Ass Backwards: Senate to Shelve Bush Tax Cuts for Individuals; House to Pass Small Business Tax Cuts
by ilene - September 23rd, 2010 6:02 pm
Ass Backwards: Senate to Shelve Bush Tax Cuts for Individuals; House to Pass Small Business Tax Cuts
Courtesy of Mish
If ever you want to see tax policies that are ass backwards, look no further than two Congressional tax bills, one should pass but may not even get a vote, the other is seriously misguided but will pass anyway.
Senate Democrats Ready To Shelve Tax Cut Vote
TPM reports Senate Dems Ready To Shelve Tax Cut Vote
A senior Senate Democratic aide told TPM today there won’t be a vote on extending the Bush tax cuts in the upper chamber before the November election, a blow to party leaders and President Obama who believed this would have been a winning issue.
"Absent a stunning turn of events, we’re not going to do tax cuts before the election," the aide told TPM.
"We have a winning message now, why muddy it up with a failed vote, because, of course, Republicans are going to block everything," the aide said.
Aides for two senators in tough bids have suggested they would take the plunge and vote before the election, but they’d prefer to vote if it means the tax cuts extension could actually be passed. And that’s not counting the conservative Democrats who disagree with the majority of the caucus about where the threshold should be — and lean toward a higher than $250,000 in income definition of the middle class.
Politics as Usual
The irony is both parties are blaming each other and both parties are to blame. Certainly the Democrats should have enough votes to pass something given they have a majority. I highly doubt the Republicans would filibuster a tax cut proposal this close to election.
However, Democrats might not have the votes because of defections. Senate leaders fear those defections, and do not want to risk Democrats being blamed.
Another, perhaps more likely alternative is that Democrats believe a "winning message" (blaming Republicans) is better than "winning action".
Either way, taxpayers will suffer.
Contrary to the what the Democratic fools believe, I think people will blame incumbents not Republicans for failure to pass something. Thus, Republicans have every incentive to do the wrong thing, short of a filibuster.
The bottom line is the same. Nothing gets done, and both parties are to blame.
Year End Cliff Gamble on 2% of GDP
I did not think it would…
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30 Statistics That Prove The Elite Are Getting Richer, The Poor Are Getting Poorer And The Middle Class Is Being Destroyed
by ilene - August 31st, 2010 3:49 am
30 Statistics That Prove The Elite Are Getting Richer, The Poor Are Getting Poorer And The Middle Class Is Being Destroyed
Courtesy of Michael Snyder at Economic Collapse
Not everyone has been doing badly during the economic turmoil of the last few years. In fact, there are some Americans that are doing really, really well. While the vast majority of us struggle, there is one small segment of society that is seemingly doing better than ever. This was reflected in a recent article on CNBC in which it was noted that companies that cater to average Americans are doing rather poorly right now while companies that market luxury goods and services are generally performing exceptionally well. So why aren’t all American consumers jumping on the spending bandwagon?
Well, it seems that there are a large number of Americans who either can’t spend a lot of money right now or who are very hesitant to. A stunningly high number of Americans are still unemployed, and for many other Americans, there is a very real fear that hard economic times will return soon. On the other hand, there is a significant percentage of Americans who are blowing money on luxury goods and services as if the economy has fully turned around and it is time to let the good times roll. So exactly what in the world is going on here?
Well, in 2010 life is very, very different depending on whether you are a "have" or a "have not". The recent article on CNBC referenced above described it this way….
Consumer spending in the U.S. has turned into a tale of two cities in 2010, with an entire segment of consumers splurging confidently on the finer things in life, while another segment, concerned about unemployment and with little or no discretionary income, spends only on bare necessities.…
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Another Atlas Shrugs – Small Business Owners Chime In
by ilene - August 24th, 2010 6:18 pm
Another Atlas Shrugs – Small Business Owners Chime In
Courtesy of Mish
In response to Small Businesses are Not Hiring – Should They? I received a couple emails worth sharing. The CEO of a healthcare consulting company writes ….
Hello Mish
You ran a series of articles on small businesses, hiring and expansions. I thought I would add to it.
I run a small firm, with about 45 employees and 40 contractors. We have been growing pretty well, close to 80% topline numbers for the past 3 years. Our average salary is over $100,000. We have some innovative software we sell to the industry. We also offer operational improvement strategies and IT consulting.
We provide great healthcare insurance coverage to our employees. It is necessary in order to attract talent and I am in the talent business. Our healthcare costs went up 90% this year – and that is on a 6-figure number to begin with. We found only one insurer willing to provide us coverage, United Healthcare.
