Monthly Archives: July 2012
As I’ve mentioned many times, the engine of America is small business. Those businesses provide jobs to 85% of Americans. And according to the US Chamber of Commerce, they’re not going to be doing much if any hiring in the near future:
Small business owners’ concerns about the future—particularly on health care and taxes-—are impacting their hiring, according to the U.S. Chamber’s fifth quarterly small business survey released today.
Only one in five small businesses (20%) expect to add employees in 2013, according to the poll of 1,225 small business owners, conducted by Harris Interactive. The majority of small businesses say they are likely to keep the same number of employees over the next year – meaning there is likely to be little change in overall unemployment figures.
Concerns about health care and taxes (both brought to you by Barack Obama) are causing caution among small businesses and that’s because they perceive an “unsettled” business climate. Consequently there’s no incentive for them to change the status quo. In fact, they obviously believe there is some safety in the status quo (see the survey to see how they feel about their businesses locally) .
As we’ve mentioned repeatedly, government policy does have an effect on the economy. It can be an enabler that helps create incentives for businesses to expand and hire or it can be a disabler, doing precisely what it is doing now to unsettle the business climate, create disincentives for expansion or hiring and have small businesses go into a defensive posture.
It doesn’t get more defensive than now.
More from the Chamber survey:
- 78% want government to get out of the way.
- 90% are concerned about the impending fiscal cliff and are worried that Congress will fail to take action to prevent it.
- Nearly 60% say that expiration of the 2001 and 2003 tax rates and other business provisions, coupled with sequestration, will directly impact their business’ growth.
As you might imagine the road map to a better business climate is not hard to follow. There’s just no desire by the class warriors to do that.
Instead of doing the hard work of creating a business climate that will provide small business incentives to expand and hire, they’d rather tax them while demonizing them as the evil rich and talking about “fair shares” to 50% of the country that pay’s no – zero- income tax.
If this doesn’t paint the picture of what is wrong with the policies of this administration, I’m not sure what will. This is Econ 101 stuff. And apparently it is like a foreign language to this administration.
The golden goose is on life support, and the administration is about to pull the plug.
But let’s talk about Bain Capital, shall we?
Real bad according to J.P. Morgan:
This morning we lowered our tracking of Q2 GDP growth from 1.7% to 1.4%. For some time now we have noted that our Q3 GDP call — which was already below consensus at 2.0% — had risks that were skewed to the downside.
After the latest round of data we have decided to lower our projection for Q3 to 1.5%. The strength in inventories reported this morning suggests that businesses may have got caught offsides when final demand weakened this past spring. That inventory build should weigh on production growth in the third quarter as already-cautious businesses seek to work down stockpiles. Added to this downside, the weakness in June real consumer spending will make the arithmetic for Q3 consumption a little more challenging.
Finally, the decline in gasoline prices — which had been seen as an important support to the economy — has partly reversed itself in recent weeks, thereby lessening the impetus to growth from that source. For 2012 as a whole, we are now looking for growth of around 1.7% on a Q4/Q4 basis, about the same as last year and 0.2%-point below our tracking last week. On a year-ago basis real GDP has been growing at a below-trend pace since early last year. If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.
Q2 – 1.4% growth.
Q3 – 1.5% growth
Q4 – 1.7% growth
For the year, under 2.0%.
The word “pitiful” doesn’t even begin to connote the severity of this forecast. And note the bottom line of the JP Morgan forecast: “If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.”
And here we are doing the usual – talking about distractions like Bain Capital.
According a report by Reuters, much of it is related to the looming crisis in Europe:
Only 23 percent of the firms polled in June plan to add to staff in the next six months, the National Association for Business Economics said on Monday.
NABE’s prior survey, conducted in late March and early April, had shown 39 percent of companies planning to add workers.
The point, of course, is now is certainly not the time, with unemployment at 8.2%, to give business another reason to delay hiring, right? That would seem, to most, to be a reasonable point. While the European problem unfolds and comes to some sort of resolution, you’d think government would be attempting to encourage and enable domestic businesses to do some hiring anyway, right?
Instead, as demonstrated in the story below, you have a president (and a party) who seem dedicated to killing whatever possibility there is for such hiring in the bud by calling for higher taxes on the “rich”.
Of course they count on the bulk of the public being ignorant of what comprises the “rich” that the administration wants taxed (small business which produces 85% of the jobs in the US) and certainly, to some extent, they’ve been successful in that endeavor.
Many will tell you that there’s really not much government can do economically. That they get blamed or praised when it goes south or does well, but in fact that’s more political tradition than reality.
