Small Bussiness Under Attack

            Small business, with two to ten employees, are becoming an  endangered species in America. The family business once the backbone of this country is under attack from the unintended consequences of the many laws and mandates passed in recent years. Inspections, a plethora of permits, licenses, taxes, insurance requirements, and regulations make it almost impossible for a small business to open, compete, and operate legally. Big government has become toxic for small business.

            Few Americans risk capital, try to meet payroll, buy health insurance for their workers, try to create and innovate, lease an attractive site, maintain business licenses, observe myriad obscure regulations, compete with cutthroat competitors. While doing these task they are also asked to meet disability access standards, remain on call 24/7 for any business emergencies, and stay up late into the night trying to juggle interests of employees, business and community.

           Today only 2% of all Americans actually employ at least one non-relative employee. According to the Small Business Administration only 10% of Americans own a business and 80% of these are single self employed businesses. The remainder of Americans busy themselves with demanding jobs with higher than average wages, a full complement of generous benefits and frequent paid holidays. Most seek a definite work day without after hour calls.

           America has become not so much a capitalist society as a worker's society demanding socialist protections, this is why workers are not getting any job offers and America has lost its competitive edge.The owners of small businesses are burdened with spending countless hours trying to comply with the red tape rather than in earning a living. Though usually denied by government employees, jobs in Government often pay better and are less demanding while providing security and benefits that the private sector can’t match.

      It has been said that money is the mother’s milk of politics, this in many ways has been the Achilles heal of small business. The lobbyist that represent banks, big business and special interest have had their way  to the detriment of America and small business. They have shaped and crafted regulation that has shifted commerce strongly in their favor. As the stocks of large companies rise we are often oblivious to the names of local businesses that cease to exist. Even as many small businesses try to carve out a niche they can defend against the giant retailers down the street they must also compete against exploiters like Amazon that have no brick and mortar presence and avoid local and state sales tax.
                                                                                              
     The question of whether bigger is better is often debated as Wal-Mart expands across the land. The advantage of size allows for whole departments to specialize in dealing with Government regulations that have become the bane of the small businessman. The sad truth, while efficient in distributing goods these behemoths diminish cultural diversity and alter the fabric of society. The jobs they offer neither fulfill or excite, few people grow up filled with desire to work at a big box store like Wal-Mart or in a Amazon warehouse.

       My point is that small business and entrepreneurship were key in making America great, but beyond the Lemonade Stand of childhood  few Americans know anything about running a business. Running a business in America is complex and requires knowledge and smarts, if we want to create more jobs Government must encourage small business formation by slashing through the regulations, simplifying, and removing ,the burdens that make it so difficult. This is the only hope that for America to remain a land of opportunity.


Footnote; If you are interested in this topic, please read my recent post below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,
               http://brucewilds.blogspot.com/2012/01/small-business-endangered-species.html                                                                                                               
Footnote #2; A more recent post related to job creation and this subject can be found below,
                http://brucewilds.blogspot.com/2013/10/amazon-not-answer.html

     

     
                                                                         

Import Prices To Rise

History is said to repeat itself, but a better description would be to say it 'rhymes" In the 1970s America experienced a wage spiral that caused the cost of goods and services to soar. The inflation took hold in and formed a feed-back loop that was only broken when the then acting Federal Reserve Chairman Paul Volker to raise the interest rate into the teens, this slammed the economy into a wall bringing  about the a deep and painful recession  that finally crushed  inflation. Today the wage spiral is in China buy consumers in America are about to pay the price.

Over the last few decade China has grown to be the world’s largest manufacturing power, its output of televisions, smartphones, steel pipes and other consumer items surpassed America’s in 2010. China now accounts for a fifth of global manufacturing. Its factories have made so much, so cheaply that they have curbed inflation in many of its trading partners. But the era of cheap China may be drawing to a close.

Costs are soaring in China, starting in the coastal provinces where factories have historically clustered. Increases in land prices, environmental and safety regulations and taxes all play a part. The biggest factor, though, is labor. Recently an investment bank, released a survey of over 200 Hong Kong-based manufacturers operating in the Pearl River Delta. It found that wages have already risen by 10% this year. Foxconn, a Taiwanese contract manufacturer that makes Apple’s iPads (and much more besides) in Shenzhen, put up salaries by 16-25% last month.

