American Elephants

Why is Business Not Hiring? The Gibson Guitar Raid Revisited. by The Elephant's Child

Les Paul Is Remembered In New York City
It was August of 2011, when armed federal agents raided Gibson Guitar’s Nashville headquarters, seizing wood, instruments and creating a national outcry over the high-profile  persecution. Agents were supposedly working from a tip that Gibson had broken laws in India and Madagascar, two countries that supply Gibson with ebony and other scarce woods for its guitar frets.

Both India and Madagascar say that Gibson has done nothing wrong, and has complied with all their laws. Federal agents seized more then $1 million of Gibson’s property. The Department of Justice alleged that Gibson imported wood for its guitar frets in violation of the Lacey Act — a federal law that makes it a crime to import flora or fauna in violation of a foreign nation’s laws.

August 7, 2012: the Department of Justice announced yesterday that the Gibson Guitar Corporation had accepted a deferred prosecution agreement regarding the Department of Justice’s allegation that Gibson violated the Lacey Act.  As a result, the Department of Justice will not charge Gibson with a crime (except for maybe a tax offense, left open) for “illegally importing ebony from Madagascar and ebony and rosewood from India” through a German intermediary from June 2008 through September 2009.”  Gibson, in return, must pay a $300,000 fine, make a community service payment of $50,000 to the National Fish and Wildlife Foundation” bulk up its internal procedures, and generally grovel whenever the government asks it to do anything related to this matter.

Heritage points out several features of the agreement worth mentioning:

First: The government acknowledges in the agreement that “certain questions and inconsistencies now exist regarding the tariff classification of ebony and rosewood fingerboard blanks pursuant to the Indian government’s Foreign Trade Policy.” In other words, the government acknowledges that the relevant law—not just our law, but a foreign nation’s law—is unclear. Ordinarily, that conclusion should lead the government to drop any charge that Gibson violated the law, especially the law of a foreign nation.

Second: The government’s case is no better regarding Madagascar. The agreement cites (1) “Madagascar Interministerial Order 16.030/2006,” and (2) some other equally well-known “laws”—all of which may have been written in a foreign language. The agreement alleges that Gibson received a translation (from whom is not stated) of the first whatever-it-is saying that “‘fingerboards’ are considered ‘finished’ under Madagascar law” and therefore may be exported. But, according to the government, “trip organizers”—who, for all we know, could have been Gibson’s trip companions “Greenpeace and other non-profit environmental groups”; the agreement does not say—informed Gibson that “under the organizers’ interpretation of [Madagascar’s] 2006 Interministerial Order, the harvest of ebony was illegal and that instrument part ‘blanks’ would be considered ‘unfinished’ and, therefore, considered illegal to export.” Put aside the obvious problems with government’s reliance on the opinion by the trip’s “organizers” of a foreign order written in a foreign tongue—Gibson was given conflicting views of the law. That should have ended the matter entirely. Remember: Gibson imported wood, not heroin.

Third: The press release is full of all of the chest-puffing that we are accustomed to see the federal government display: The government has enforced the law, prosecuted the wicked, protected the environment, cured the common cold, etc. But the government has made a federal case out of “fretboards” or “fingerboards.” …

Fourth: Gibson must pay the National Fish and Wildlife Foundation $50,000 for its (or its designee’s) use for the environment. Really? Fines paid to the government go into the U.S. Treasury and belong to the public; the NFWF is a private organization. In essence, the taxpayers are subsidizing the NFWF.

Why does it matter that Congress is out of town?  Why, because there are currently two bills before Congress that would have the result of repealing criminal provisions of the Lacey Act.

On the part of Gibson, they made a dollars-and-cents decision. An imperial administration can pretty much beat any poor sucker who gets in their crosshairs into submission.

Reading further on the case it suggests that the “tip” came from the Environmental Investigation Agency, a private group of activists who have appointed themselves to investigate and report “environmental crimes.”

Corporate CEOs pay attention to events like the Gibson Guitar Corporation raids. (There were actually two). This showed the Justice Department of the federal government going after a private corporation with a SWAT team, armed agents, who seized property and shut the Gibson factories down. Although Gibson was able to show that it was in full compliance with the law, they were nevertheless put out of business for a period of time, forced to pay a fine of $300,000, forfeit claims to about $262,000 worth of wood seized by federal agents and contribute $50,000 to a private foundation to promote conservation of “protected tree species.” Improper, illegal, federal government arrogant overreach because they could.