Every other provider pulled out of our segment of the small business market. Cigna, our prior carrier, refused to renew at the last minute on a technicality despite being our carrier for the past 3 years.
Our management team’s focus for two weeks was seriously diverted as we dealt with the consequences of this. Had we lost coverage altogether, we would have been out of business as our employees would go elsewhere.
Our staff is young and healthy, by and large. Average age is early 30s, in the healthcare consulting, software and technology industry. Only in a severely government distorted marketplace can a firm with a young and healthy staff that has had coverage for years face insurers pulling out or demanding a 90% hike.
We had plans to add one person to our R&D staff, a low 6-figure salary. That was shelved because of healthcare costs. Our software development cycle is slowed as a result.
How has the healthcare bill helped the economy? In this case, not one bit. And everyone of my employees has been hurt, because we switched mid-year, those who were part way into their deductible have to start all over again. That is a few 1000s for a number of employees. Because of a bill that passed that cost us money, and most of our employees money. No one is happy with this.
I
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Small Businesses are Not Hiring – Why Should They?
by ilene - August 20th, 2010 1:35 pm
Small Businesses are Not Hiring – Why Should They?
Courtesy of Mish
In response to Creating Jobs Carries a Punishing Price, an article about Mr. Fleischer, president of Bogen Communications Inc. and why he is not hiring, I received an interesting email from "David" a reader who disagrees with Mr. Fleischer’s stated reasons for not hiring.
One of the items mentioned by Mr. Fleischer and challenged by "David" is the idea that corporations are sitting on cash. On this score, "David" is correct. I have also debunked the idea that corporations are sitting in cash (Please see Are Corporations Sitting on Piles of Cash?)
"David" also challenged Mr. Fleischer’s math on healthcare.
However, such arguments miss the entire point of the post.
Actions Matter!
It does not matter one iota if Mr. Fleischer is wrong about corporate sideline cash or anything else. What matters is Mr. Fleischer thinks he has sufficient reasons not to hire.
On that score, I believe Mr. Fleischer is correct. There are numerous good reasons to not hire.
Businesses have a legitimate worry about health care costs, rising taxes, and other artifacts of Obama’s legislation.
On the consumer side, this is not a typical recession. This is a credit bust recession with consumers still deleveraging. With savings deposits yielding close to 0% and with credit card rates over 20%, common sense dictates consumers pay down bills rather than make new purchases. The housing bubble has burst and boomers are headed into retirement with insufficient savings.
Given all the economic uncertainties, consumers are reacting in a rational manner by not spending. In turn, businesses have consistently cited lack of customers as one reason to not hire.
Pertinent Facts
That Mr. Fleischer fails to articulate reasons that others agree with is irrelevant. The pertinent fact is he is not hiring.
More importantly, numerous other small business owners think and act just like Mr. Fleischer. How do we know? Simple …
- August 03, 2010: Wells Fargo/Gallup Small Business Index Hits Record Low, Future Expectations Dip Below Zero First Time Ever
- August 10, 2010: Small Business Trends – Yet Another Disaster
- August 19, 2010: Weekly Unemployment Claims Hit 500,000, Exceed Every Economist’s Estimate; No Lasting Improvement for 9 Months
What Can Be Done?
For my thoughts on what to do about small business hiring, please…
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The Bernanke Cycle
by ilene - August 17th, 2010 8:45 pm
The Bernanke Cycle
Courtesy of Joshua M Brown, The Reformed Broker
“Eighty-one percent of the jobs lost in America were from small business,”
-Senator Mary L. Landrieu, (D) Louisiana and chairwoman of the small-business committee
One of my pet topics here is the utter neglect of small businesses, which have been completely ignored during the race to stimulate and reflate The Systemic Six banks. In a press release from something called Industry Source Network, this systemic neglect is given a name - The Bernanke Cycle…
The Bernanke Cycle works as follows:
1. Small business gets battered by the economy. The business is still profitable but less so than before.
2. The business sees its lending facility pared back or eliminated by their bank.
3. Small business cuts jobs, moves to a smaller building or stops future equipment orders so that their expenses reflect the reality of their new lower revenues.
4. These cuts also negatively impact other small businesses associated with the small business’ supply chain which gives the cycle a multiplier effect.
5. Small business owner takes their austerity program to their lender in hopes of restoring some of their lost borrowing capabilities. The lender looks at the lower revenues, layoffs and downsizing as a further deterioration of the business. The lender lowers the business’s line of credit even further.
6. The business now has to run on even less cash and is not able to replenish inventory at the levels needed to grow its business.