For years companies in China have operated on razor thin margins while chasing growth. It’s not cheap like it used to be, and these cost will work through the system and eventually be passed on to consumers in the way of higher prices. This comes at a time when many Americans can least afford it, high unemployment and slow wage growth is a problem here at home. A weaker dollar would  make things even worse, but is quite possible, America has pumped trillions of dollars out into the world over the last several decades, this action has the potential to come home to roost.

 

tHE pOISON aPPLE

Is Apple All It seems?

How do they do it?  How does Apple remain the darling of so many Americans while stories continue to surface on how those they have contracted to make their products abuse their workers? The widespread criticism for its environmental and business practices would have caused major damage to the corporate image of most companies resulting in large protest outside their offices and massive boycotts of their products.

Not so with Apple, Fortune magazine named Apple the most admired company in the United States in 2008, and in the world from 2008 to 2011. Recently the Economist called it a "phenomena" and questioned if it was a "bubble." Apple's success even before this period was evident in its stock price. Between early 2003 and 2006, the price of Apple's stock increased more than tenfold, from around $6 per share (split-adjusted) to over $80. Since then it has soared well past $500 a share.

Apple's brand's loyalty is considered unusual for any product, but it is not just the technology, much of Apples success has do do with its marketing that has make it "super cool." Apple Store openings can draw crowds of thousands, with some waiting in line as much as a day before the opening. The New York City  "Cube" store had a line as long as half a mile. An opening in Tokyo was estimated in the thousands with a line over eight city blocks. In America the government and schools use taxpayer money to buy countless numbers of Apple products helping to carry Apple to the next level.

However Apple has a less tasty side that appeared in a 2006 report  written on working conditions at factories in China where the contract manufacturers Foxconn and Inventec produced the iPod. The article stated that one complex of factories that assembles the iPod and other items had over 200,000 workers, that lived and worked in the factory. Employees regularly worked more than 60 hours per week making around $100 per month and were required to pay for rent and food from the company.  This generally amounted to a little over half of the workers' earnings.

Workers in factories producing Apple products have also been exposed to n-Hexane, a neurotoxin that is a cheaper alternative than alcohol for cleaning the products. In 2010, workers in China moved to sue iPhone contractors over poisoning from a cleaner used to clean LCD screens claiming that they had not been informed of the effects. After a spate of suicides in a Foxconn facility in China that makes iPads and iPhones, workers were forced to sign a legally binding document guaranteeing that they would not kill themselves. In 2011 Apple admitted that its suppliers' child labor practices in China had worsened.        

So now the crux of the issue, why Apple, and for how much longer? To us not so enamored with the company we just don't get it. Add to the history of worker exploitation the fact that since Apple manufactures in China it creates few jobs in American. Is the typical Apple user so self-centered that they just don't care, or do they lust for the product so much that they bury and ignore their social conscience?  These consumers are even willing to pay higher prices to lock themselves into a closed system tightly controlled by Apple while open systems exist in the market place. Yes everyone loves a winner and success breeds success, but everything has its limits, it is only a matter of time before this apple begins to spoil.

Government Officials and Insider Trading

Something is seriously flawed  with Washington in that only recently a ethics bill passed the Senate that would ban insider trading by members of Congress. The bill also would require prompt disclosure of stock transactions by lawmakers and by thousands of officials in the executive branch of government. A 96 to 3 vote followed three days of impassioned debate in which senators tried to outdo one another in proclaiming their support for ethics in government. We should not ask why we would have to pass such a law, but instead  why was this "ever" allowed, and why did it take so long? 

The President called for passage of such legislation in his last State Of  The Union address. More than half of House members, including at least 100 Republicans quickly signaled support for it. A handful of lawmakers have tried for years to enact restrictions on stock dealing by members of Congress. Their efforts drew little support until new attention to the practice last year, coupled with election anxiety, prompted a flood of backing for the action at a time of intense public scrutiny of congressional ethics.

