September 8, 2010

Robbing Peter...

In Obama's speech today, he laid out a big long wish list, ostensibly some tax cuts for business -- $100 billion here, $50 billion there. Pretty soon, as Ev Dirksen famously said, it'll add up to real money. But the real tragedy here - something very few reporters have bothered to ask - is how we will pay for all this?

As it turns out, Obama plans to raise taxes on business by an equal amount to cover his large if ineffective political promises. Somehow that has made less news than his big splashy tax "cuts." As we noted below, his favorite ploy is "raising taxes on oil and gas companies," a swell idea for the most gullible among us. Does anyone believe that he'll actually squeeze a few hundred billion in tax revenue out of the oil companies? And if he does, how much do you figure it'll cost to fill up your tank....?

His other favorite political ploy is the elimination of a thing called "deferral.' This fairly technical tax vehicle is described by the Business Roundtable as such:

"In order to maintain the ability of worldwide American companies to compete against their foreign-based competition and in conformance with tax policies of our trading partners, the U.S. government defers collecting taxes on earnings of the foreign subsidiaries of worldwide American companies until those earnings are actually paid to the U.S. parent... All member countries in the Organization for Economic Cooperation and Development (OECD) and other developed nations that tax the worldwide earnings of their globally operating corporations permit some form of deferral." (Emphasis ours)

So ending deferral will put US companies at a global disadvantage. Great, just what we need.

And last but not least, he plans a huge tax increase on small business, that will neither stimulate the economy nor create jobs.

So as you read about these "tax cuts" from now 'til the day of reckoning on Election Day, just ask, "How do we pay for this?" You'll find that the Administration is not robbing Peter to pay Paul, they're robbing Peter to pay Peter.

The Silly Season has begun.

Congress, Sending Jobs Overseas

Here's this from the President's remarks in Ohio today:

"We see a future where we invest in American innovation and American ingenuity; where we export more goods so we create more jobs here at home; where we make it easier to start a business or patent an invention; where we build a homegrown, clean energy industry -- because I don’t want to see new solar panels or electric cars or advanced batteries manufactured in Europe or Asia. I want to see them made right here in the U.S. of A by American workers." (Emphasis ours)

Well, that's all fine and good, but look what his party has wrought in Congress, according to the front page of today's WaPo:

"WINCHESTER, VA. - The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison's innovations in the 1870s. What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.

The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.

Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China."

The story, entitled, "Light bulb factory closes; End of era for U.S. means more jobs overseas" tells of the unintended consequences of federal policy. Expect to see more of this as the Administration exerts its not-so-invisible hand into the workings of businesses large and small. If Obama really wants to see all this stuff made in the "Good old U S of A," he'll need a dramatic shift in policy, one we don't foresee.

September 6, 2010

How to pay for the campaign promises? Tax the oil companies, of course

As the sight of the electoral gallows focuses the mind of Obama and the Dems, they will continue their frenetic spending - or try to - but now aimed at business. Right. But the big question on all of this is how on earth they plan to pay for it, from Obama's $100 billion plan to permanently extend the research & development tax credit to his newest whopper, the $50 billion infrastructure plan. (Does anybody remember Monty Hall frantically moving about the audience at each show's close? The pre-election Obama has him beat.)

For a little insight, here's this gem in the Bloomberg story on Obama's gazillion-dollar stimulus, please-God-can-I-buy-your-vote plan:

"The White House will propose to pay for the new spending by eliminating tax deductions for oil and gas companies..."

Of course they will.

This is the same plan they have to pay for the R&D tax credit proposal. Here's the excerpt from the blurb on Politics Daily:

"It would be paid for by closing corporate tax breaks for multinational corporations and oil and gas companies."

This is so preposterous as to be downright hilarious. Does anyone actually believe it? Hey - let's tax the oil companies - they're unpopular! Forget the fact that it'll increase everyone's cost of energy, it'll sell. And while we're at it, let's tax the Grinch, Darth Vader, mean people - and anyone who cuts me off in traffic!

In the coming weeks, you'll see lots of promises as the Dems get more panicked about their dire election prospects. As the bidding gets more frenetic, you can expect to see even more promised taxes on the oil companies to pay for it - anything for a vote, right? But the fact is that it's not going to happen and if it does, we'll all pay more for our energy, the Democrats' gift that will keep on giving long after the polls are closed.

