Robust job growth requires boldness and risk-taking in the private sector. What we have now is boldness and risk-taking in the public sector. It is loading as much debt onto the balance sheet as possible, and creating the predicate for more regulation, spending, and taxes. We have active government and hesitant entrepreneurs.

Late in the Great Depression, Franklin Roosevelt’s Treasury secretary, Henry Morgenthau, told Congress, “We are spending more than we have ever spent before and it does not work.” Democrats have made Morgenthau’s plaint their governing ethic. In so doing, they are demonstrating their political and intellectual bankruptcy even faster than they are bankrupting the country.

Spending money does not create wealth.  Spending money does not raise the standard of living.

But it lets politicians feel like they’re “doing something” and gives their fat egos a boost.  Also, spending money buys votes  … even if it’s at the expense of what will soon be a bankrupted citizenry.

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U.S. small businesses are slightly more optimistic about their economic outlook than they have been in the last two years but are still not ready to expand staffs and boost capital spending, according to a survey released Tuesday.

“The recovery in optimism we are currently experiencing is very weak compared to recoveries after 1982 or 1975,” the survey concluded. “The May Optimism index is a shade better than April but remains well below the other recovery trajectories.”

The NFIB survey of 823 businesses through the end of May showed that more small businesses are experiencing weakening sales than are enjoying sales improvement. Widespread price cutting was also reported, it said. May was the 18th consecutive month in which more business owners reported cutting average selling prices than raising them.

Eighteen straight months of price cuts.  You’re not going to get expanded hiring and capital investment when your margins are compressing simultaneously with a sales decline.

Unfortunately, we look like we are on our way to having a double-dip recession.

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1.  ObamaCare means a harder economic climate for Small Businesses

At core ObamaCare is a mandate.  It is a requirement that people purchase health insurance.  This means that more dollars that were available for other purposes in the past, will now be directed to health care in the future.  Unless your small business serves the healthcare industry, these dollars are not headed your way.   Also, since nothing in the bill actually reduces heathcare and heath insurance costs, but actually increases them, an additional amount of dollars will flow into healthcare just to meet the rising costs.  These are dollars your businesses will not see from your customers because they are required to divert them elsewhere.

2. ObamaCare means higher health insurance expenses for Small Businesses

As noted above, nothing in ObamaCare reduces expenses.  The only way to reduce cost is to increase supply or decrease demand.  ObamaCare increases the demand for health care while doing nothing to increase the  supply of health care.  You will see your premiums increase if you provide healthcare to your employees or yourself.

3. ObamaCare means penalties and fines

For some small businesses, you’ll pay a penalty (fine) if you don’t provide health insurance for your employees.

4. ObamaCare means that part-time workers will become a dying breed

The penalty for not providing health care to employees is the same for part-time and full-time employees.  Since this penalty is part of the overall compensation expense for employing someone, it doesn’t make sense to employ part-timers.

While a simple analysis of the bill would lead any dispassionate analyst to conclude this, we also have empirical proof.  This approach to healthcare – the health insurance mandate – is currently being tried in Massachusetts and has failed.

None of these developments is good for business or good for job creation.  The US was headed toward bankruptcy before ObamaCare.  It’s just headed there faster, now.  The only way out is to (a) cut spending, (b) raise taxes, (c) print money, or (d) default on the debt.

It’s your guess as to which is our fate.

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Related Entry: This is Gonna Hurt: The Pain for Mandatory Health Insurance

[A] new provision in the health care bill will require businesses to count part-time workers when calculating penalties for failing to provide coverage.

As we warned in in October of last year measures such as these hurt small businesses and part-time workers (particularly students, working mothers, and people who work for companies with a seasonal bent), leading to more unemployment and more mis-allocated resources in the economy.

Ed Morrissey from Hotair.com issues his analysis and warning today, too.  He’s spot on.