Worth mentioning is that Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation’s banking and financial services industries. Office of Congressional Ethics, an independent investigative agency, opened a probe late last year focusing on numerous suspicious trades on Bachus’s annual financial disclosure forms. It is no surprise that in the first case of its kind involving a member of Congress the investigators say that they have found probable cause to believe insider-trading violations have occurred.

One American citizen who may be less then impressed with this double standard that our politicians have enjoyed is Martha Stewart, if I were Martha I would be spiting up blood. According to the Security Exchange Commission in December of 2001 Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock after receiving an inside tip from her broker, Peter Bacanovic. The day following her sale, the stock value fell 16%.

Stewart went on trial in January 2004 and later spent five months in Federal Prison. In a highly publicized five-week jury trial later in the year Stewart was found guilty of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. She was sentenced and later went on to serve a five month term in a federal prison facility and a two year period of supervised release including five months of  home detention during which she had to wear an electronic monitoring device. Stewart also was forced to pay a fine of $30,000.

But the pain did not end for the "private citizen" Stewart, in August 2006, the SEC announced that it had agreed to settle the related civil case against her. Under the settlement, Stewart agreed to give up $58,062 (including interest from the losses she avoided), as well as a civil penalty of three times the loss avoided, or $137,019. She also agreed to a five-year ban from serving as a director, or any other officer role responsible for preparing, auditing, or disclosing financial results of any public company. 

To add more injury to insult in June 2008 Britain refused to grant Martha Stewart a visa to enter the United Kingdom because of her criminal conviction for obstructing justice. The old saying, "power corrupts, absolute power corrupts absolutely" describes the situation in Washington. Again those in power are the ones who benefit, while the rest of us remain victims of our system, we the people deserve better.

Fannie Mae, What are you doing?

In late February it was announced  that  Fannie Mae  is offering to sell nearly 2,500 foreclosed properties to investors as part of a new federal initiative to aid the housing market by selling off distressed properties in bulk. In my opinion it is an over complicated plan and nothing more then a political stunt to give the impression that something real is being done. With millions of  empty and foreclosed properties on the market this is not even a small step at addressing the problem.

The Federal Housing Finance Agency released details of a planned pilot transaction under which the government-controlled mortgage-finance firm will offer the properties for sale to investors in bulk, but require those investors to rent them out. Of the 2500 properties about 1,700 are single-family homes and more than 525 are condominiums.

A mix of tenant-occupied and vacant properties in Atlanta, Los Angeles, Phoenix, Las Vegas, Chicago and parts of Florida will be offered for sale. Edward DeMarco, the FHFA's acting director said "This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of [foreclosed] properties in the marketplace."

A Treasury Department counselor for housing finance policy, said in a statement that the initiative would aid "neighborhoods that were especially hard-hit by the housing crisis and will help meet the rising demand for rental housing in many communities." Investors will be required to post a security deposit and sign a confidentiality agreement before they receive access to detailed information about the properties. Potential investors are being asked to demonstrate their financial capacity and experience and detail their plans for the properties, which must be rented out for a specified period.

 This policy is just wrong. What is the benefit over selling them off individually to the highest bidder and being done with it?  I feel the "required to rent them out" requirement reeked of bureaucratic overreach, I'm also troubled by the "confidentiality agreement" as well as buyers "detailing their plans for the properties", this leads me to believe that the highest bid may not be accepted. This has the potential for more then a little corruption! 

Record Imports Are A "Unsustainable" Problem

Many people that comment on Japans huge government deficit and debt fail to realize that for many years Japan sported a large trade surplus. This allowed its citizens to buy bonds and allows Japan to control its destiny, this is unlike America that borrows from China and other countries to fuel its spending. The presidents spokesman was on Meet The Press a while back and said, "The time for austerity is not today" he went on "we should look at cutting the budget as a long term goal but not today." As always, it is a case of kick the can down the road.

