Watch President Obama's speech on climate change today at 1:35PM EST

At 1:35 pm EST today, June 25th, President Obama will speak at Georgetown University on the growing threat of climate change. He will lay out his vision of where we need to go to do what we can to address and prepare for the serious implications of a changing climate. Tune in at whitehouse.gov/live. A video preview is available here. 

End tax cuts for the wealthiest

This afternoon President Obama will hold a press conference to talk about growing the U.S. economy and reducing the deficit.  He will certainly address the fictitious “fiscal cliff” you’ve heard so much concern about.  You can watch it live here.

The talking point on this scary fall is that the country’s economy will dive into a recession on January 1 if we don’t take action by the end of the year.  The truth is that Congress can act on all the fiscal issues involved in the early part of January and the average American won’t feel any pain. (Wall Street investors will make all their money back from any stock losses during December so don’t cry for them.) 

We aren’t in jeopardy of falling off a cliff.  It will be more like a slow motion rappel down the hill with a secure harness allowing us to zip right back to the top when compromise is achieved.

We can expect the President to talk about the Bush-era tax cuts that are set to expire for everybody on December 31^st.  The President ran on the pledge to only allow these tax cuts to end for individuals making over $200,000 and joint filers making over $250,000 a year. 

The controversy over this tax policy has been going on for several years.  My first opinion editorial in The Hill ran in September 2010.  The message was very simple then as it is now—end tax cuts for the wealthiest.

The Hill's Congressional Blog
September 23, 2010

End tax cuts for the wealthiest

By Frank Knapp, Jr.

The Board of Directors of The South Carolina Small Business Chamber of Commerce voted this week to support the effort in Congress to end tax cuts for the very rich. Here’s why.

First, letting the tax cuts for the top two income brackets expire will impact very few real small business owners. The reality is that almost all small business owners are middle-class Americans with middle-class incomes. Of those who aren’t, more small business owners are lower income than upper income. Only two to three percent of tax filers who claim income from a business make over $250,000 a year. Many of these people are wealthy passive investors or part of large corporate law and accounting firms who invest in financial and real estate partnerships — not hands-on small business owners.

While big business CEOs, Congressional lobbyists, Wall Street bankers, some attorneys and other professionals will lose their tax cuts on the portion of their incomes that is over $250,000 (they keep the tax cuts on the portion under $250,000) — the vast majority of small business owners will not be impacted at all.

Second, if our government is going to borrow $700 billion from China and other nations, using it to cut taxes on the very rich is an extremely counterproductive way to put American’s back to work and grow our economy.

The Congressional Budget Office this year looked at 11 policy options in terms of boosting small business and creating local jobs. It found that keeping the tax cuts for the top two income brackets was the least effective because higher-income households simply don’t spend as much of their income as middle and lower-income households. Remember — spending money in your local economy helps small businesses, not sending checks to hedge funds or putting money into “too big to fail” banks that favor quick buck speculation at the expense of Main Street investment.

Instead of handing more money to those who won’t create main street jobs, the money would be better used to help the real engine of our economy — the small businesses that create most of our new jobs. We should be stimulating more customers for our small businesses through infrastructure projects and keeping teachers and law enforcement officers working. We could also be giving incentives to small businesses to start hiring again by reducing their payroll taxes or other measures. And we can do all of this for a lot less money and reduce our nation’s deficit at the same time.

Allowing the tax cuts on the top two income tax brackets to expire and putting the money into more productive “job creating” or deficit reduction uses is the right business decision for our country’s small businesses and our nation’s economy.

Frank Knapp, Jr. is the President & CEO of The South Carolina Small Business Chamber of Commerce.


Source:
http://thehill.com/blogs/congress-blog/economy-a-budget/120545-end-tax-cuts-for-the-wealthiest

NFIB's bogus poll

Two recent polls of businesses seem to show conflicting results:

“69% of small business owners and manufacturers say President Obama’s Executive Branch and regulatory policies have hurt American small businesses and manufacturers.”