This change in the parallel bill would have a big impact on small businesses, who already have trouble competing with their larger competitors.  It will force businesses into either paying for benefit packages that they can’t afford with their current staff levels, pushing them either into cutting staff to recoup the costs or shutting their doors altogether.  It will have a major impact on the part-time labor market, which supports student workers and second earners in families under normal economic conditions.

Today Rasmussen reported that 57% of American’s think that ObamaCare will damage the economy.  They’re right.

In that same time frame, the town where I grew up, Beaumont, Jefferson County, Texas, had a very large oil refining industry which employed a huge percentage of the local residents.  The union, the Oil, Chemical and Atomic Workers, were extremely powerful, and managed to gain enormous concessions from industry.  What many did not recognize was that as part of routine maintenance, about 20% to 25% of a refinery was dismantled and rebuilt every year.  Management of the oil refining companies realized that as part of the existing protocol, they could rebuild in a different community, where the OCAW was not as strong.  The jobs left Jefferson County.

A dozen years ago, I became curious, so I went online and researched a number of parameters from 1890, when unions were being organized, until 1941, when we entered World War II.  I looked at the unemployment rate, as published, the GNP, as it was recorded at that time, average wage, and the political issues of the times.  Until 1929, there was a progressive increase in GNP, employment rate, and wages, until the bubble burst.  We did not return to 1929 employment rate and GNP until we started manufacturing war materials for Europe in 1939.  The interesting side observation was that the average wage was about what it was in 1890, or about 1/3 of what it was in 1929.

Where are we today?  Certainly it is expensive to hire American workers.  Why else are so many illegal immigrants taking American jobs for less than union wage.  Why are states with right to work laws experiencing less pain of unemployment than states where unions are dictating who can get jobs and at what compensation?  We cannot blame unions, alone.  What does it cost in the way of payroll taxes to hire an American worker?  Where have all the jobs gone?  They have gone where the cost of labor is not more than the value it provides – other countries.  What can be done to restore American jobs and productivity?  I can think of two things that would provide immediate help.  First, let’s stop legislating unfair advantage to unions.  Second, decrease payroll taxes, or even provide a prolonged holiday from such taxation.  It is counter productive.  Can we expect to see either happen?  I doubt it.  Our current legislative bodies are addicted to the tax revenue and union contributions.  So, we will continue our downward spiral, until we change the population of law makers.

Dr. Barry Jacobs is a Reproductive Endocrinologist, practicing in Carrollton, Texas, a northern suburb of Dallas. He completed his residency training in obstetrics and gynecology at Baylor College of Medicine in Houston, and remained at that institution to become its first fellow once Baylor achieved accreditation for an advanced training program in Reproductive Endocrinology and Infertility. Dr. Jacobs has served on the faculty of several medical schools and was director of Reproductive Endocrinology at Texas Tech Health Science Center in Amarillo. Currently, in addition to his clinical activities caring for infertile patients and those with recurrent pregnancy loss, he is Chairman of the IVF committee at Baylor Medical Center in Carrollton.

We are also small business owners and employees ourselves, and what is emerging from these conversations frightens us and should frighten all American workers.

The consensus? “They can force us to pay for health care, and fine us if we don’t, but they can’t prevent us from firing workers or lowering wages.”

When you change incentives, you change behaviors, and if this bill passes, Small Businesses are incentivized to lay off workers and lower wages.

As the health care bill in the house currently stands, employers will be forced to provide health insurance to all workers.  Since health insurance is a compensation cost, employers are reviewing which employees are most important to them, or give them the most hours, and are making plans to fire employees who do not give them enough value to justify providing insurance.

If small businesses choose to not provide health insurance, they’re going to be levied an 8% of payroll fine.  Since that just means total compensation costs go up by 8%, businesses will offset that by lowering wages (or firing people).

In fact, some businesses we’ve talked to are getting ready to lay off workers and then hire new people who have been laid off elsewhere, but paying a lower wage than they did for the same work before – but, hey, the employee will have mandated health insurance (even if her standard of living drops in every other area)!

