American Elephants

Well shucks, we missed another investment opportunity! by The Elephant's Child
November 2, 2020, 6:16 pm
Filed under: Capitalism, Economy, Election 2020, Politics | Tags: , ,

First time we saw the plywood going up, we should have called our brokers to ask who was the biggest mill turning out one-ply sheets of plywood! And they are still putting up more because they expect more riots and protests when the election results come out.

If you’re a nice person, it’s hard to try to profit at someone else’s misfortune. Wonder what they do with all the plywood when this all blows over and life returns to normal. Surely it will eventually return to normal?

Would Republicans go out and riot if Biden wins? Have they ever?

Regulation, Red Tape, and the Heavy Hand of Government. by The Elephant's Child

The health of small business may be the most important indicator of long term growth in our economy. But this spring has been a hard time for small business. Only 119,000 jobs were added in March, and although April and May saw the jobs market perform better, small businesses who make up the bulk of payroll services firm Paychex Inc.’s customers said the measure of small business hiring was off by half a percentage point by the end of May. Not a good sign.

In today’s world,  when the shift from a manufacturing economy to the information economy is the major trend in American business, the health of small business may be the most important indicator of long term growth. We need hundreds of thousands of creative new small businesses led by entrepreneurs who are attempting to take advantage of the riches of the information sector to provide new products and services.

The Left’s push for a higher minimum wage, and Obama’s new order to force businesses to pay overtime to anyone making less than $50,000 a year will simply encourage the proliferation of robots, electronic cashiers, and more part-time workers. Over time the creativity of entrepreneurs could provide the new jobs that will replace the ones being automated or outsourced. Cheap money and relatively cheap labor should be helping, but a number of factors are at work. We have an administration that deeply believes that more regulations makes life better, which is clearly part of the problem.

Big businesses can cope. When the minimum wage jumps to $15 an hour, a chain of drugstores can afford to install automatic checkout machines that won’t get $15 and hour plus overtime, plus healthcare, plus sick leave, plus being late for work. It’s not so easy for small business.

Control and Regulation and the heavy hand of government  have a cost. The Left is basically clueless. This time it’s affecting us all.

Fool Me Once, Shame on You. Fool Me Twice, Shame on Me. by The Elephant's Child

One of the problems with debating Democrats, whether on a big stage in Danville, KY or at the gym with an obstreperous lefty, is that we’re usually debating apples and oranges.  Whatever the issue is, we define it differently. And that’s a problem.

Take the issue of “taxes and the rich.” Democrats try to create images of the filthy rich whose wealth came from ill-gotten gains, who keep their wealth in Swiss banks or in the Cayman Islands. These are people who do not deserve their wealth, which rightfully would belong to the all-American middle class, who work hard; while the rich loll around in the sun, beside the pool drinking something expensive.

Republicans insist that a big chunk of that category of “the rich” are small businesses whose owners file the taxes of their business—as individuals. Democrats will have none of it.  Small businesses, specifically as defined by President Obama and Joe Biden, are the little mom-and-pop enterprises, like your neighborhood lunch counter, the shoe store, and your plumber. This error in definition is a problem.

The Small Business Association — a government agency — says that small businesses, defined as companies with fewer than 500 workers, employ about half of the workers in the private sector.

The Chamber of Commerce defines small businesses as firms with revenue of $25 million or less.

You see the problem.  But it’s even worse than that. The Democrats struggle mightily to make you think of the top 1%, but when it comes to who they are planning to tax, you need to remember that oft-mentioned “We won’t raise taxes on anyone who makes less than $250,000, or $200,000 in the case of individuals.” That’s a long way from the top 1%. And it includes a huge number of small businesses who file as individuals.

Look again at how small business is defined. According to the Small Business Association, those companies with fewer than 500 workers employ about half of the workers in the private sector. Those companies are the engine of growth in an economy.

Think how a business begins. Somebody has an idea, he gathers funds by mortgaging his house, committing his savings, hitting up all his relatives. He hires a few people, and they all work hard and it turns out that his idea is a good one and he’s good at money management, so the shop grows and he hires more people. It is the small companies who are trying to grow and succeed who hire lots of people, not the big corporations. We’ve featured quite a few of those people who made videos in response to Obama’s “You didn’t build that,” to show that — yes indeed they did build it.

Mr. Biden, last night, echoing Obama’s statements, said something to the effect that we don’t believe in trickle-down growth, we want to grow the middle class out from the middle. That’s paraphrasing, but how the hell do they expect to do that? If past administration policies are an example, they take the “increased taxes” from the rich, and use them as a stimulus, intending, by putting more money in the hands of the middle class to increase demand, which in turn will make businesses grow. Uh huh. And no Republican has ever talked about, nor advocated “trickle down” growth.

