinions was written by Judge Frank M. Hull. He was appointed by a Democrat – President Bill Clinton in 1994. He was joined by Chief Judge Joel F. Dubina, who was appointed by Republican President H.W. Bush.
Until Judge Hull’s decision, lower court rulings were rendered along party lines. Republican appointees invalidated the health-law, and judicial appointees by Democrats upheld it.
“This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives,” wrote Judges Hull and Dubina.
“We have not found any generally applicable, judicially enforceable limiting principle that would permit us to uphold the mandate without obliterating the boundaries inherent in the system of enumerated congressional powers,” they also wrote.
Yes, there more legal challenges in the courts, including Virginia and the District of Columbia.
But this ruling was the most salient. The opponents’ case was pursued by attorneys general and governors from more than half of the states – 26. Other plaintiffs included the National Federation of Independent Business and two individuals.
Again, the U.S. Supreme Court will rule on the case.
Possible Ramifications
The Atlanta court’s dramatic ruling might influence the pricing of insurance policies. The Obamacare requirement guaranteed funding via the consistency in the mega pool of policyholders. Now, insurance companies started to hike premiums — just as predicted here at The Biz Coach.
Politically, there’s also a different landscape. Perhaps the Supreme Court might agree with the Atlanta court. But any legislative attempts by Congress to sidestep such a ruling would be unwise. That’s because the Democrats no longer enjoy being the majority in both houses of Congress. Republicans are unified against the law.
States governments are carrying out the law’s reforms. There has been a lot of angst about the costs in implementing the law. Many of the states’ politicians complain their rights have been trampled.
Even though the remaining portions of Obamacare were untouched by the Atlanta court, the ruling also appears to torch them. Why? The mandate to buy insurance is a source of the law’s funding, which has now been disrupted.
Only one source remains as a funding source – a decrease in Medicare benefits. Democrats have been disingenuous. They conveniently omit the devastation to recipients of Medicare.
Let’s hope the entire baggage in Obamacare is at-risk. It was clearly unconscionable for Congress to require Americans to buy private products.
The Great Recession may have technically ended but not for most businesspeople and consumers. That’s why the S&P downgrade and court ruling are beneficial. The reproaches help to end the expansion of the over-extended Federal government.
The reproaches also hold the promise of enhancing the economy by alleviating economic uncertainty for 14 million unemployed Americans and employers. Companies have been reluctant to hire, in part, because of the expense of Obamacare.
Here’s a better strategic plan: Balance the budget without increasing taxes on everyone. Make it feasible for startups and other businesses to hire and expand.
Economic and political freedom are two of America’s sacred liberties.
From the Coach’s Corner, here are related public policy columns:
Only Fiscal Sobriety Will Prevent Further Fiscal Chaos
Do We Really Honor the Declaration of Independence?
Manufacturing Jobs Might Return to U.S. as China’s Labor Costs Rise
Economic Climate for Small Business – Has Obama Misread the 3 Ms?
Government Spending Causes Companies to Cut Back, Harvard Study
“Giving money and power to government is like giving whiskey and car keys to teenage boys.”
-P.J. O’Rourke
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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?
Only Fiscal Sobriety Will Prevent Further Fiscal Chaos
Updated Feb. 1, 2012
We’re way past the deadline to demonstrate financial leadership. It’s time for economic fundamentals and teamwork focused on economic patriotism.
As the world’s largest-economy, threats for a double-dip recession will only worsen unless the Unites States stops the fiscal dysfunction. In fact, not only is the U.S. economy is danger, so are world markets.
With a $1.6 trillion dollar deficit, investors and average Americans aren’t confident that the Obama Administration and Congress are competent enough in public policy. Voters are sick and tired about the bickering and finger-pointing.
Fourteen million Americans are out of work. The catalysts are the economy, advances in technology and business greed for outsourcing.
Despite what the Obama Administration claims, the S&P downgrade of the U.S. credit rating was justified. If a family or a company’s credit situation is lousy and cash flow is poor, they don’t qualify for loans, period.
All of that stimulus spending hasn’t turbo-charged the economy.
The challenges are many:
- Capital isn’t circulating.
- Consumers have cut spending.