In an era of 10% unemployment, massive deficits, an enormous national  debt burden, and growing unfunded liabilities for Social Security and Medicare/Medicaid, the government is about to do something that will kill wage growth and increase unemployment.

Oh, and it will mean less doctors who want to practice medicine, punishment of all companies that innovate in the medical industry, all while increase demand for medical services.  Rationing, here we come.

We were right about Cash for Clunkers.   And we’re right about this.

Our only hope is that someone in Washington wakes up.  And soon.  Because we’re at the precipice.

If you haven’t made a call to your representative recently, now would be a good time to make a last minute push.

Please email this to your friends, family members, and co-workers who work for small businesses, and let them know about this imminent danger.

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The bill is currently on the desk of Governor Schwarzenegger, and he has until October 11th to sign it into law, or veto it.

We circulated the notice to CA members and encouraged them to contact the Governor and encourage a veto, but thought we’d also share it here on the SBABG blog so that others might share it with their contacts in California.

The right to bear arms, protected by the second amendment, doesn’t just mean the right to bear guns, but also to bear ammunition.  This bill creates burdensome and discriminatory regulations against some citizens by making it harder to obtain the means to defend themselves.

This regulation will drive up the cost of self-defense by reducing distribution efficiencies – thereby reducing supply and driving up cost – and likely lowering the distribution of ammunition amongst law-abiding citizens because of the difficulty of obtaining it.

Online and catalog handgun ammunition sales have helped to drive down the cost of ammunition and, therefore, the cost to arm and defend oneself.  This trend will be reversed if AB 962 is signed into law.

Since handguns are not hunting guns, but self-defense weapons, it means that the cost to defend oneself will increase.

This legislation also directly damages small businesses by not only imposing compliance costs on them, but disallowing many small businesses from selling ammunition online or through catalogs, as they’ve done for years.

Politicians think this measure will keep ammunition out of the hands of criminals, but it won’t. The gangs and cartels already have their black-market supply lines and unlimited access to ammunition.  Moreover, California cannot prevent criminals from going to another state to purchase ammunition and crossing state lines.  And forensics cannot match particular bullets to particular ammunition sales and get the criminals name and address.

This bill will merely hurt law-abiding citizens who do comply with law.

If you wish to comment on AB 962, you may contact Gov. Schwarzenegger by phone at (916) 445-2841, or via fax at (916) 558-3160. To e-mail Gov. Schwarzenegger, visit http://gov.ca.gov/interact

*The SBABG member forwarded us the following information about AB 962:

Among other regulations, AB 962 would:

• Ban all mail-order and Internet sales of handgun ammunition.

• Prohibit the retail sale, the offer for sale or the display of handgun ammunition in a manner that allows ammunition to be accessible to a purchaser without assistance of a vendor or employee.
• Require that the delivery or transfer of ownership of handgun ammunition occur in a   face-to-face transaction, with the deliverer or transferor being provided bona fide evidence of identity of the purchaser or other transferee.

That evidence of identity, which must be legibly recorded at the time of
delivery, includes:

• The right thumbprint of the purchaser or transferee.
• The date of the sale or other transaction.
• The purchaser’s or transferee’s driver’s license or other identification number and the state in which it was issued.
• The brand, type and amount of ammunition sold or otherwise transferred.
• The purchaser’s or transferee’s signature.
• The name of the salesperson who processed the sale or other transaction.
• The purchaser’s or transferee’s full residential address and telephone number.
• The purchaser’s or transferee’s date of birth.

This period is no different.  It is more painful and more dark than most generations have experienced, but it is not unprecedented and it is not insurmountable.

The various “stimulus” and “bailout” plans the government undertook were not necessary and have not helped out recovery, but have actually impeded it.  Recovery was already underway when the bust occurred – the bust was the first step in stopping all of the insane practices that cheap-money fed lending has brought about.  The stimulus and bailouts have prevented the adjustment from happening more quickly by propping up businesses that should otherwise have gone under or been restructured or sold to efficient operators much more quickly.  But there it is . . . no use dwelling on things no longer in our control.