7. Go back to step 1 and repeat until the business becomes truly uncreditworthy and eventually becomes insolvent.
I couldn’t agree more, and I see very little being done to help, either nominally or tactically.
Source:
The Bernanke Cycle is Crippling Small Business (PRLog)
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Small Business Trends – Yet Another Disaster
by ilene - August 11th, 2010 4:36 am
Small Business Trends – Yet Another Disaster
Courtesy of Mish
Neither the treasury market nor small business trends reflect the incessant optimism of the stock market. These will eventually align, when I do not know.
Please consider NFIB Small Business Economic Trends for August 2010.
OPTIMISM INDEX
The Index of Small Business Optimism lost 0.9 points in July following a sharp decline in June. The persistence of Index readings below 90 is unprecedented in survey history. The performance of the economy is mediocre at best, given the extent of the decline over the past two years. Pent up demand should be immense but it is not triggering a rapid pickup in economic activity. Ninety (90) percent of the decline this month resulted from deterioration in the outlook for business conditions in the next six months. Owners have no confidence that economic policies will “fix” the economy.
LABOR MARKETS
Ten (10) percent (seasonally adjusted) reported unfilled job openings, up one point from June but historically very weak. Over the next three months, nine percent plan to increase employment (down one point), and 10 percent plan to reduce their workforce (up two points), yielding a seasonally adjusted net two percent of owners planning to create new jobs, up one point from June and positive for the third time in 22 months.
CAPITAL SPENDING
The frequency of reported capital outlays over the past six months fell one point to 45 percent of all firms, one point above the 35 year record low reached most recently in December 2009. The percent of owners planning to make capital expenditures over the next few months fell one point to 18 percent, two points above the 35 year record low. Five percent characterized the current period as a good time to expand facilities, down one point. But a net negative 15 percent expect business conditions to improve over the next six months, down nine points from June and 23 points from May.
INVENTORIES AND SALES
The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months lost one point, falling to a net negative 16 percent, 18 points better than June 2009 but indicative of very weak customer activity. Widespread price cutting continued to contribute to reports of lower nominal sales. The net percent of owners expecting real sales gained a point over June, rising to
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Atlanta Fed asks: How “Discouraged” are Small Businesses?
by ilene - May 29th, 2010 1:15 pm
Atlanta Fed asks: How "Discouraged" are Small Businesses?
Courtesy of Mish
The Federal Reserve Bank of Atlanta Asks How "Discouraged" are Small Businesses? Here are some Insights from an Atlanta Fed small business lending survey.
Roughly half of U.S. workers are employed at firms with fewer than 500 employees, and about 90 percent of U.S. firms have fewer than 20 employees. While estimates vary, small businesses are also credited with creating the lion’s share of net new jobs. Small businesses are, in total, a big deal.
Many people have noted the decline in small business lending during the recession, and some have suggested proposals to give incentives to banks to increase their small business portfolios. But is a lack of willingness to lend to small businesses really what’s behind the decline in small business lending? Or is it the lack of creditworthy demand resulting from the effects of the recession and housing market distress?
We at the Federal Reserve Bank of Atlanta have also noted the paucity of data in this area and have begun a series of small business credit surveys. Leveraging the contacts in our Regional Economic Information Network (REIN), we polled 311 small businesses in the states of the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee) on their credit experiences and future plans. While the survey is not a stratified random sample and so should not be viewed as a statistical representation of small business firms in the Sixth District, we believe the results are informative.
Indeed, the results of our April 2010 survey suggest that demand-side factors may be the driving force behind lower levels of small business credit. To be sure, when asked about the recent obstacles to accessing credit, some firms (34 firms, or 11 percent of our sample) cited banks’ unwillingness to lend, but many more firms cited factors that may reflect low credit quality on the part of prospective borrowers. For example, 32 percent of firms cited a decline in sales over the past two years as an obstacle, 19 percent cited a high level of outstanding business or personal debt, 10 percent cited a less than stellar credit score, and 112 firms (32 percent) report no recent obstacles to credit.
Perhaps not surprisingly, outside of the troubled construction and real estate industries, close to half the firms polled (46 percent) do not believe there
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Double Digit Health Insurance Hikes Crush Small Businesses
by ilene - May 29th, 2010 12:56 pm
Double Digit Health Insurance Hikes Crush Small Businesses
Courtesy of Mish
Small businesses across the country are getting hammered by rising medical insurance costs. Blue Shield of California is jacking up rates as much as 76%.
Is this what president Obama meant when he said "Change You Can Believe In"?
The LA Times reports Health insurance rate hikes hitting California small businesses could hurt state’s economic recovery.