The reason I put increased taxes in quotation marks is that the rich have many options, and they don’t have to pay increased taxes. Past history has shown that increasing taxes seldom brings in the increased revenue estimated. And, if they have raised taxes on all the small businesses who file as individuals, those small businesses will be laying off workers because of the increased expenses. They will already be laying off workers because of ObamaCare, and because of increasing regulation.

There isn’t enough revenue from increased taxes on the rich to make any difference with the deficit, and if they spend it on another futile stimulus, it won’t make any. There are all sorts of increased taxes coming as a result of ObamaCare. The need for more revenue will increase, because there is no serious intent on the part of the Obama administration to cut spending in any way. They care, therefore they spend.

President Obama has made clear his contempt for American business. He sees government work, or work for non-profits as a higher calling — as service.  And his entire administration has the smallest percentage in history, only around 6%, of people who have ever worked in the private sector.

Tom Sowell once wrote that “the political left has long had a remarkable lack of interest in how wealth is created.  As far as they are concerned, wealth exists “somehow” and the only interesting question is how to re-distribute it.” Sounds remarkably applicable today.

Seasonally adjusted, the net percentage of owners planning to create new jobs has fallen to four percent. Sales are weak. Fed Ex has announced planned  layoffs. The regulatory burden on small business is estimated by the Small Business Administration to be over $1.75 trillion annually.

There still seems to be some belief left over from the hope and change of four years ago. The president has been remarkably silent about any plans for his second term. His campaign speeches are almost entirely attempts to bash Republicans. Mr. Obama has made clear his contempt for Mitt Romney, which seems to be of a part with his contempt for business in general. He does not understand “growth”nor how it comes about. His goals have included a vast new regulatory burden, and he does not understand how that retards business growth, nor does he understand that since “they have enough money” why they shouldn’t share more of it.

Listen to what he has to say. Do you see any indication of what he would want to accomplish in a second term, how he would pay for it, and how he intends to relieve the burden that government has imposed on the people? And just how do you grow an economy “from the middle out?” There’s no plan, there’s no hope. It’s all just about winning — all politics, all the time.

Managing Risk Is Hard. When the Threat Comes From Government, It is Terrifying! by The Elephant's Child

Taxes are a complicated matter, and everybody hates them. There is all sorts of confusion about just whose money it is (ours!), or the government’s (the government has no money of its own). If you allow the Bush tax cuts to expire — you are raising taxes. If you extend some Bush tax cuts for just one more year, it is not a cost to government. Things simply remain the same. If we could just agree on the meaning of language, it would help.

There are arguments as well on what the effect of raising taxes is on the economy. Democrats usually believe that is a good way to get more revenue. Republicans know that raising taxes always brings in less revenue than was expected, particularly because wealthier people have more ways to avoid paying taxes, but it also has a negative effect of dampening business activity. And the more uncertainty there is  in the mix, the more it will dampen business activity.

There is risk to all business activity. Somebody may invent a product tomorrow that will make your business obsolete. Your suppliers may raise their prices or simply fail to produce. Your employees may do something really stupid. The risks are endless. When the government essentially promises that “we’re really going to get you, starting on January 1;” who is going to hire a bunch of employees under threat of huge unknown health care costs? To top that off, it is clear that the heavy hand of government regulation may just descend on you at any time for regulations you have never heard of.

I don’t think that President Obama has a very clear understanding of business risks or of how businesses make hiring decisions. I don’t think he understands”small business.” There is an army of workers out there who are free-lancers or individual craftsmen. They work on their own, at their own pace and at their own pleasure, independently. There are small businesses that we classify as “Mom & Pop” businesses —little shops. Then there are small businesses, with only a few employees: insulation installers, plumbers, all sorts of service businesses who may range from sole practitioners to a boss with a couple of employees. All of these could fit in Mr. Obama’s under $250,000 category on whom he does not want to raise taxes because he envisions them as — Small Business. But they are not the engine of employment in the American economy.

The small business that drives employment and provides the most jobs could still be plumbers  but those who hope to be major plumbing contractors, who hope to own a fleet of trucks and grow their business. I’ve known both kinds. Both may be ambitious, but one hopes to do more business and make more money, but does not want the hassle of running a larger company, and likes his independence. If he wants to take some time off to go fishing, he can.

It’s the driven, who want to build a bigger business that create the growth in employment and in economic activity. I think that is a distinction lost on Mr. Obama, who seems to know that “you don’t raise taxes in a recession when the economy is fragile,” yet believes that anyone with a household income over $250,000 is one of the hated “rich” who need to pay more taxes —partly because he believes in redistribution of income, partly because he wants voters to hate the rich in general and Mitt Romney in particular.

There are 894,000 businesses that file their taxes as individuals or sole proprietors. They not only are targeted with much higher taxes at the beginning of the year, but if they have over 49 employees, they will be targeted by ObamaCare. To that add the uncertainty in our own economy, the uncertainty in Europe, the uncertainty of a government focused on regulating everything, and the threat of a government that seems not to understand business at all.

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