The acceleration in job losses was the inevitable response to the excesses of the tech-bust/post-9.11 stimulus.   Loose money lending  led to a debt binge that not only saddled many individuals and businesses with too much leverage, but also led to a misallocation of jobs and resources, so that people were employed in short-term projects (i.e. an excess of housing-related projects that were not sustainable long terms) and capital was deployed into companies that did not have long-term prospects (again, primarily housing related businesses, mortgage companies, etc). The only way through this is for capital and people to migrate to industries with real, non-artificial demand, and for the debt burden to be worked off, whether by paying it down or through defaults.

The artificial boom led to an inevitable bust which resulted in dislocations in nearly every market.  We’re all feeling it.

The hangover is proportional to the binge.

Government’s penchant for bailing out their Capitalist Cronies meant that bad behavior was rewarded for many, and many whose behavior was unimpeachable have been handed the tab and punished.  But there’s no crying in baseball.  Politicians and governments have been corrupt since the dawn of man.  It’s no different now.  In 1,000 years – don’t worry, we’ll all be gone by then -  it will be no different.  The key is to understand this and just do your best to combat it.  We aren’t called upon to win, we’re called upon to fight.  By fighting we ensure that the injustices are less than they’d otherwise be.

It is true is that the American economy – and it’s citizens relationship with government – is forever altered.  The policies undertaken have slowed recovery and set a horrible precedent – that bad behavior will be bailed out and good behavior will be punished by coercing responsible parties to underwrite the bailouts for the irresponsible ones.  The actions that were undertaken have undermined prosperity in the long-run, and we’ve kicked the can for future generations to deal with.

But will the economy eventually be back?  Yes.

It will be back in spite of the actions undertaken by government.

Who will lead the economy back?  Small businesses have led the recovery in the last seven recession, according to the Kauffman Foundation.  Just like most every other time it’s happened, it will be the people in the economy providing the goods and services in their communities.  It will be led by small businesses, by the people who, when they either lost it all or faced that prospect, got up the next day and went about figuring out how to create value in the world. People will buy and trade service and goods that are needed to improve the standard of living.  You will continue to work each day to better the lives of others.  And others will work to better your life.  You will, in a free market, find one another and be blessed by your trade.

If you were in an unsustainable – boom induced – line of work, you’ll migrate to another line and hopefully not one of those that will be artificially created by the new round of stimulus;(for example, some of the “green jobs” that have been artificially created by Big Government, which are resulting in new resource misallocation and are where the new “bust” will likely occur… however, green jobs that are market driven will be OK, those driven by real demand and not by government mandate.

When the recovery eventually occurs, AND IT WILL, Big Government will try and take credit.  However, you will know that that’s like trying to take credit for the sun coming up.  It was going to happen anyway, in SPITE of the obstacles big government laid in the way by preventing the economy from naturally correcting itself, and would have happened much sooner if Government had left worse well-enough alone.

Good will come of this.  If nothing else, people, more than ever, have been alerted to the fact that Big Government cannot save them.  Government is just a group of people who are no more competent or benevolent than any others (and, in fact, are largely less benevolent and competent than your average American citizen).

If nothing else comes of this but people learning to avoid the excesses that come during cheap money and credit booms, something good will have been learned.

If nothing else comes of this but the ability to audit the fed, and thereby begin the process of preventing future cheap-money booms (that lead to these busts), some good will have come of this.

As small business owners and employees this is a painful time for us, but it’s not the end.  It’s a beginning.  It’s a time to fight, a time to save, a time to innovate, and a time to recommit to the ideals of a free people.  It’s a time to condemn tyranny and waste wherever it’s found.

It’s a good time to be alive.

