| According to an Associated Press article today, | | | | money that is in family and business pockets can |
| the political class is about to pass a $30 billion | | | | now be confidently and efficiently spent to pull |
| piece of legislation that is supposed to jump start | | | | economic activity through the economic system |
| the small business market and get the economy | | | | based on the personal needs of each family and |
| moving again. Components of the legislation include | | | | business, not the dictates of a central |
| the following: | | | | government. That is why the one year |
| - Establish a $30 billion fund to help community | | | | exemption for small business self employment |
| banks lend to small businesses. | | | | taxes is so inane. Next year those expenses are |
| - Cut some taxes on both small and large | | | | back so why would anyone do any long term |
| businesses. | | | | planning and spending for such a short term |
| - Boost Small Business Administration loan | | | | exemption? |
| programs by cutting loan program fees, raising | | | | In addition to a pull strategy, the political class |
| loan guarantee limits and spending limits. | | | | needs to remove the tremendous amount of |
| According to the article and common sense, this | | | | uncertainty they have introduced into the market |
| stimulus package will fail just as dramatically as | | | | and the economy, with uncertainty comes a |
| the other ones that the political class has | | | | hunkering down mentality that no amount of |
| implemented: | | | | Clunker money, home mortgage relief money, or |
| 1) According to the article, demand for credit and | | | | short term tax exemption money can overcome: |
| loans is down and many businesses are sitting on | | | | - By stretching out the debate on what Bush tax |
| cash reserves, precluding them for needing to go | | | | cuts will be extended, the political class has |
| out and get a loan. Thus, this money set aside | | | | introduced uncertainty into the market and |
| could go unused and have no impact on the | | | | economy, resulting in depressed economic activity, |
| economy or unemployment. | | | | since no one knows what the tax bite will be. |
| 2) According to Jade West, a lobbyist for the | | | | - By passing a mammoth and probably ineffective |
| National Association of Wholesaler-Distributors: "It | | | | health care reform bill, the political class has |
| won't do any good. Business doesn't need credit - | | | | introduced uncertainty into the market and |
| business needs customers. If they don't have a | | | | economy, resulting in depressed economic activity, |
| customer base because demand is down, they're | | | | since no one know what the increased business |
| not going to borrow because there is nothing for | | | | and family tax and health costs will be, and there |
| them to borrow for." | | | | will increases. |
| 3) The Republicans' concern, and it may be a valid | | | | - By proposing a mammoth and probably |
| one, is that the banks may start to lend some of | | | | ineffective cap and trade energy program and |
| this taxpayer money to businesses with less than | | | | legislation, the political class has introduced |
| desirable credit worthiness, eventually sticking the | | | | uncertainty into the market and economy, |
| taxpayer for the bill if these shaky small business | | | | resulting in depressed economic activity, since no |
| loans go sour since the banks will not be at risk, | | | | one knows what the increased energy costs will |
| the government in the name of taxpayers is | | | | be for their business and family. |
| taking the risk. | | | | - By passing a health care law that requires any |
| 4) Congressman Lincoln Diaz-Balart said: " What | | | | extraordinary amount of incremental business |
| we have today before us is junior TARP." And | | | | paperwork and bureaucracy, the political class has |
| we all know that the original TARP was useless. | | | | introduced uncertainty into the market and |
| 5) According to tax counsel Bill Rys of the | | | | economy, resulting in depressed economic activity, |
| National Federation of Independent Business: | | | | since no business knows how much financial and |
| 'There's some OK stuff in it, but the impact's | | | | human resources they will have to divert to fulfill |
| going to be minimal." | | | | the increased paperwork requirements of the law. |
| 6) The small business tax cuts include tax breaks | | | | We have seen what push economic stimulus |
| for restaurant owners and retailers who remodel | | | | planning has done and what uncertainty has done |
| their stores or build new ones. However, if | | | | to the economy: it has done nothing of any |
| unemployment stays so high, what good will | | | | positive significance. Sky high deficit spending and |
| better looking stores and restaurants be if no one | | | | sky high unemployment. It is time for a change |
| has any money to spend in them? How do new | | | | and a move away from silly programs like this |
| paint jobs and new carpeting help grow the | | | | $30 billion waste. All it does is satisfy the egos of |
| economy? | | | | those in charge in Washington, it gives them a |
| 7) And, what good is a tax break for certain small | | | | sense of accomplishment. |
| businesses is if Obama has his way and does not | | | | But, to use an old cliche, they have spent a lot of |
| renew the Bush tax cuts for those small business | | | | time and effort to line up the deck chairs on the |
| people making over $250,000 a year? Any | | | | Titanic while the ship continues on a disaster |
| savings they get from this mini-TARP are likely to | | | | course. These programs are way too small to |
| be offset by higher income taxes. | | | | leverage the economy, it is like pushing on a |