“39% of small businesses say that President Obama is the most supportive candidate of small business, whereas only 31% say the same of Governor Romney.  And 28% are still not sure which presidential candidate is more suportive of small business.”

Sure the questions weren’t the same but the conclusions should be highly correlated.  If 69% of small businesses think that President Obama has been very bad for them, then we shouldn't expect 28% to be undecided and only 31% favoring Mitt Romney on the issue of which candidate is more supportive of small business.

So what happened?

The first finding was from a National Federation of Independent Business/National Association of Manufacturers (NFIB/NAM) poll released yesterday.  The second was from a George Washington University/Thumbtack (GWUT) poll released last week.

The NFIB/NAM poll surveyed businesses with 2 to 499 employees while the GWUT poll surveyed businesses with 1 to 499 employees.  What’s the difference?  A lot!

The GWUT poll analysis says that, “According to US Census data, 91.6% of small businesses have between one and five workers.  Another 3.8% have 6-10 workers, and 4.6% have over 11 workers.”  The authors of the GWUT poll insist that their respondents closely matched the Census data.

So how well did the NFIB/NAM poll do with keeping close to the Census data of size of businesses?  Not very well.

First, the NFIB/NAM poll didn’t include sole proprietors.  So their percentage of respondents with 5 or fewer employees (48%) was vastly underrepresented.   But while the truly small business owners were under surveyed, the NFIB/NAM poll over surveyed the larger businesses. 

The Census data, according to the GWUT poll, shows that 1.9% of businesses have 21 to 100 workers and only 0.33% of businesses have between 101 and 500 employees.  What were the percentages of NFIB/NAM respondents following into these categories?  18% had between 21 and 99 workers and 6% had 100 to 499 employees?

Here are the comparisons between the Census data and the sample used by NFIB/NAM.

Workers           Census             NFIB/NAM
1-5                   91.6%              48%
21-100             1.9%                18%
101-499           0.33%              6%

It doesn’t take an experienced researcher to conclude that the sample used in the NFIB/NAM poll was skewed in favor of larger businesses.  This alone should disqualify the poll as representing the opinions of small business owners.

But wait, there’s more.

All the respondents in the NFIB/NAM poll weren’t even business owners or presidents of the companies.  This poll included 22% of the responses that came from managers.  We have no idea who these managers were or what they managed.  It could have been the maintenance department as far as we know.  Yet the NFIB/NAM poll counts their opinions just as much as the opinion of real small business owners.

But don’t blame the polling company that conducted the survey for this pretty worthless “small business” NFIB/NAM poll…blame the organizations who called the shots on the sample, the questions and the interpretation of the results.  

The polling company’s representative was very careful in his released comments on the poll.   Bill McInturff states, “It’s clear that small business owners and manufacturers are becoming increasingly frustrated by the federal government’s inability to solve America’s economic problems.  Manufacturers place most of the blame squarely on policies coming out of Washington.” 

There you have it from the man who knows the intricate details of who was surveyed and exactly who said what in the NFIB/NAM poll.  He carefully did not say small businesses blame Washington (and by inference the President) for the economy.   He said “manufacturers”.

Obviously this poll was intended to mislead the public and politicians during the last weeks of the Presidential campaign.  The NFIB has once again shown that it really doesn’t represent the true small businesses of this country and it doesn’t mind letting the good name of small business to be misused by big business interests.  In fact, it is paid millions to do just that.  As I have said numerous times before, the NFIB is a small business pretender.

Fortunately, today a new website was launched (www.NFIBexposed.org) that will help the public, politicians and press lift up the curtain and see exactly who the NFIB really is and who’s bidding it is doing. 