'Small businesses feel squeezed by Obama policies'

That's the headline of the story in the online WaPo today, which begins with pretty much all you need to know:

"Last year, even as he struggled through the worst of the recession, Chris Upham said revenue at his District-based real estate and construction businesses doubled -- allowing him to hire two agents.

But Upham said he hasn't increased his staff thus far in 2010 and he doesn't expect to for the remainder of the year.

That's because his taxes rose sevenfold. And he said he anticipates they'll increase again if the Bush tax cuts for people earning $250,000 and above expire at the end of the year.

As small businesses try to plot their recovery, attention is turning to what many owners consider burdensome policies -- higher taxes, new accounting procedures and health-care mandates. Even as the government tries to help with an array of small-business initiatives, many owners say the intervention is as much a hindrance to hiring as the faltering economy."

This totally jibes with the Kevin Hassett op-ed in last week's Wall Street Journal.

So while Obama and the Dems have their deathbed conversions here as they face grim prospects for the elections, keep this in mind. They will try to throw money at the problem, without realizing that the best course is lower taxes and less regulation. Luckily for many Dems, looks like they'll have lots of idle time to ponder that after Election Day.

September 5, 2010

Labor Day 2010

It is by now an article of faith that the AFL-CIO and their gloomy allies at the Economic Policy Institute will inevitably greet Labor Day with a grim assessment of the state of the American worker. Yet like a broken clock that is accurate twice a day, this year they may have inadvertently stumbled upon the truth. In their blog post, they point out - correctly - the persistently high rate of unemployment and the anemic rate of job creation. To be sure, this is not one of the better Labor Days for America's workers. Lest you need any confirmation beyond what you hear in your own neighborhood and workplace, here's a map that pretty dramatically shows the oppressive march of unemployment from January 2009 to today.

Yet through this gloom, employers -- working men and women all -- have persevered. As you'll see from this fact sheet, employers collectively have spent $6.5 trillion on wages and salaries and another $1.5 trillion on benefits. According to the Census Bureau, over 170 million workers receive employer-provided health care -- voluntarily - at a cost of $637 billion, a number larger than the entire GDP of the country of Turkey. Over 55% of employers with over 100 employees provide both undergraduate and graduate educational assistance to workers.

Spend some time with any group of employers - and employees - and you will hear near-heroic stories of firms large and small who have labored mightily to keep from laying off employees, by having near-idle employees doing inventory, tidying the shop or other tasks - often at great cost to themselves and their companies. The fact is that through some of the worst economic times this country has experienced, employers have stepped up, have soldiered on, have continued to provide opportunity and create wealth for some 139 million employees in the workforce. And they do this while navigating the labyrinth of new requirements on health care, looming tax increases, voracious trial lawyers and a very long wish list of items
that will make it harder and harder for them to compete.

And so on this Labor Day 2010, when there is precious little else to celebrate, we honor the employees and employers who work side-by-side every day, imbued with that unique blend of American capitalism and optimism, who "strive valiantly," as Teddy Roosevelt said, in the hopes of more prosperous Labor Days yet to come.

[Cross-posted at ChamberPost.]

September 4, 2010

Can This 'Marriage' Be Saved?

That is essentially the crux of the WaPo's lead editorial today entitled, "Troubled Marriage," subtitled, "Feeling scorned by the president, big business is turning to the GOP How fair is that?"

How fair, indeed.

The piece opens with a mention of this piece by hedge fund founder Daniel Loeb - former Obama classmate and fundraiser - accusing the Obama Administration of undermining the principles of free-market capitalism. (Among his points, Mr. Loeb cites the new credit card bill as an example, noting, "The effect is a redistribution of wealth from people who pay their debts on time to those who do not." Yeah, we knew that.) The WaPo goes on to wring its hands over uncertainty, but quickly dismissing it due to lack of mention by Ben Bernanke in Jackson Hole. To be fair, Bernanke had a lot of ground to cover in Jackson Hole, and chose to focus on other things. But there is no doubt that uncertainty continues to bedevil business. This is the twin uncertainty that US Chamber economist Marty Regalia noted in the Labor Day press event -- uncertainty about the market and uncertainty about government policy, brought to you by the Obama Administration.