| 8) Let's do some math. According to the trade | | | | string. Nothing usually happens. You need to get to |
| association that supports community banks, there | | | | where you are pulling on that string to leverage |
| are about 20,000 community bank locations in the | | | | things and enable growth. |
| country. If you divide the $30 billion by the | | | | A number of simple steps would help move to |
| number of bank locations, each bank location will | | | | any effective pull approach to fixing the economy, |
| get about $1.5 million to loan out. If the average | | | | would remove uncertainty from the market, and |
| small business loan is $100,000, each bank location | | | | reduce overall government spending to help pay |
| will only be involved in about fifteen loans, hardly | | | | down the national debt and offset lower family |
| enough to move the economy forward. And this | | | | and business taxes: |
| assumes, that the small businesses around each | | | | - Step 1 - start a systematic reduction in the size |
| community bank actually needs a loan (see the | | | | fo the Federal government by reducing every |
| points above). | | | | government function by 10% a year for five |
| 9) More math. There are about 14 million | | | | years. |
| unemployed Americans workers today. If you | | | | - Step 2 - keep ALL of the Bush tax cuts in place |
| divide the size of this stimulus program by the | | | | in order to help pull demand through the economic |
| number of unemployed, we see that this program | | | | system. |
| is the equivalent of spending about $2100 per | | | | - Step 3 = increase government fraud and waste |
| unemployed American. Now, if spending $800 | | | | investigation resources in order to greatly reduce |
| billion in the original stimulus program did not | | | | the self-admitted waste of $100 billion a year in |
| prevent unemployment from soaring to about | | | | government programs. |
| 10% and 14 million people (about $57,000 per | | | | - Steps 4 - raise the retirement age and eliminate |
| unemployed person), this program is highly unlikely | | | | Social Security payments to Americans with more |
| to do anything but waste another $30 billion. | | | | than $3 million in net worth in order to put Social |
| 10) And finally, if this idea of a program is so | | | | Security on a solid financial footing and get this |
| good, why was not introduced sooner? It seems | | | | major government expenditure under control. |
| that this is the "Hail Mary pass" or the scraping | | | | - Step 5 - implement an expert driven, not |
| the bottom of the economic idea barrel. Nothing | | | | lobbyist and politician driven, strategic planning |
| else has worked, even programs that were | | | | process for the development of a coherent, |
| considerably larger, so what makes anyone think | | | | easy-to-understand and doable national energy |
| that this johnny-come-lately program will do | | | | program that would provide clear long term goals |
| anything but waste $30 billion more of taxpayer | | | | and tactics for national energy usage, removing |
| wealth? | | | | the uncertainty and confusion of Obama's |
| Obama and the political class do not get it. They | | | | doomed cap and trade program. |
| keep trying to "push" the recovery through the | | | | - Step 6 - implement a comprehensive and |
| economic system. They push out rebates for | | | | expert driven, not lobbyist and politician driven, |
| Cash For Clunkers and Cash For Appliances, they | | | | analysis and planning process to determine the |
| push out money for infrastructure jobs, they | | | | root cause of rising health care costs and |
| push out money for teachers' pay, etc. The | | | | implement a coherent, understandable plan to |
| problem with this push strategy is that everything | | | | address these causes, providing certainty in |
| is finite. Once the Cash For Clunkers rebate | | | | tactics and costs going forward. This, of course, |
| money is distributed, the incremental economic | | | | would require the repeal of Obama Care. |
| stimulus affect, if any, is gone. Once the | | | | - Step 7 - implement a process to return virtually |
| infrastructure work is done and paid for, the | | | | all foreign deployed U.S. military personnel to |
| incremental economic stimulus effect, if any, is | | | | significantly reduce our defense budget without |
| over. These push tactics provide no lasting, | | | | sacrificing homeland security. |
| positive changes to the economy or the players | | | | - Step 8 - prohibit the use of Federal taxpayer |
| involved, as witnesses by our first hand negative | | | | money on any program or project that does not |
| experience over the past two years. | | | | materially affect a large number of citizens in at |
| More of a pull strategy is needed, especially since | | | | least five states. |
| all of Obama's push tactics have been failures. In | | | | These steps should not be this hard. We know |
| this context, a pull strategy would provide, | | | | what does not work, why do we have to have |
| positive, long lasting, stable incentives for the | | | | the same repackaged, doomed, non-leveraged, |
| economy. This means that tax rates for | | | | ineffective "push" ideas come around every |
| individuals and businesses and families would be as | | | | month? The political class needs to learn from its |
| low as possible for as long as possible. Families and | | | | mistakes and start doing something different, |
| businesses could then plan around this stable tax | | | | something innovative for a change. Its called |
| environment and think longer term with certainty. | | | | leadership and unfortunately, it is in short supply in |
| With certainty comes confidence and growth. The | | | | Washington these days. |