Déjà vu all over again…with a bad twist

Yesterday President Obama reiterated his position that he supports extending the Bush-era tax cuts for the lower 98% of all taxpayers for another year.  Of course, that also means that he supports allowing those same tax cuts for the top 2% of tax payers to revert back to the Clinton-era levels (you remember the 90’s when the economy was soaring and we actually had a budget surplus)—a position shared by most Americans.

Of course the President’s GOP opponents argue that all the Bush-era tax cuts should be extended because to do otherwise would cause the wealthiest to stop creating jobs. 

Sound familiar?  It should.  We’ve been having this debate since 2010 when all the tax cuts were set to end.  The South Carolina Small Business Chamber, the American Sustainable Business Council, Business for Shared Prosperity, the U.S. Women’s Chamber of Commerce and other business groups support allowing the tax cuts for the upper 2% to expire and to use the new revenue for deficit reduction and investment in the nation’s infrastructure, first responders and teachers.

I wrote about this issue in The Hill once in 2010 and again in 2011.  The point is pretty simple.  Very few small business owners (less than 3%) fall into the upper 2% tax brackets and many that do have some business income are K Street lobbyists, hedge fund managers, high-powered consultants, Wall Street bond traders and the wealthiest Americans.  They are not your Main Street small business people.

Plus, businesses do not hire workers based on the business-owners income tax rate.  Businesses hire workers when the demand is there for products and services. 

But here is the new twist to this old debate. 

The traditional line against the tax rates going up for the wealthy is that it would hurt the small business job creators.  This argument recognized that small businesses create most new jobs but distorts the reality of the income of small business owners.  As indicated above, very few have incomes that would cause them to see a tax increase if the Bush-era tax credits on the top 2 tax brackets increased.

But yesterday in a radio interview, Presidential candidate Mitt Romney said, “What the president is proposing is therefore a massive tax increase on job creators and on small business.” 

AND???  Is Mr. Romney now making a distinction between “job creators” and “small businesses”? 

I thought maybe he simply misspoke but Romney spokeswoman Andrea Saul also made the distinction yesterday.  “The president’s latest bad idea is to raise taxes on families, job creators and small businesses,” she is quoted as saying.

This is apparently now the official position of the Romney campaign.  Small businesses are now not to be recognized as the same as job creators. 

Why is this important?  Because one of the few things small business has going for it in government is the deserved reputation as job creators.  But even with that we still don’t get the respect we deserve from government which at all levels heaps attention and incentives on big business while giving crumbs to small business.

If there is now an official effort to decouple job creator status from small businesses, we are in deep trouble.  The billionaires and multinational corporations that are trying to buy this election to totally control our economy and government will have driven the final stake into our hearts.

377 Million reasons for small business to like Obamacare

One of the provisions of the Affordable Care Act--Obamacare--is the requirement that 80% to 85% of health insurance premiums go toward actual medical costs and not to overhead and profit of the insurers.  Otherwise the policy holder is due a refund at the end of the year.

This medical loss ratio went into effect in 2011.  Now we our learning exactly how beneficial this part of Obamacare is for the American public.

The Kaiser Family Foundation has estimated that small businesses are due about $377 million in health insurance rebates thanks to President Obama's healthcare reform.  Big business should receive about $541 in rebates and individuals about $426 million.

This is the second Obamacare provision that is making health insurance more affordable for small business.  Since the reform was signed into law in 2010, hundreds of thousands of qualifying small businesses have been receiving federal tax credits for offering health insurance as an employee benefit. 

And there is more good news on the healthcare front.  According to the Centers for Medicaid and Medicare Services health care spending nationally is experiencing its slowest rate of increase (4% a year) in 50 years.

Controlling health care costs was something that most of us felt that Obamacare did not sufficiently address.  And while the Great Recession has played a role in restraining healthcare spending over the last few years, experts agree that the economy doesn't deserve all the credit for bending the healthcare cost curve.

Here are some of the other explanations offered by health economists.

--many insurers and health systems are moving to accountable care that rewards quality of care not quantity, focusing on patient follow-up to insure physician instructions and medication regiments are being kept in order to prevent expensive visits to the hospital.

