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Wednesday, October 17, 2012

Obama Doesn’t Understand Business

Each debate paints a more cohesive picture in regard to President Obama's business acumen.

He has none.

It’s clear he doesn’t know the difference between Chapter 7 and Chapter 11 of the U.S. Bankruptcy code. And neither do many of the people who will vote for him again as president.
The President didn’t “Save” General Motors. General Motors filed Chapter 11, a legal motion to restructure its debt and to reach new agreements with its creditors and contracts with its unions. The only change that occurs is the terms of the company’s debt and so business continues. The company does not get liquidated and disappear. So to say the government saved General Motors is not the truth. What the government did by buying into GM was to save the GM Union from having to take a step back from the crazy money they make and the sumptuous benefits they enjoy. And all at the expense of the people who invested their money in the company. It's the GM shareholders: retirees, town governments and regular people, who got the shaft on their investments when the government voided their stock holdings. This is what the Obama administration did. And General Motors, despite of what you may hear, isn't out of the woods as far as it's solvency is concerned, they still have a flawed business structure which it has yet to address.

President Obama is counting on the American people not to know the difference between Chapters 7 and 11 also.  
But other aspects of the economy and business seem to either elude or just doesn’t have an effect on the President’s policies toward a vibrant economic recovery for the nation.

Regulating business: The cost of doing business in this country is high. There are permits and restrictions on business, some good and some bad but all cost money and contribute to overhead.

And who bears the costs of compliance with all these State and Federal regulations? The businesses themselves, of course. All businesses have to hire their own people to make sure that they are in compliance with all the articles of regulation and tax that they are responsible for.  There is no write-off for these expenditures. They're expenditures.

It's not just an issue of good business practices, some of these regulations are out of control like the Americans with Disabilities Act which almost closed every public pool in the state of Massachusetts this Summer before it was put on hold, required all public pools to have a lift to transport disabled people into and out of the pool. A nice idea but so costly that the pools had decided that it was better to just close. The requirement has not gone away, it’s just on hold. There is also the provision in the ADA that requires public buildings to have elevators if there is a second floor. Elevators are very costly to purchase, install and maintain. This is a prohibitive sum in purchase and maintenance costs.
There are also permits, insurance, certification and licensing to starting a business that have become a burden to the point that many businesses cannot become legitimate in the eyes of government and remain thus restricted and under the table.

Then there are the taxes. The Federal tax rate on business runs from 15% to 35%. Then there are the State taxes, local property taxe, taxes on income, sales and even exise taxes on unsold inventory. There are taxes on utility bills, phone bills, shipping and purchasing. Add to that unemployement taxes, workers compensation taxes and the cost of offering a subsidy for health insurance for employees.
All this contributes to a businesses’ “Overhead” or the cost of doing business before they collect a penny in sales.

Currently the climate for American business is bad based on all of the above.

The more overhead, the less profit. The less profit, the less expansion. The less expansion, the less hiring. The less hiring, the less payroll and income taxes that are collected. It is an inevitable downward spiral of Socialism. There is no balance, only eventual failure.
Mitt Romney has proposed to drop some of this overhead. Obama isn’t on board with that right now, he's got a big government to feed.

President Obama believes if the government buys enough Chevy Volts that General Motors will become solvent. He also believes that if the government spends enough money, the economy will turn around. They also believe that by the Federal Reserve purchasing mortgage debt with printed money and deficit spending, that this will help lift up a sagging economy.
Does anybody believe this will happen?

The more taxes and fees go up, the more businesses that will close under the pressure and the less money gets collected. The government; Federal, State and Local have many mouths to feed. If tax revenues fall, these governing bodies will have to start letting some people go.
This they should understand.

With the governments faith in the so called “Green Business” to the tune of handing out hundreds of millions of dollars in support money starting to show real collapse and failure, one can draw the clear conclusion that government interference in the marketplace is never a good idea.
This particular failure falls squarely on the shoulders of the Obama administration.

In order to support business one must know what it takes to run a business and there are few in the current administration that have done that. Secretary of the Treasury Tim Geithner is one and President Obama is another. Vice President Joe Biden is yet another. Together they have zero business experience, being mainly long time bureaucrats, and it shows in their understanding of the country’s economy and business atmosphere. This is not an encouraging scenario.
And here we are. Do you go to the guy who’s had a business for a job or do you go to a guy who’s never had a business and who’s only jobs were on the public payrolls?

So what’s the answer?

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