- Businesses aren’t hiring.
- Money isn’t being lent.
- Despite efforts by the Small Business Administration to promote loans, the majority of small companies don’t have the collateral, credit and cash flow to qualify for a loan.
- Don’t forget the obnoxious greed on Wall Street, which helped cause the meltdown.
- Precious little is being manufactured.
- Many investors have more confidence in gold.
- The trade deficit is exacerbated by manipulation of currencies by China, India and Japan.
The selections for the bipartisan debt panel raise more questions. It appears we’re headed for more deadlock. The panel is filled with staunch partisans from both sides – the same politicians who have long failed to recognize problems and deliver results.
The blame game has become onerous, and few politicians – from the White House to Congress – have offered constructive ideas. What we need is balance and compromise. Move to the middle, please.
To Democrats: Cut spending.
To Republicans: Quit attacking Social Security and Medicare as entitlements instead of lifelines, and reconsider the Bush tax cuts for the wealthy. (Note to Republicans, Democrats aren’t the only culpable spenders. Lest I forget, Mr. Bush waited six years before vetoing any pork bills in a GOP-dominated Congress.)
To both parties: Stop the hometown pork to get re-elected, shun unnecessary risk, and simplify the tax code. Consider all options, including the call by Steve Forbes for a 10 percent flat tax.
To the White House: Wake up to realities. Hire bipartisan economists.
Remember why this nation was founded. At-risk are all of our political and economic liberties.
Now, can we get sober fiscally and agree to roll up our sleeves?
From the Coach’s Corner, here are additional resource links on public policy:
Manufacturing Jobs Might Return to U.S. as China’s Labor Costs Rise
Job Creation: Will Public Officials Listen to Intel’s CEO?
“This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer.”
-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 complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Do We Really Honor the Declaration of Independence?
July 3, 2011
Progressively more every year, many Americans, especially public officials, demonstrate they need to review the reasons for Independence Day and why we celebrate the fourth of July. It is, of course, a national U.S. holiday that commemorates the adoption of our unique Declaration of Independence on July 4, 1776.
Thomas Jefferson was inspired to write it between June 11 and 28, 1776. He eloquently stated the convictions of Americans. They weren’t new ideals expressing the desire for liberty. John Locke and others beat him to it. The Declaration of Independence was written as a list of grievances against the King of England, and has been cited as a list of timeless principles.
It was written and signed amid the American Revolution – the most significant event in our history. The first shots were fired in April, 1775. The war would last eight years.
It inspired the meaning of this phrase, “the shot heard round the world.”
Coincidentally, the fourth of July has other significance. Two signers of the Declaration of Independence who were elected president, Mr. Jefferson and John Adams, passed away on July 4, 1826 — the 50th anniversary of Independence Day. Fifth President James Monroe died July 4, 1831. Thirtieth President Calvin Coolidge was born July 4, 1872.
For most Americans, it’s a fun holiday. Across the nation are barbecues, baseball games, carnivals, ceremonies, concerts, fairs, family reunions, fireworks and political speeches. The holiday is a heavy travel day for many Americans.
Allegedly, as a document, the Declaration of Independence is still cherished as an avowal of freedom from tyranny. Do we honor it? Are we truly independent? No. Those type of events challenging royalty more than two hundred years ago – catalysts for the American Revolution and the Declaration of Independence – are prevalent today.
On a personal note, this month also marks the two-year anniversary of this portal with business-coaching columns on eight topics. Seeming countless assaults on the economic and political liberties of businesspeople prompted dozens of public policy columns.
In the last two years, conditions have worsened. Numerous crises are looming this Independence Day. They include the trade deficit, credit and housing bubbles, high unemployment and an enormous national debt. At the very least, they threaten to financially imprison our children and grandchildren for decades. Worse, they threaten this nation’s future.
Much is prompted by dysfunctional public policies by the “ruling class” – that’s how one of this portal’s frequent readers describes many public servants at the local, state and federal levels. I ageee.
“Now, even the deviancy of the old nobility is becoming more commonplace, as once they were given land by the sovereign, upon which to live well,” the reader wrote in an e-mail. “Now they are given government pensions and benefits.”