--there has been an increase in high-deductible health plans that require people to pay more out of their pockets for healthcare costs before insurance benefits kick in resulting in people opting not to seek medical attention, even vaccinations (i.e. self-imposed healthcare rationing).

--a lack of expensive new drugs hitting the market and more emphasis on using generics is holding back increases in pharmaceutical costs—a  major healthcare spending driver.

--efforts to reduce medical errors that result in expensive and needless healthcare services are working.

But in addition to all these contributing tangible factors is the meaningful, if hard to measure, effect of the country’s attention being focused on the need for healthcare reform.

According to Mark McClellan, President George W. Bush’s Medicare and Medicaid director, past slowdowns in healthcare spending “have occurred not just because of the direct effect of reforms, but because of greater attention to reforms changing provider and patient behavior.”

When we all are talking about a problem and what to do about it, that alone can change our behavior.  Patients are a little more willing to take care of themselves and be more thoughtful in the medical services they seek.  Doctors and hospitals are a little more aware of the cost of procedures and best practices.  And insurers are a little more demanding on healthcare providers and a little less on raising premiums.

And there has certainly been no one who has directed the public’s attention to the healthcare crisis and reforms than President Obama.  For that alone he deserves enormous credit.

Hope and danger in JOBS Act

Today President Obama is scheduled to sign the JOBS Act, legislation that has received both enthusiastic support from the business community and scorn from regulators and consumer organizations.  So what is the reality?

Well, the JOBS Act is deserving of both praise and scorn. 

First the praise.  Contained in the Act is a provision for enabling small businesses to have access to large numbers of investors through crowdfunding.  The concept is simple.  Allow many people to invest relatively small amounts of money into a small business trying to raise limited amounts of money and thus justifying reducing the regulatory oversight on of the Security and Exchange Commission.  These are not gifts as in today’s social crowdfunding, these are the purchasing of shares of a company.

We were successful in amending the crowdfunding part of the JOBS Act in the Senate so as to provide sufficient individual investor protection on this new source of capital for Main Street small businesses.  Not only is it critical that small businesses have better access to capital, especially since banks are not meeting the needs of small businesses according to new analysis, but also because we need investors to feel secure in using crowdfunding.  If the public thinks they will be defrauded of their money, they won’t’ use crowdfunding investing.

Which brings us to the JOBS Act scorn.  The rest of the Act deserves concern because it reduces accounting and disclosure rules for much larger businesses, those capitalized up to $1 billion and having gone public as “big league” securities for less than five years .  The real fear is that this deregulation might eventually result in financial scandals that will shake public confidence even for investing in our small businesses.

So while we hope that the SEC writes the regulations for implementation of the JOBS Act so as to minimize potential fraud on Wall Street, those of us who support crowdfunding to help most small businesses not looking for the “on ramp” to the DOW need to get to work.  We need to create the vehicles that the public will use to make small investments in their local community businesses as safe as possible to protect consumers.  If we don’t, this new hope for accessing capital will fade once again for small business.

Cracking down on China’s unfair trade

The argument that “free” trade will create more jobs here in the U.S. stands in stark contrast to the facts.  Since the 2001 trade deal with China we’ve lost 6 million manufacturing jobs here at home.

The calls for “fair” trade are growing.  Our manufacturers find it almost impossible to compete with foreign manufacturers that freely pollute and pay only dollars per day to workers toiling in substandard  conditions.  These foreign manufacturers are often subsidized by their governments in violation of World Trade Organization rules. 

Former South Carolina Senator Fritz Hollings wrote a great opinion editorial in 2010--“Wake up, American, or lose the trade war--that is a must read to understand the importance of fighting and winning trade wars instead of retreating as the U.S. does. 

In his State of the Union address this year President Obama called for tougher trade enforcement to give our manufacturers a more level playing field to compete.   I expressed my hope that he meant what he said and that we should support him.