I disagree. Economic policy can have a profound effect on the economy. A policy that encourages and enables business will have a net positive effect economically. One that discourages or unsettles the business climate (increased regulation, increased taxation, etc.) will have the opposite effect.
Right now we have an example of the latter. The 8.2% unemployment rate we now endure isn’t a result of the “European crisis”, it is the result of an unsettled and hostile domestic business climate, much of it created by the current administration’s policies. Europe’s woes will only add to that. Instead of doing everything they can domestically to encourage expansion and hiring, this administration has decided to again lobby for taxing the job creators at an even higher level.
Of course be prepared for the ready excuse that the crisis in Europe presents. Blaming Bush doesn’t work as well now as it did 4 years ago. ATMs and tsunamis won’t work either. But President “It’s the Other Guy’s Fault” will try very hard to shift the blame of any economic downturn in the next few months across the Atlantic.
But remember – we are at 8.2% now. And that has much more to do with this President’s policies than anything that has happened in Europe.
The following statistics were released today on the state of the US economy:
Retail sales declined for the third month in a row, falling a greater-than-expected -0.5% in June. Less autos, sales fell -0.4%; less gas and autos, sales fell -0.2%. Retail sales on a year-ago basis were up 3.8%.
In another unwelcome sign for the economy, Business inventories in May rose 0.3%, while sales fell 0.1% for the second month in a row. This raised the stock-to-sales ratio to 1.27. That’s the highest level since May 2011.
The Empire State Mfg Survey rose more than 5 points to 7.39, but new orders, an indication of future activity, fell to -2.69. Unfilled orders are also contracting, at a very steep -13.58.
Apparently Barack Obama was channeling Elizabeth “Fauxahontas” Warren the other day in a speech when he said:
Look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart.
The natural angle of attack when one wants to demean accomplishment is to attempt to portray it as something you were given vs. something you earned.
In this case, where Obama denigrates the accomplishments of the successful (and my goodness when did success become something you attack?), he’s attempting to do just that. Because, so the collectivist thinking (oxymoron alert) goes, if he and others helped the successful become successful then they can justify claiming a portion of the pie the successful have.
Of course that requires ignoring how the successful become successful. We heard Elizabeth Warren talk about public works that she claims enabled businesses to succeed. Like roads, power grids, etc. What she would have you believe is everyone else paid for those things but apparently the entrepreneur was just a net beneficiary. Silliness to the extreme.
Also always shunted aside are the sacrifices the “successful” made to reach the stage of success they enjoy. I personally know “successful” people who mortgaged their house to the hilt, cashed in whatever they had in savings and borrowed the rest to start their business.
They took all the risk, and yes, some of them failed. But they didn’t have anyone holding their hand when they set out on their journey to success. They simply worked harder than anyone else, made the additional sacrifices that had to be made (80 hour weeks, little time with the family, etc). to make that success a fact.
The focus for the collectivists starts at the big house the successful have now, not the risk, work and sacrifice they went through to build that house.
And now that they are a success, suddenly they have a bunch of leeches who want to claim a portion of it (remember about 50% of those in this country pay no income taxes at all). It reminds me of the lottery winner who suddenly discovers he has cousins, nieces and nephews he’s never heard of all clamoring for some of the winnings. But in this case, what Obama is trying to justify via this nonsense is not asking for money, but taking it “legally”.
His is the same song the communists sang in 1917 Russia. Those who worked hardest and achieved the most don’t “deserve” what they have accumulated because they did it on the backs of everyone else. We’ve heard variations on the theme quite often from leftist politicians: “It takes a village”, for instance or claiming the successful are simply “the winners of life’s lottery”, etc.
Naturally where Obama wants to strike is precisely where jobs are created. Almost a million of those in the tax bracket he wants to hit with higher taxes are small businesses. You’d think the guy who obviously thinks he’s a economic genius would know that. You’d think a guy who said “the last thing you want to do in a recession is raise taxes” would actually follow through on something he got right.
But no, instead he plays the class warfare card and essentially parrots the communists.
No, I’m not calling him a communist, I’m simply pointing out the irony of what he’s doing. Draw your own conclusions about what he is, but one thing he isn’t is a friend of the free market. He certainly isn’t the economic genius he thinks he is and frankly, he’s leading us down the same path Europe went down years before and we all know how that is turning out.
It is envy cloaked as “fairness”. Class warfare designed empower government even while it cripples business and, in the end, would contribute to increasing our economic woes.
