« Deliberate Mean-Spirited Distortions | Main | The "Good News" Wisconsin Indicator »

April 19, 2012

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

THANKS FOR THAT 'BITE OF THE APPLE'; Kind of getting to the 'CORE' of it all. US Corp Profits coming from both sides of the foreign Balance Sheets'. Could the US get any more irrelevant ? Always enlightening, Bill.

UNEMPLOYMENT---no surprise unemployment claims for last week were adjusted upward and this weeks remained at 388,000. Not much job creation despite 81% of US Big Cap companies beating earnings. Sooner or later the politicians will realize that this country is the land of small businesses and the days of large employers and unions are behind us. But it shows us the power of the big political contributions from both corporations and unions both private and public. 9,000,000 small businesses can turn the country around overnight--just get government out of their way and they will.

A BITE OF THE APPLE---Look at the markets go today. All based on what? Durable goods were down 4%. Transportation down. Consumer confidence down. Two new hospital reports released this week showed hospitals will lise revenue dramatically under Obamacare driving them further in the red. Another report released today showed that 351 small US banks cannot repay the $15B of TARP funds and said that was a prime reason that small businesses were not getting loans. Based on APPLE's incredible back to back earnings report released after the close yesterday. Apple is up $52 as I write this. Not that I'm complaining as our profit sharing plan owns Apple and increased our shares at 3PM yesterday. We also own many other Apple supplier stock. But here's the rub: Apple like GE,Walmart,Chipolte,McD's and most other large cap American companies got those earnings based on selling i phones to the new middle class rising in China. And, that middle class is rising on the backs of American workers who are saddled with employers struggling to pay their benefits, their taxes and the cost of regulations designed to protect the consumer. Protect me at what cost workers should ask? MY job? Not to rob from Romney who used Reagan's line last night but how can you be better off without a job? 71 Million peple are on food stamps. 5 million Americans have quit looking for work and fallen off unemployment. Under employed Americans are taking temp jobs. 8.2% of the workforce is unemployed and living off extended unemployment benefits. When Obama set out to level the playing field perhaps we thought he mean't giving the disadvantaged a better chance to rise up. It appears, however, that what he really mean't in his statement to Joe the plumber was to take from the advantaged and lower their standards. As median household income falls and gas and food prices rise the misery index climbs. As an employer I see no indication that this President has done anything to inspire me to hire Americans. So, the bite of the APPLE is better sweet. APPLE is a marvel of ingenuity and innovation. But, it's business model, while brilliant, exploits the weaknesses of the American system rather than building on our strengths as Boeing does. ( Interesting that Holder attacks both of these successful companies.) Investors reward profits and profits as Apple proves come these days from exploiting overseas workers and selling to the rising middle class overseas. Want the middle class jobs back in America? Deregulate, lower taxes and restructure the educational system to match the demands of industry in the 2000's.

ON THE LAFFER CURVE----one needn't study much history to realize that capital goes to the markets with the lowest taxes. American industry cannot invest fast enough overseas where they pay zero US tax and have created tens of millions of new jobs for people who who pay tax to their government and are happy to have them. The darlings of the stock market: Apple,GE,Chipolte,Panera Bread, McD's,etc are all ivesting as fast as they can overseas. At home Holder attacks Boeing for opening a plant in SC and Apple for brokering ebook sales. The NLRB pushes for more unionization--further incentivizing foreign moves. EPA pushes out more anti oil regulations. And, Obama wants more taxes. This is progrowth, projobs? So far median household income has dropped from $57k to $55k in 3 years. Food and gas have skyrocketed. Housing plummetted. And, if you take out the rise in Federal income from the median income I would bet the median nongovernment household income has dropped around $4k. The Laffer curve simply says that if you do things to give people an opportunity to go elsewhere they will. And, in response to higher taxes revenue drops as they do so.

THINGS ARE LOOKING UP--if you live in an oil state.

I just returned from a meeting with many of my long time friends who own Executive Search firms across the country and Canada. Keep in mind I have been in the business for 37 years. Those who live in oil producing states are seeing an increase in business, especially Temporary Hires, across most industries. Manufacturing is picking up in those areas as well. But, other than oil and gas companies, the hiring is of contract workers and temps. Those of us not in the oil producing areas of the country are seeing a very cautious employer base reluctant to hire or invest in their businesses. Let's look at reality:
---Home prices continue to drop. Nothing has been done to bring back the single family home industry.

---Obamacare costs continue to be implemented. Obama is currently trying to push the implementation of the reduction of Medicare benefits off until after the election with a temporary "bonus" extension.

---College graduates are 53% unemployed/under employed. Returning Vets are largely unemployed. Inner city black young adults are 43% unemployed.

---The administration has just implemented new regulations against oil and gas producing companies through EPA bypassing Congress.

---States no longer have any stimulus funds left to continue the "shovel ready" projects.

---Banks continue reluctant to loan to small businesses.

---8.2% of Americans are "officially" unemployed with another 8% unemployed not looking.

---Huge mandatory tax increases and budget cuts loom over the markets. Including social security.

---The NLRB has just released new guidelines making it much easier for unions to attempt to organize American industry.

---In the stock market if you review the earnings reports of the major companies you see that the profit gains are slowing and the revenue growth is turning south forcing companies to make profits grow through "efficiency" moves also known as less people/benefits.

---The administration has a deficit of $700B through the first 6 months of the FY. Immediately after the election there will be a need to increase the debt ceiling once again setting the stage for another fight post election.

---In a recent survey of small business owners they were asked to define their reluctance to expand: 34% uncertainty in the economy, 35% inablilty to get capital (60% turndown rate at the bank), 14% new regulations, 8% other and 9% hiring. Considering there are 9 million small business owners the potential for jobs is there but inhibited by ineffective leadership. Even so, small business woners have created nearly all of the new jobs in America.

---California now has a $1B agricultural production of "legal" by local law but "illegal" by Federal law marijuana. The cash crop of the Northern California farmer. And, the crime wave and guns to go with it.


---On the bright side Rubio is beginning to look more and more like a willing VP candidate with Romney. The only real hope in sight is a win for that team.

ADVANTAGE ROMNEY; His overall simplification and reduction of Base Rate naturally 'folds' into presently proposed workable fiscal solutions. One of the important aspects will be to 'widen the Base'. Increased tax rates, especially to a narrower base, only increase the 'WIGGLE' for each Government 'WAGGLE'; and on it goes. "THANK GOD ;THE DAY OF DELIVERY APPROACHES". (the 'Link'to the California Piece so enlightening; I had to send to Romney's Campaign)

I choose Perspective #2. My guess is that we're "right" of the Laffer Curve peak, based on historical precedent. We had a booming economy when the top tax rate was 28%, with reasonably minimal deductions. The reduction of the FICA tax rate for individuals effectively reduces current rates, but only minimally and that cannot stand if we want a solvent SocSec system. Reduce rates and revenues will increase. Increase them and we slip back into a full recession. #1 is accurate, but it's a description, not a solution. #3 starts with a false premise, that "society is unfair," or at least that "inequality," whatever that is, is unfair.

My column The Mandate is up on RedState.

The comments to this entry are closed.