The idea that we need to get through this rough patch before tightening the purse strings has resulted in massive deficits. A country cannot run both a fiscal deficit and trade deficit, this is unsustainable. Recent figures from the Commerce Department showed that last month the overall trade deficit rose by 3.7% to $48.8 billion, up from a $47.06 billion figure for the month earlier. Imports rose 1.3% to a record $227.56 billion, boosted by demand for foreign cars and machinery. US exports grew slightly, by 0.7%, helped by the weak dollar, with records set for petrol, services and advance technology goods.

The widening of the trade gap was bigger than had been expected. For the whole of 2011, the US trade gap rose 11.6% to $558 billion, the highest since 2008. The economically important deficit with China for the year jumped to a record high $295 billion. The latest figures, and the exchange rate that China sets for its currency against the dollar, is likely to be discussed more at coming meetings. The Senate, controlled by the Democrats, recently passed legislation to try to force China to raise the value of its currency.

But let us get to the crux of the problem, you cannot go on year after year spending more then you earn. When coupled with huge government budget deficits the trade deficits weaken the dollar and drive America in direction of bankruptcy. Let me say it again "this is unsustainable."  It is a myth that we can "export" our way out of this mess, a myth spread by politicians preaching the "no pain" method of solving a problem. The simple answer is that Americans must begin to accept reality and cut back their purchases of foreign goods.

Ron Paul Revisited, Yet Ignored

 Maine held its caucuses from Feb. 4 to 11. Romney won 39% while Texas Rep. Ron Paul won 36%, media reports say. Neither Santorum nor former House Speaker Newt Gingrich campaigned in Maine; they drew 18% and 6% respectively there. The percentages reflected about 84% of the state’s precincts reporting. The vote in Maine does not allocate delegates to the Republican National Convention, which is set for the last week in August in Tampa, Fla. The Republican Party convention in Maine, set for May, will select the state’s delegates.

The media and the Republican establishment has already started to spin this so called "victory" as a rebound for Romney, who is generally considered to lead the Republican candidates to run against President Barack Obama in November. Last week he lost three beauty contest to former Pennsylvania senator Rick Santorum who won Republican votes in Colorado, Minnesota and Missouri. As in Maine last week’s votes in Colorado, Minnesota and Missouri were similarly non-binding.

Having supported Ron Paul and his ideas for years I have noted and complained about his being ignored and dismissed by the media and the Republican establishment. Tonight the campaign of 2012 Republican Presidential candidate Ron Paul sent an email to supporters regarding today’s caucus results from the state of Maine. See below for a portion of comments from Ron Paul 2012 Campaign Manager John Tate.

“Ron Paul will win the most delegates out of Maine tonight. “In fact, he will probably even win the ‘beauty contest’ straw poll the media has already called for Mitt Romney – even before all the votes have been tallied.“In Washington County – where Ron Paul was incredibly strong – the caucus was delayed until next week just so the votes wouldn’t be reported by the national media today. “Of course, their excuse for the delay was ‘snow.’

“That’s right. A prediction of 3-4 inches – that turned into nothing more than a dusting - was enough for a local GOP official to postpone the caucuses just so the results wouldn’t be reported tonight. “This is MAINE we’re talking about. The GIRL SCOUTS had an event today in Washington County that wasn’t cancelled! “And just the votes of Washington County would have been enough to put us over the top.

Paul said. Romney will "be better off if he wins it and I'm going to be a lot better off if I win. So this will give me momentum and it will just maintain his. It's a pretty important state as far as I'm concerned." It seems that  Paul’s message of liberty and Constitutional principles is resonating with Americans everywhere who are sick and tired of the status quo establishment. He plans to take this campaign on to ‘Super Tuesday’ and beyond.” Maine will continue counting its votes as they come in but because there is no reliable in-state polling, this race is still anybody's game.

 Paul has put a lot of effort into Maine, and while a loss would not be a good sign for Paul more importantly, a win for Paul would mark the fourth consecutive loss for Romney. Losing that many times can't be a good feeling,and strengthens the argument that voters are unexcited by his candidacy. So while Paul continues to assert himself as the only "real alternative" Republican, Romney keeps trying to prove as he says, that he is "severely conservative"

         THIS POST TIES IN WITH OTHER RECENT POST CONCERNING THE PRIMARY