This week the Obama Administration’s Department of Commerce announced that new tariffs were coming for Chinese solar panels.  The story from The Hill is below. 

Let’s hope there is more of this willingness to fight for our manufacturers to come.

---------------------------------------------------------------------------------------------------

The Hill
March 21, 2012

US imposes tariffs on Chinese solar imports

By Andrew Restuccia - 03/20/12 03:46 PM ET

The Commerce Department said Tuesday it will impose tariffs on Chinese solar panels imported into the United States.

In a preliminary decision, the department found China is unfairly subsidizing certain solar panels. As a result, the department ordered U.S. Customs and Border Protection to impose tariffs of 2.90 to 4.73 percent in the form of cash deposits or bonds on Chinese solar panels imported into the United States.

The finding is a major victory for a group of U.S. solar panel manufacturers that alleges China is flooding the U.S. market with underpriced solar panels and subsidizing its solar industry in a way that violates World Trade Organization rules.

The companies filed a petition with the Commerce Department and the International Trade Commission last year requesting the tariffs.

“Today’s announcement affirms what U.S. manufacturers have long known: Chinese manufacturers have received unfair and WTO-illegal subsidies,” said Steve Ostrenga, CEO of Helios Solar Works in Milwaukee, Wis., in a statement. Ostrenga is a member of the Coalition for American Solar Manufacturing, which supports imposing tariffs on Chinese solar imports.

“We appreciate the Commerce Department’s hard work in bringing these subsidies to light, and we look forward to addressing all of China’s unfair trade practices in the solar industry,” he said.

The trade case has caused a rift in the solar industry, with power generators and others who have benefited from low-price panels raising concerns that the petition will drive up costs.

But Rhone Resch, president of the Solar Energy Industries Association, a solar industry trade group, said in a statement that the tariffs will likely not have a “material impact on the U.S. market.”

SEIA, pointing to the decision, called on companies to launch “global and regional dialogues on trade and competitiveness and the role of government in encouraging development of the global solar energy industry.”

The Commerce Department said Tuesday it will make a final decision on the tariffs in June. The International Trade Commission will then need to finalize its finding that Chinese solar imports harm the U.S. solar industry before a final order can be issued. An ITC decision is expected in July.

The Commerce Department is separately weighing whether China is flooding the U.S. market with underpriced solar panels. The department will make its preliminary determination on May 17.

http://thehill.com/blogs/e2-wire/e2-wire/217091-us-imposes-tariffs-on-chinese-solar-imports

Access to capital through crowdfunding

This week I’m off to DC to join David Levine, co-founder and director of the American Sustainable Business Council, in a media tour for the ASBC (I serve as vice-chair of the organization).  We will be doing a few other things including have discussions with the Americans for Financial Reform and hopefully some Congressional staff on the issue of crowdfunding.

I first mentioned crowdfunding as a potential tool for small businesses and entrepreneurs to have access to capital way back on November 17, 2010.  At that time only a few organizations, including the ASBC and the SC Small Business Chamber of Commerce (SCSBCC), were aggressively supporting changing SEC regulations to allow crowdfunding and we thought it was a long shot.  My have things changed.

First President Obama announced his support and instructed the SEC to seriously consider it.  Then the House overwhelmingly passed a version of crowdfunding.   Then bills were introduced in the Senate.  The House just recently passed more legislation including crowdfunding again and this week there may be action in the Senate.

But with all this relatively rapid action there is the distinct possibility that the original crowdfunding concept to really help small business will be lost as Congress and special interest groups expand the concept well beyond the initial idea.  The ASBC and SCSBCC will be working in DC this week to protect our small business interests.

The ASBC has posted on their website (also below) a good overview of how crowdfunding can help small business.  I’ll keep you informed of actions on the Hill.