Small businesses in California are being hit this year with double-digit hikes in health insurance costs that could hurt the state’s economic recovery as companies curtail plans for hiring and expansion to pay their insurance bills.
Five major insurers in California’s small-business market are raising rates 12% to 23% for firms with fewer than 50 employees, according to a survey by The Times.
Similar increases are being felt by many small businesses across the nation, including those in Texas, Ohio and Florida — mainly the result of escalating costs for medical care and pharmaceuticals, insurers say.
In California, some small businesses say they are stunned by their latest insurance bills. Longtime customers of Blue Shield of California, for instance, are facing rate hikes as high as 76% after the insurer lost money on a handful of plans.
"We don’t have that money," said Ann Terranova, a San Francisco financial planner who is dropping Blue Shield for herself and two employees after learning that their annual premium would jump to more than $19,000 a year from $11,000.
Financial pressures are also squeezing Tessier Cabinet Co., a 59-year-old family business in Montclair. Its president is reluctant to hire because of weak demand for his goods amid a 14% rate hike from Kaiser Permanente. "I’m ready to hang it up," Dan Tessier said.
Small firms nationwide are struggling with the problem as they worry about what the effect of the new national healthcare law. It will impose billions of dollars in taxes on insurance companies and require mid-sized firms to provide insurance for workers or pay fines.
"They are very concerned that their costs aren’t going to go down. They’re just going to go up," said Stephanie Cathcart, a spokeswoman for the National Federation of Independent Business in Washington. "They’re going to be paying new taxes, new fees. It’s kind of a double whammy on them."
Small businesses say 2010 is shaping up to be their most expensive year
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The PR War
by ilene - February 24th, 2010 3:43 pm
The PR War
Courtesy of James Kwak at Baseline Scenario
Every major bank other than Goldman Sachs must be ecstatically happy that Goldman exists, soaking up all the attention with its escapades in Greece and Italy. The other banks, by contrast, are trying to make themselves out to be white knights. See, for example, JPMorgan’s ad today in multiple major print newspapers describing its commitment to small business lending:
Like that picture of small-town America?
The main claim is in the second paragraph: a commitment to lend $10 billion to small businesses in 2010. These kinds of marketing claims are difficult to verify. But I gave it a shot.
“Small business” lending, in JPMorgan’s financial supplements (great web page, by the way), is almost certainly “Business banking origination volume,” on page 13 (PDF page fourteen) of the most recent supplement. To see how JPMorgan Chase defines its business lines, see page 3 (PDF page eight) of this Realigned Financial Supplement. “Middle Market Banking” is included in Commercial Banking. So the “Business banking” segment of Retail Financial Services is almost certainly small business lending.
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More from the Fed Minutes
by ilene - January 6th, 2010 3:44 pm
Fed Minutes Part 2 by Phil:
Staff Economic Outlook
In the forecast prepared for the December FOMC meeting, the staff raised its projection for average real GDP growth in the second half of 2009 somewhat, and it also modestly increased its forecast for economic growth in 2010 and 2011. Better-than-expected data on employment, consumer spending, home sales, and industrial production received during the intermeeting period pointed to a somewhat stronger increase in real GDP in the current quarter than had previously been projected. In addition, the positive signal from the incoming data, along with the sizable upward revisions to household income in earlier quarters and more supportive financial market conditions, led to small upward adjustments to projected growth in real GDP over the rest of the forecast period. The staff again anticipated that the recovery would strengthen in 2010 and 2011, supported by further improvement in financial conditions and household balance sheets, continued recovery in the housing sector, growing household and business confidence, and accommodative monetary policy, even as the impetus to real activity from fiscal policy diminished. However, the projected pace of real output growth in 2010 and 2011 was expected to exceed that of potential output by only enough to produce a very gradual reduction in economic slack.The staff forecast for inflation was nearly unchanged. The staff interpreted the increases in prices of energy and nonmarket services that recently boosted consumer price inflation as largely transitory. Although the projected degree of slack in resource utilization over the next two years was a little lower than shown in the previous staff forecast, it was still quite substantial. Thus, the staff continued to project that core inflation would slow somewhat from its current pace over the next two years. Moreover, the staff expected that headline consumer price inflation would decline to about the same rate as core inflation in 2010 and 2011.
Oil, nat gas and copper are up 20% since the staff determined consumer price inflation was "transitory."
Participants’ Views on Current Conditions and the Economic Outlook
In their discussion of the economic situation and outlook, meeting participants agreed that the incoming data and information received from business contacts suggested that economic growth was strengthening in the fourth quarter, that firms were reducing payrolls at a less rapid pace, and that downside risks to the outlook for economic growth had diminished a bit further. Although
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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