And just don’t forget – when things turn around, and they eventually will, it will be because of the efforts of people like you who, in spite of the obstacles of Big Government, will overcome and prosper again.

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Most people dislike taxes but see at least some level of tax as inevitable, even necessary.  Surely some of our dislike for taxes is driven by the fact that it’s human nature for us to want to keep more of what we earn and to direct where it’s spent rather than abdicate that decision to another person.

Some of our dislike is driven by the fact that we inherently oppose wastefulness and don’t like to see our money spent on things we believe are inefficient or unnecessary. Some of our dislike comes from seeing our money spent on activities that we consider immoral or unethical.

And many of us dislike taxation because we believe it takes money away from producing things that people want – its best use – and instead is diverted into uses that are less valuable to society, and even are often used to prop up government-sponsored monopolies that the private market isn’t allowed to compete with, preventing us all from having a better quality of life.

But one thing is sure, the taxes you pay out of your earnings are dollars that you will not be able to spend to improve your life or reinvest in your business to create additional goods or services, increase your workers salaries, hire new workers, donate to a charity, or spend in your community.

Every dollar taken from your business is a dollar you can’t spend at another business, use to send a child to college, or donate to a charity.  Every dollar taken from you is a dollar you can’t lend to another business owner.

If politicians are truly serious about stimulating the economy, they will cut taxes.  Period.

America already has a deeply flawed tax system.  In fact, the Tax Oppression Index ranks America in the bottom half of Industrialized Nations, and our ranking is set to plummet further.

Taxation often sends a discouraging message, “You cannot be trusted to do with your money things that will make the world better off, therefore it must be confiscated and given to those who know better than you.”

Have no doubt that many politicians would like take everything you earn, and give you back whatever they feel is “just,” if only you’d keep working.  They’ve learned, though, that at some point the burden is just so great that many people finally throw up their hands and won’t work.

The federal government – and many state and local governments – treats the country as something it owns and allows you to use, so long as you pay your “dues.”  Don’t believe it?  Think you “own” your “property”?  Try not paying your property taxes.  You’ll ultimately lose “your” property.  That’s the “dues” you pay for the privilege of the government allowing you to “own” something.  The way they see it, they own the country, you rent from them.

Even your own body and labor.  They own it, to the tune of whatever they decide.  Sometimes they decide to own 10% of your work.  Sometimes 40%.  Sometimes 90%.

They claim you and everything you possess.

Taxation without your consent is theft, but what can you do?

What you can do is educate others to see the reality of our system today so that it can be reformed.

It starts with an understanding that government is not a magic institution that can wave its wand and turn us into a utopia, if only we feed it.  It’s an institution made up of people who are no more benevolent and competent than the people and businesses they take from.

It starts with an understanding that, yes, we can be trusted with our lives, our liberties, and our properties, and that we can use those resources we have earned better than those who have not earned them, but merely confiscated them from us.

It starts with an understanding that every dollar of taxed income incurs an opportunity cost, which is the choice you no longer have and can’t make because that dollar was taken away from you.

It starts with an understanding that competition lowers prices, an understanding that when a government carves out a monopoly for itself in any market, and does not allow for competition, we’ll all pay way too much for the “service” provided.

Here are some exercises you can use to teach your employees and coworkers about the “hidden costs” or “perils” of taxation.  Embedded in the message is a warning that if they value job security and personal prosperity, they should never vote for a tax increase on themselves or on anyone else.

Let’s look at a couple of simple profit and loss statements – two companies with identical performance, but one is not taxed at all, while the other is taxed at 40%.

Now, assume that every $30K reinvested each year creates one job.  This may or may not be accurate for your business, but it is for mine, so it will work for illustration purposes.

That’s a 65% increase in job creation.  That’s enormous.

That money could also be used to fund an employee retirement plan, or give employees a raise, or just have a big enough savings that during an economic downturn a company can weather the storm and not have to lay off employees.  That’s job security.