Everybody wonders why so many corporations are sitting on big chunks of cash and not hiring and expanding. They are streamlining, divesting whole departments, to run more efficiently with fewer people. I would submit that the Obama administration’s treatment of Gibson Guitar Corporation is a prime example of why companies large and small are not taking on more risk; why there are more lobbyists than ever.

Hiring a new worker is a risk. It takes months before they are fully pulling their weight. Expanding is a risk, the economy is not healthy. Introducing a new product is a risk. The Obama administration has made it clear that they don’t particularly like the private sector, they don’t appreciate capitalism, they feel free to sic federal agencies (IRS) (EPA)(BLM) on those who disagree, or give them trouble, or stand in their way. The Obama administration had no compunction about taking over the auto industry— and made a mess of it — which they still celebrate as a great accomplishment. You don’t take big risks when the climate is so uncertain, and that uncertainty can be laid directly in the lap of the Obama administration.


Where Are the Jobs? Why is Business Not Hiring? by The Elephant's Child

It is not a good climate for business.  If you are wondering why the job market is not improving, why business is not hiring, why small businesses are shutting their doors, why there are so many vacant storefronts — the number one culprit is uncertainty.

When business is worried about how much their taxes will go up on January 1; when they are unsure about all the new regulations and rules that are being imposed on them; when they don’t know what the new health care laws will mean for them,  what the rules for that will be, and what it will cost;  if card check will pass; and whether they will have to move part or all of their operations overseas — then the reasons for the lack of jobs become clearer.

President Obama has repeatedly and aggressively led Democrats to attack American business.  He has attacked the Chamber of Commerce as a corporate interest standing against open elections and U.S. Workers.

He has repeatedly and aggressively attacked health insurers, accusing them of dropping people from their rolls just because they get sick. HHS Secretary Sebelius warned Americas Health Insurance Plans that they had better not tell their customers that their costs were going up because of the new law, and that a report in the Wall Street Journal that McDonalds might drop the limited benefits for 30,000 workers was flat-out wrong . (No it wasn’t).

Treasury Secretary Geithner said that U.S. oil and natural gas producing companies “should not receive federal subsidies in the form of tax breaks because their businesses contribute to global warming” before Congress last Wednesday.

Obama has told drug and insurance companies that he will hold them accountable for the prices they charge and the harm they cause.  He has promised to allow Medicare to negotiate with drugmakers for cheaper prices.  With less revenue from Medicare, drugmakers may begin charging more for drugs sold outside the program.  Lower profits mean less money for R&D, and fewer new drugs on the market.

Obama promised, during the campaign, to try to bankrupt the coal industry, which generates over half of our electricity.  Environmentalists are a major voting block for Democrats, and the EPA is working to shut down coal-fired power plants and coal producers.

Obama has claimed that doctors are making decisions about your treatment based on the fee payment schedule rather than what is best for the patient.  He has suggested that Doctors look at the reimbursement system and see that they would make more money if they took the kid’s tonsils out rather than give them an antibiotic.

— Obama unceremoniously took over General Motors and Chrysler, making GM a ward of the state, and giving Chrysler to Fiat.  In the process he shuttered the private businesses of hundreds of car dealers whose only sin was that they purchased automobiles from the car companies to sell on their own lots.  He simply decided that there should be fewer car dealers.

By slapping a moratorium and new safety regulations on the oil drilling industry in the Gulf of Mexico, Obama not only shut down offshore drilling, but shuttered all sorts of businesses around the Gulf that are dependent on the drilling industry.  The Interior Department has continued to delay issuing drilling permits, further strangling the industry.

Why do you suppose business and industry would feel uncertainty?  Why would they not be investing their savings in expanding their businesses?  Why would they be reluctant to hire? Should be obvious.

In Europe, the EU has imposed all sorts of rules to protect employees from the possibility that employers might take advantage of their employees. The extensive  rules have made it very hard to fire a bad employee.  Because it is so hard to fire a bad employee, European businesses are very slow to hire, slow to expand, and economic growth has slowed significantly.   But we don’t learn from the experience of others either.

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