However, there is value in such quotes as his above. When you hear him say things like this, it becomes much clearer as to his true ideological roots and what an additional 4 years would bring. The press may not have done the job of vetting this president before he took office, but quotes like this do as much for that process as any vetting by the press would accomplish There’s no question of where he lives ideologically. And it isn’t an ideology that belongs in the most powerful office in this land.
If you’re wondering where all this nonsense about Bain Capital is coming from and why, Jen Rubin of the WaPo gives you the low down:
The Obama team knew months ago that the economy would not sufficiently improve before Election Day to justify his reelection. Its polling showed simply blaming President George W. Bush wouldn’t be sufficient. The president and his political hacks concluded that it was too late and too risky to adopt a whole new second-term agenda. (It would risk offending either the base or centrists and reveal his first-term agenda to have been entirely inadequate.) So what to do?
Extend the Republican primary by running ads hitting Romney and encouraging Democrats to vote against Romney in Michigan and elsewhere. Then, before Romney could fully get his bearings, unload a barrage of negative attacks, scare mongering and thinly disguised oppo attacks through the mainstream media, taking advantage of many political reporters’ relative ignorance about the private equity field and their inclination to accept whole-hog President Obama’s version of “facts.”
We here at Q&O have addressed the problem of media ignorance many times in the past. I’ve seen in manifested in both the military reporting and, of course, economic reporting. In fact, what that ignorance produces is a steno pool that pretty much reports what it is told vs. having the knowledge and experience to spot inaccuracies or disingenuousness put out in press releases or talking points.
When you add a bias, this becomes a very dangerous but potent means of accomplishing the twin goals of discrediting your opponent and distracting the public from the real issues (economy) and the President’s record (abysmal).
Obviously our latest attempt at distraction is Bain Capital. With the 800 pound twin gorillas of 8.2% unemployment and multi-trillion dollars of debt, you can bet that this is really the only avenue open to the Obama campaign and, as soon as they’ve gotten all they can get from this distraction, they’ll have another lined up and ready to go (my guess is it will have something to do with the Mormon faith).
Rubin is of the opinion that the Obama campaign has “shot its wad”. They don’t have the money the Romney campaign has, the Bain nonsense isn’t resonating with voters and the polls have not moved significantly since they’ve started it. I say, not so fast.
When you have a compliant media ready, willing and able to be your stenographer, money really isn’t a problem. Romney’s campaign may have more money by you can bet it won’t get as much free press engaged in taking down Obama. In fact precisely the opposite will be true.
It is a mistake to believe that the Obama campaign is pretty much done with its apparent failure to see Bain swing the voters to their side. They know they have to stay away, as much as possible, from unemployment and the economy. My guess is we’ll see the new line of attack begin to unfold within days, if not weeks. Because here’s what they’re faced with (according to a Democratic strategist):
On the one hand, the last round of Bain attacks has clearly rattled the Romney campaign, and a smattering of survey evidence suggests that the sustained ad campaign in swing states has scored some points. On the other hand, the Pew survey found no shift since May in swing-state voter preference.
But it’s not too early to say that Obama’s vital signs look dicey. Over the past 33 months, his job approval has been lower than George W. Bush’s at a comparable time in his presidency for all but one week. Bush averaged above 50 percent in the quarter before his successful reelection campaign, while Obama has been stuck in the 46-48 percent range for months. And the famous “wrong track” measure now stands at 63 percent, versus 55 percent in the days preceding the vote in 2004. If these two numbers don’t improve for Obama, his presidency will be in jeopardy. And they probably won’t — unless the economy perks up noticeably.
The economy won’t perk up noticeably by November. And that means they’re not done with the distraction campaign … it’s all they have. That means it is only going to get nastier and nastier.
Mark my words.
The smell of desperation in the air is clear and significant.
One of the things I’ve been eternally grateful for is the family I was lucky enough to marry into. For over 3 decades, I’ve been a part of a family that I both admire and respect. They are, to me, the salt of the earth and they represent the type of people who’ve made this nation great.
I’m out here to celebrate the birthday of the matriarch of that clan, my mother-in-law, Mrs. Ruby James Weaver’s 100th birthday.
Here in the Cookson Hills of eastern Oklahoma, the Weavers are well known and loved. I’ve always joked about visiting my “outlaws” instead of in-laws. My mother in law’s maiden name is James and I have two brothers-in-law named Younger. But, as a mentioned, a more all-American family can’t be found. Farmers, ranchers, you name it, they are part of the generation that has helped make this nation the richest and most powerful on earth. And, as you might imagine, some of the last of what was once a very common thing – rugged individualists.