Crowdfunding: Accessing Capital for Small Business

Given the challenges small businesses and entrepreneurs face in raising capital to help them grow and compete, the crowdfunding concept is a viable solution. Crowdfunding, especially in the context of community-based financing of local projects, has the potential when done correctly to be a very useful tool in opening up access to capital for business. Crowdfunding simply put is raising investment funding in small increments from a large number of people often through Internet marketing.

Current Securities and Exchange Commission (SEC) rules make this type of small dollar investments cost prohibitive due to registration and reporting requirements at both the state and federal level. Since 2010, ASBC has been one of the earliest supporters of crowdfunding as a vehicle for small business to gain access to capital. ASBC has worked on Capitol Hill to insure that the interests of locally-owned small businesses and entrepreneurs are properly served in the development of crowdfunding legislation.

Legislation is moving through Congress that would create a Crowdfunding exemption to the SEC regulations. The House passed the McHenry bill, the Entrepreneur Access to Capital Act (HR. 2930), with an overwhelming bipartisan majority. In the Senate, two bills are pending: Democratizing Access to Capital Act (S.1791) by Sen. Scott Brown (MA) and the CROWDFUND Act (S.1970) by Sen. Jeff Merkley (OR). We applaud the work of both senators.

It is vitally important for any crowdfunding legislation to allow small businesses to pursue maximum investments of $100 or slightly higher from individuals with an aggregate cap on total capital raised in the range of $100,000. Low individual investor limits combined with aggregate caps promote community-based economic support for local businesses while keeping potential investor losses and fraud risks relatively low; these limits allow relatively light SEC oversight.

We understand the argument for making intermediaries optional, since many small business owners and investors are not tech-savvy and may not be comfortable investing via an unfamiliar third-party platform. However, further work is needed to ensure sufficient investor protections without requiring an intermediary. We support strong and enforceable investor protections that won’t unnecessarily restrict the flow of capital within local communities and to local projects.

Because individual state laws on investments pose an obstacle to crowdfunding, the federal law should override state regulations.

For more information, or to get involved in the working group that manages this campaign, please contact us.

Multinationals aren't here to help

“We don’t have an obligation to solve America’s problems.” 

Remember this quote from an Apple executive as reported by Charles Duhigg and Keith Bradsher.  It appeared in the first of a two part story that will surely win the two New York Times journalists deserved recognition for exposing Apple’s decidedly un-American manufacturing standards in China.

Remember this quote the next time you hear Apple, which is sitting on $98 billion in cash on hand, and other multinational corporations offer to help the American economy if we only lower their corporate taxes and let them bring home overseas profits with little taxation so they can hire workers. 

Remember that quote the next time Apple and their ilk lobby for more trade deals with other countries to create jobs here at home like we did with China in 2001 (we’ve lost 6 million manufacturing jobs since then). 

Remember that quote when you hear Apple and their big business elite or one of their organizations like the U.S. Chamber telling the American people that they know what is best for our country.

Remember that the real motive of Apple and other multinational corporations is not to solve America’s problems.  That’s because they are not American businesses any longer—they’re “citizens of the world” Thomas Friedman correctly points out in his column yesterday.

These multinationals have no allegiance to any country.  They have only one goal—to make as much profit for their executives and shareholders as possible by increasing production and lowering costs.  The slave-labor like conditions and slave-labor wages at Apple’s Chinese manufacturing plants are detailed in the New York Time’s stories.

Likewise, America should have no allegiance to these multinationals.  When Steven Jobs told President Obama last February that the iPhone jobs aren’t coming back to America, the President should have told him that we were going to start getting tough on trade enforcement.  No longer should we allow other countries to produce cheaper products due to little concern for their workers and environment.  “Meet our standards or pay tariffs” the President should have told Mr. Jobs. 

Almost a year after that meeting with Mr. Jobs, the President did call on tougher trade enforcement in his State of the Union.  Let’s hope he means it and give him our support.