And, remember, the money we spend with other companies creates jobs there, too!  That cash is either reinvested in business, reinvested somewhere else, or spent in some local economy.

Now, what happens if your customers’ individual tax rate goes from, say 20%, to 0%?

They have more money to spend on your goods or invest in or loan to your business.

What happens if the rate goes up?  Just the opposite.  Resources and cash are diverted away from your customers (and potential customers).

Help employees understand that sales taxes reduce the amount of money customers spend with you.  If a customer has only $100 of discretionary income they’re willing to spend with you, $94 of their available income will go to you and $6 will go to the government.  That 7% extra you could have makes an enormous difference over the life of a company.

When a politician says, “I’m going to take from someone else – not you – to pay for my pet program,” we must all remember that other person who has been targeted may someday be – or already is – our customer.

We should never vote to take away someone else’s purchasing power.  Even when politicians are making Robin Hood arguments and saying they’re going to take from someone and give it to us, we must resist the temptation to burden others.  We should, “Do unto others as we’d have done unto us” and all that.

A tax increase is a freedom or choice decrease.  It takes away options from businesses and individuals.  A tax decrease is a freedom or choice increase that provides new opportunities to individuals and businesses.

Just as someone’s death leaves us wondering “what might have been” had they lived, taxation leaves us wondering what “might have been” had we been able to determine how our money would be used.

What children weren’t able to go to college because their parents were overtaxed?  What businesses were never launched, what discoveries were never made, what lives were not saved because of innovations never pursued, all because the resources and money that could have been used in those pursuits was confiscated?

Now you might be thinking, what about schools?  What about roads?  What about . . . ?  Those are valid thoughts.

While some may argue for the abolition of all coercive taxes, and others may oppose that or think it unrealistic, I think we can all agree that lower taxes is good for everyone.

And don’t underestimate how much cheaper and quicker private citizens can get things done when they are able to compete with government monopolies.

Let’s assume all tax is abolished.  What might happen?

Well, the dollars you were spending on tax for school funding, or roads, or downtown arts centers is now back in your pocket.  All the money you spent on any government service is now back in your pocket.

Will we all just go without?

No.

Any service provided by government that was of any value will find lots of people in the free market (who now have more money to invest and spend) who are willing and able to meet those needs.

That saved money will still be invested and spent, but it will now be at your discretion and by your choice.

Let’s also remember that if a service is received where the tax is paid, it more closely resembles free trade.

If a service is not delivered where the tax is paid, it more closely resembles theft.

Taxes paid should be paid where the benefits for paying them are delivered directly to those paying them.

Most people are willing to pay a local tax to support a local school where their children or the children in their community attend or to pave roads in the communities where they live.  At the local level these things are best worked out.

Most of us are not willing to pay a federal tax used to support abortion delivery services in Mexico  – whether we’re opposed to abortion or not -  or funding opera in Washington DC, or financially backing research on the sexual behavior of gay Argentines.

Last year many of us worked 2-4 months out of the year for the government.  That is, when the year was over the government took roughly 15-35% of our incomes.

The American Revolution was fought because of burdens far less than that!

We must educate our employees and co-workers about the benefits of low taxes (and of lowering taxes), of services rendered where taxes are paid.

You can use the examples above to show them how low taxes gives them job security and increases their earning potential.

When people are taught free market principles, they understand them.  They can see through the smokescreen that Big Government propagandists throw their way if you help them see through it.

If you own a business, consider showing your employees how taxation affects your profit and loss statement and how personal income taxes limit what people can spend with your business.  It will help them understand that high taxes directly affect them and limit their current and future choices and freedoms.  Help them understand the immorality of voting for a tax increase on someone else while exempting themselves.

Please share your ideas with us in the comments below.  Is this sort of educating feasible in your workplace?  Are people responsive to this message or apathetic?  What more can be done?

If SBABG.org were to prepare printable fliers or pamphlets that contain this information in a summarized form, would you be interested in distributing them to your co-workers or employees?

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