Mrs. Weaver raised 10 kids on, well, not much and did a magnificent job. She has 23 grandchildren, and as she admitted last night, has lost count of the great and great-great grandchildren.
I married the baby of the family. Like I’ve said, I got lucky.
So, to the best mother-in-law in the world and matriarch of one of the finest families I know, happy 100th birthday, Mrs. Weaver.
The following statistics were released today on the state of the US economy:
The Producer Price Index rose 0.1% in June, and up 0.8% on a year-over-year basis. Ex-food and transportation, the Core PPI was up 0.2%, and 2.6% year-over-year.
While some increasing optimism is evident in the underlying numbers, the overall consumer sentiment index fell 1.2 points to 72.0.
I swear I almost laughed out loud when I read this. President Obama is asked in an interview what the biggest mistake of his presidency has been:
"When I think about what we’ve done well and what we haven’t done well," the president said, "the mistake of my first term – couple of years – was thinking that this job was just about getting the policy right. And that’s important. But the nature of this office is also to tell a story to the American people that gives them a sense of unity and purpose and optimism, especially during tough times."
Story telling is his biggest mistake? He’s been telling “stories” for 4 years, most of them fictional. It is his abysmal and clueless performance in office that’s been his biggest mistake. OK, poor performance probably isn’t a mistake, it’s, well, poor performance. Perhaps his biggest mistake was thinking he’s done well. No, that’s just ignorance and ego.
No his biggest mistake was concentrating on his legacy while he let the economy go to hell and now it’s all but unrecoverable (in his 1st term, which is all that matters to him). He continually told a story about how he and Sheriff Joe were “focused like lasers” on jobs and the economy.
And here we are.
But all of that is not why I almost laughed out loud.
How many times have you seen the left and Democrats claim that it isn’t the message that is the problem but how it is delivered?
The above quote is the Obama version of that very premise. You can’t instill a sense of unity, purpose and optimism when you’re continually taking away freedoms.
Cluebat for the left: it has nothing to do with delivery, it has to do with the fact that most Americans think your policies (and ideology, at least the part that continually calls for more expensive and intrusive government and sees government as the solution to all problems) suck.
It isn’t the “story”, okay?
It’s no secret that my optimism well has about run dry. Signs like this don’t make the level rise any. Read the whole thing. Go on. I’ll wait.
You see here’s the thing: I’ve been writing about how close we are to and economic and currency meltdown, but not a lot about societal meltdown. But troubling signs are there, too. There’s a fundamental and growing lack of respect for the government. Not because we’re bad people, but because we recognize the growing divergence between what the government does and what common sense tells us.
So, as the linked article points out, we engage in an endless list of violations. It’s estimated that in perhaps in the course of a day, and almost certainly in the course of a week, all of us commit some act that, statutorily, makes us criminals. The range of government powers, and the scope of activities they cover, make it almost possible to obey the law in it’s entirety. We know this, and we know, just as surely, that there is something wrong about it at a very basic level. And we respond to that knowledge.
It’s not civil disobedience that I’m talking about. It’s the opposite: Civil disobedience is meant to be noticed. It is a price paid in the hope of creating social change. What I’m talking about is not based on hope; in fact, it has given up much hope on social change. It thinks the government is a colossal amoeba twitching mindlessly in response to tiny pinpricks of pain from an endless army of micro-brained interest groups. The point is not to teach the amoeba nor to guide it, but simply to stay away from the lethal stupidity of its pseudopods.
The amoeba does not get smarter but it does get hungrier and bigger. On the other hand, we get smarter. More and more of our life takes place outside of the amoeba’s reach: in the privacy of our own homes, or in capital accounts in other nations, or in the fastest growing amoeba avoidance zone ever created, cyberspace. We revolt decision by decision, transaction by transaction, because we believe deep down that most of what government tells us to do is at bottom illegitimate.
In other words, in a thousand small ways, an increasing number of us are learning the power of "no". We just haven’t started acting on it seriously yet. And, of course, it’s not all of us. There are still a fair number of people whose faith in the government to be everyone’s mommy and daddy would be touching, if it weren’t so frightening. But a lot of people are waking up to the fact that the government, in matter both large and small, is increasingly incompetent.
Now we might never act on the increasing size and scope of government, if we felt we were getting some value out of it. If it could keep the trains running on time, we might think we’d gotten a fair trade-off, or, at least, enough of us would that society would keep humming along in a fairly stable trajectory. Sadly, it’s increasingly obvious that ever-larger government not only can’t keep the trains running on time, it actively prevents them from doing so.