He laments we keep electing the same people with the same damaging political, and in many cases, self-serving philosophies.
He’s not alone. Consider the analysis of noted economist Peter Morici, a professor at the University of Maryland, and the former chief economist at the U.S. International Trade Commission in the Clinton Administration.
“…since 2007, government spending has jumped $1.1 trillion but only $200 billion was needed to cover inflation – the $900 billion additional was new programs and benefits and higher pay,” wrote Dr. Morici in an op-ed piece on this portal. “That has increased federal spending’s share of GDP from 19.6 percent to more than 25 percent.”
That goes for the White House, too, with a $39 million payroll (White House discloses wide-ranging staff salaries).
Meantime, there’s little statesman-like behavior in budget talks ( Obama, GOP lob rhetorical fireworks over budget and debt). What’s also disconcerting is that Democrats refused to consider the GOP’s initial recommendations in budget cuts of $2.5 trillion over 10 years.
Ironically, the Republicans were responsible for countless earmark and pork legislation during the Bush Administration. President Bush failed to veto even one pork bill during his first six years in office.
Another indicator of why our liberty is threatened by another recession: April’s deficit on international trade in goods and services skyrocketed to $43.7 billion, according to the Commerce Department.
Dr. Morici points out goods from China and imported petroleum represent the entire U.S. trade deficit. But our track record in encouraging the drilling for oil is dismal.
“The United States produces only 5.6 million barrels a day of oil and imports 9.6 million barrels -gasoline accounts for 8.3 million barrels,” says Dr. Morici. “The United States could easily increase domestic production by 3 or 4 million barrels a day over several years and slice 2 million barrels off fuel consumption by using readily available, more fuel efficient internal combustion engines and plug in hybrids, and further deploying domestic natural gas use.”
On another front, the Federal Register has a compilation of all federal business rules and regulations. A 2010 check revealed it contained 81,405 pages of regulations.
Actually, the abuses of our liberties comprise a much longer list than discussed here.
Certainly, businesspeople from Bernard Madoff to Enron executives have let us down. But there are a lot hardworking, diligent business folks. However, politicians wonder why such businesspeople feel shackled.
Hence, the question: When are we going to affirm the Declaration of Independence with economic patriotism to validate the principles of Independence Day?
From the Coach’s Corner, actually, all of this fiscal chaos from disingenuous behavior suggests the U.S. Constitutionis under fire, too. It’s worth re-reading.
“Ancient Rome declined because it had a Senate; now what’s going to happen to us with both a Senate and a House?”
-Wll 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 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
Updated Feb. 14, 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 2011 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 – those 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.
You’ll recall the disingenuous complaint by the National Labor Relations Board against Boeing. It took months to settle.
So we don’t forget, here was the issue:
An editorial, “The right way to win Boeing jobs for Washington state” 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.”
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.
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.
From the Coach’s Corner, here are more thoughts on job creation: Will public officials listen to Intel’s CEO?
“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 complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Solutions for 3 Dangers to Small Business, Travelers’ White Paper
More than 50 percent of small businesses report they face three dangers – tax regulations, healthcare costs and poor disaster planning – according to an insurance company study. Nearly 33 percent cite government regulations as a salient obstacle to their success.
However, most respondents now say they’re optimistic about revenue growth and hiring workers.
That’s according to a nationwide study by the Travelers Institute, which is the Washington, D.C. public-policy arm of the Hartford-based Travelers Companies.
The organization embarked on a campaign: To spotlight the public-policy issues that are perils to small businesspeople; as well as the solutions.
“Travelers is committed to being a constructive participant in the public policy dialogue with regard to important issues facing our industry,” wrote Jay Fishman, the Travelers chairman and CEO on the institute’s Web site.
“We hope to contribute to solutions on a wide range of issues that face our customers, our agents and brokers, and the communities we serve,” he added.