The Post ends with a "Why can't we get along?" plea, but it is a little disingenuous. To the question, one might say, "Gee, I don't know - maybe it's the uncertainty, maybe it's the planned higher taxes on small business, maybe it's the increased costs of health care, maybe it's the the increased regulations, maybe it's this mind-boggling chart of looming workplace legislation from Mr. Obama's allies in the Congress."

Add it all up and there is plenty of cause for concern. If this "marriage" is troubled, it's because business has proved an all-too convenient whipping boy for this Administration, and an all-too convenient paymaster for its long wish list. If Obama wants a better relationship with business, maybe he needs to look not only at his rhetoric but at the substance of the job-killing policies that he is advancing.

September 2, 2010

Time to Get Off The Sidelines....

Starting today (actually starting last night with this intro blurb) I'll be posting periodically on ChamberPost, the US Chamber's blog. I'll be covering their annual Labor Day press event today and writing about that, and about whatever moves me after that.

Consider this fair warning....

September 1, 2010

On Immigration, Credit to Obama

Here's a story from USA Today, been making the rounds among the major news outlets in one form or another all day. This one's entitled, "Fewer illegal immigrants entering USA" and says:

"The number of immigrants coming to the USA illegally since 2007 has plummeted — the first significant decline in two decades, according to a Pew Hispanic Center report out today.

To be sure, the problem of illegal immigration has bedeviled every Administration. At core, the problem is that you have a huge and very powerful - and affluent - economy here, sitting above an economy that is decidedly less so in every respect. That pull, from South to North, has been powerful and unshakable. No matter what barriers we erect - legal, physical or otherwise - the pull is so strong that the illegal immigrants keep coming.

Now comes President Obama, who has fixed the core problem. By keeping the US economy in the tank, and through government spending and other policies making sure to keep the unemployment rate at historic highs, he has successfully addressed the root cause of immigration. There just is not as much incentive for illegal immigrants to cross from Mexico into the US. This singular accomplishment by this Administration has been overlooked, and Obama has not received his share of the credit for finally addressing one of the most persistent problems that we have faced as a nation.

And so, on behalf of a grateful nation, a word of thanks to our President, for his brilliant but unheralded efforts to bring our economy more in line with our impoverished neighbor to the South, thereby removing the incentive to illegally come to the US.

August 5, 2010

Who on earth could vote against Kagan? Ask Obama

As Elena Kagan is confirmed as the fourth woman to serve on the court (the greatest President, a Republican, nominated the first), Obama has been fond of condemning Republicans -- and even Democrats - who are posed to vote against her, expressing bewilderment and outrage. Yet Obama, in one of the few controversial votes he took during his brief turn in the Senate, managed to vote against both John Roberts and Samuel Alito. But the press likes to give him a pass on all that.

So the next time Obama expresses surprise or indignation over how anyone could vote against a Supreme Court nominee, maybe someone should ask him to shed light on it, as he was in the minority that did exactly that.

August 2, 2010

Newsweek Chooses the Future, Sells to 91 year-old Man

Buffeted by declining readership and advertising dollars - and generally being seen as a lefty organ - Newsweek was put on the block by its owner, the Washington Post. After a protracted process, the news broke tonight that he WaPo has picked 91 year-old Sidney Harman, husband of Rep. Jane Harman (D-CA), as the winning bidder for the big prize. (Who the hell was the other bidder, Methuselah?)

What better way to show that they are geared to a long horizon, to many, many years of future growth than by picking a nonagenarian to take the helm? While the new media world mints new 20-something millionaires by the day, the WaPo went retro on us, thumbed their collective noses at youth and picked a guy who's been collecting Social Security since Mark Zuckerberg was in diapers. A darned risky pick, but one sure to bring in the centenarians by the score.

Bravo, WaPo!

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Pat Cleary is Senior VP of Digital Public Affairs at a leading public affairs firm in Washington, where he helps corporations and associations drive their message through new media channels. Before this, he spent 10 years at the National Association of Manufacturers(NAM)in a series of senior policy, public affairs and communications posts. He started, a popular business blog, growing it to a million readers in 2006. Pat has also held a number of policy assignments at the U.S. Department of Labor and the National Mediation Board, the latter of which he chaired. His areas of expertise include human resources issues, health care, economics and trade. He is the author of "The Negotiation Handbook."

Everything posted on this blog is my personal opinion and does not necessarily represent the views of my employer or its clients.

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