Nowhere is this more clear than in the economy, and the government’s response to an increasingly irrational monetary and fiscal policy.
After World War II, the debt:GDP ratio stood at 128%, approximately 24% higher than it is now. How did we reduce that debt? First, the entirety of wartime regulation was eliminated practically overnight. Rationing, wage and price controls, industrial production controls, confiscatory business and personal taxes…all gone. And, in the three years after the war, government spending was cut by half.
That would be impossible today, of course. Social Security and Medicare alone make up more than half of government spending. Unless we gut entitlements—along with everything else—we will never have a balanced budget again. This is especially true when you consider that, though debt service is just under 6% of the Federal Budget today, that’s only true because we have artificially low interest rates. If interest rates return to the 1996 levels, then over 20% of the budget will have go to debt service payments alone…a percentage that will steadily increase as the amount of debt increases. That means 80%+ of the federal budget will be Social Security, Medicare, and interest payments on the debt.
Today, the Treasury announced that the June fiscal deficit was $904 Billion for the year so far. So, we’re going to have another $1 trillion deficit this year. Just like last year. Just like next year. And as far as the eye can see.
It doesn’t take any advanced math to see what’s going to happen. We’re going to default on our debt. Or, considering that, according to today’s announcement of the money supply, by next week, there’ll be $10 Trillion in M2 floating around out there, we’ll simply monetize it through inflation, which amounts to the same thing. But we’re clearly not going to restrain spending, which means we are years, if not months, from an economic and monetary collapse.
It shouldn’t come as a surprise to anyone when it comes. Anyone who can do simple math has the capability to see it coming. Anyone with common sense can see what we have to do to avoid it. Everyone knows that maintaining a reasonable fiscal policy and sound currency are two of the government’s primary domestic responsibilities, and everyone know that they simply aren’t doing it, and, worse, seem incapable of ever doing it again.
The excuses for not cutting government are innumerable. We can’t eliminate the Department of Education, or our children will become stumbling morons. We can’t cut Social Security, or seniors will be eating Alpo. We can’t cut the Department of the Environment, or we’ll die choking in the stinking gasses of industrial effluvia. We can’t cut Defense, or foreigners will walk openly on the streets of Washington. We can’t cut the DEA, or we’ll all be jumping out of windows from some sort of of acid-fueled illusion that we can fly over the pretty colors we smell. We can’t, in short, cut anything, because every penny of it is vital and necessary, and without it, we’ll be reduced to just a lucky few who flee from the zombie hordes inhabiting the stark, post-apocalyptic landscape brought on by smaller government. Assuming, of course, that anyone can "flee" with the acute diabetes they’ve acquired by lugging along an extra couple of hundred pounds they’ve gained from unrestricted access to 64-ounce Big Gulps.
So, not only are we gonna ride this puppy down in flames, anyone with any sense already knows that we’re gonna do it, if we stay on the current path.
The thing is: it’s no longer just some whacko fringe or criminal class who are turning into everyday scofflaws, it’s the middle class. The very people we depend upon for stability in society are the people who are now realizing that "society" is increasingly turning into a confidence game played to promote the interests of the politically powerful and their clients at the expense of the middle class. The people who aren’t rich enough to insulate themselves from the vagaries of fortune, but who are rich enough to have something to lose are supposed to be the stolid citizens, the defenders of the status quo. Increasingly, they aren’t.
So, the interesting question then becomes, what response will we see to the sort of entirely foreseeable and preventable collapse that is coming from a middle class that increasingly knows the government is a huge pile of fail? And how will they respond to the bleats of the not inconsiderable portion of their fellow citizens who will blame it not on government, but on "rootless cosmopolitans", "the 1%", "banksters", et al., and demand an even more powerful government to "fix" the problem?
Here’s another interesting question. Social Security and Medicare are about the only benefits the middle class has left. It’s almost the last thing they can expect to get back from all the money they’ve poured into the system their whole lives. How will they respond when you tell them that we can’t afford those entitlements anymore, and the only way to fix the fiscal disaster we’re facing is to take away the only skin they’ve got left in the game? What do they do when the advantages they receive from government are outweighed by the burden government puts on them?
Those are questions that really bear thinking on. Because if you lose the middle class, then their response to a crisis may not be to repair and reform the existing edifice in an attempt to return to status quo ante. Instead, it may be to simply burn the whole thing down, and start rebuilding something else from scratch. After all, when you’ve got nothing left to lose…what’ve you got to lose? What happens if the middle class are turned into revolutionaries?
Somebody may want to start figuring that out.