Conclusions from the small-business survey:
- More than 60 percent are over-burdened by tax-related issues, government compliance and mounting healthcare requirements
- Half of them cited health insurance
- 47 percent said licensing, permitting and inspection issues are an unnecessary weight
- 52 percent indicated government regulations depress small business
- More than half aren’t prepared for a disaster
More insights from the institute:
- Regulatory costs for small businesses are 36 percent greater per employee than big business
- Regulatory burdens — 33 percent of respondents cite the federal government; 34 percent for state and 16 percent for local or county
- Costs for coping with federal regulations – companies employing fewer than 20 workers spend $10,585 per employee per year but companies with 500 or more employees spend $7,755 per employee per year
- Tax compliance costs to small business – $18 billion annually
- The nation has 27.3 million small businesses
- 600,000 new businesses are started each year
- The tax code has four times more words than the Bible
The study included the opinions of 600 small-business owners, employing 50 or fewer people in 2011.
My sense: Travelers is on the right track, and is to be commended. Over-zealous government regulation is a threat to our collective political liberties, which is also a menace to our economic liberties. Let’s wish the institute luck, and remember we must all participate in the public-policy process.
From the Coach’s Corner, here are four resource links:
11 Strategies to Keep your Small Business Floating above Water
How to Ease Debt-Collection Headaches
Step-by-Step Solutions for a Company Turnaround
19 Tips to Protect Your Core Assets from a Disaster
“If you have ten thousand regulations you destroy all respect for the law.”
-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?
Senate Leadership: Kerry, McCain with Sensible Do-Not-Track
April 16, 2011
A lost art in leadership has come to the rescue of marketers and consumers, alike.
Long ago, it was a pleasure to watch politically opposite leaders – President Ronald
Reagan and House Speaker Tip O’Neil – work congenially. The focus was on
principles, not personalities. Another example from Congress and the Presidency was Gerald Ford.
Yes, I met all of them. As a young broadcast journalist, I separately interviewed Mr. Reagan before he became president, Mr. O’Neil when he was Speaker of the House, and I broke the story nationwide about Mr. Ford’s plans after leaving the White House.
They were indeed leaders. After meeting them, political compromise was naturally taken for granted. Since then, however, it seems to be a lost art.
However, we experienced a joyful return to yester-year after the bipartisan bill entitled, Commercial Bill of Rights, was introduced by Sen. John F. Kerry (D-Mass.) and Sen. John McCain (R-Ariz.).
By way of explanation, changes in commerce and the Internet have led to debate.
Admittedly, as a consumer, online privacy is a concern. Trust is important. Consumers have a basic right to protect themselves against predators.
Conversely, my marketing side has been concerned by over-reaching of consumer advocacy groups in discussions over do-not-track legislation. Marketers have understandably been worried about the loss of visitors’ data. That is, until now.
(Disclosure: Visitors data is used for data to make this business portal as relevant as possible. It indicates which columns are popular and those that aren’t, and from where visitors come and how long they spend here. Tracking makes it possible for advertising to be inserted adjacent to certain content that interests users. By using key words, readers are able to find helpful information and insights.)
But the Kerry-McCain bill is a cavalry of sorts coming to our rescue. It requires a code of conduct, but do-not-track legislation is excluded. In this digital age, much of the economy depends on it.
“Americans have a right to decide how their information is collected, used, and distributed, and businesses deserve the certainty that comes with clear guidelines,” said Sen. Kerry.
“Our bill makes fair information practices the rules of the road, gives Americans the assurance that their personal information is secure, and allows our information-driven economy to continue to thrive in today’s global market,” he added.
In general, here are the bill’s basic components:
- Accountability and security – marketers must use security
measures for data. - Access, consent, correction and notice of information – clear notice must be given to consumers as well as their right to opt-out.
- Constraints on data – Marketers are restricted on the data they collect to enable transactions or to provide services.
- Enforcement will be provided by the Federal Trade Commission (FTC) and the Attorneys General in each state.
- The FTC will be allowed to approve programs by nongovernment organizations to monitor initiatives providing safe harbors or protections.
- The Department of Commerce will help coordinate safe harbor applications for privacy and sharing of information.
Sounds good. Let’s get it done, and encourage more bipartisan leadership!
From the Coach’s Corner, here are two resource links:
Five Attributes of LeadershipAre Needed Now
Here’s the video of the senators’press conference.
Change is inevitable, except from a vending machine.
— Robert C. Gallagher
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For a complementary chat about your situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