White House hears calls for action

I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.—President Barack Obama, State of the Union 2012

A lot of people, including me in my blog on Monday, have been calling for the President and Congress to take strong action to stop the housing foreclosure crisis not only to keep hard working American’s in their homes but also to revive the housing construction industry.  Last night President Obama indicated that he has heard our message and will challenge Congress to force financial institutions to allow “responsible” homeowners to refinance at today’s rock bottom interest rates with “no questions asked”.

 That’s great news.  But now we need to see the details of the plan.  How are “responsible” homeowners defined?  We need to include as many homeowners as we can, not just ones current in their mortgages.  And we also should include investment properties not just owner-occupied housing.  It hurts the economy and property values just as much went a rental unit occupied by a working American is kicked out of the house they rent due to foreclosure. 

The bigger issue is how do we stop the big banks from killing the idea in Congress?

On Monday I said, “It is time for these private banks to give back to the country for bailing them out.  The profits they’re reeling in now wouldn’t exist if it wasn’t for the taxpayer.”  Last night the President said the program “will give banks that were rescued by taxpayers a chance to repay a deficit of trust.”

 But I doubt that our calls for the big financial institutions to grow a conscience will be effective.  That's why we must all push hard against the upcoming lobbying effort to stop this plan.  Tell your member of Congress to support the President on this issue.

A needed message in State of the Union address

One of the issues we are expecting to hear about in President Obama’s State of the Union address tomorrow night is the housing crisis.  Economists tell us that the nation’s economy won’t dramatically improve until the housing market stabilizes and demand for new homes gets back on track.  That’s how important the housing construction industry is to creating jobs.

But that industry won’t be coming back for a while if there is no effective action taken by the federal government.

As I pointed out last October, according to an analysis by McClatchy Newspapers, at that time there were 2.2 million homes whose owners had received initial foreclosure notices or notices of default but hadn’t yet been foreclosed on.  Another 1.9 million properties at that time had owners who were 90 days or more behind on their payments but hadn’t yet been served with foreclosure notices.  That’s 4.1 million homes that are soon to be put into the foreclosure bucket.  To put that into perspective the official number of all houses for sale in the nation is only 3.5 million.

The drum beat for the President and Congress to take strong action to solve this crisis to boost our economy has been growing.  Last week 27 Congressional Democrats from California asked for a meeting with the President after meetings with top Administration officials such as Tim Geithner failed to produce needed action.

For some time I’ve been advocating that we should “muscle the private banks and Fannie and Freddie to do everything in their power to keep the current home owners in their homes by letting them refinance at today’s rock bottom rates (no questions asked) and, if necessary, reducing the principle they owe.” 

There is a push in the House to have the government-controlled Fannie and Freddie write down mortgage principles for owners deep under water.  Federal Reserve Chairman Ben Bernanke wrote this month that “it might be worth the expense to lose money now in an effort to shore up the books of the government-sponsored enterprises for the long term while helping the economic recovery.”

But what about the big private banks of JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, and Ally Financial?  The states’ attorneys general have been working since the fall of 2010 to have these financial giants help the homeowners they victimized by their earlier foreclosure papers robo-signing scandal.  However this agreement is expected to compensate only about one million homeowners with principle reductions.  That will be too late for many and a drop in the bucket to really help our economy.

It is time for these private banks to give back to the country for bailing them out.  The profits they’re reeling in now wouldn’t exist if it wasn’t for the taxpayer. 

A call for principle reductions and the lowering of interest rates for both public and private mortgage holders in trouble should in the President’s speech tomorrow night.  If he really wants to get the economy rolling sooner than later, this is the course of action we must follow.

Treasury's failure hurt small businesses

The U.S. Government Accountability Office (GAO) has issued its findings on why the Small Business Lending Fund (SBLF) passed by Congress in 2010 turned into an abysmal failure in promoting loans to small businesses. 

Only 332 of the 935 community banks applying for the extremely low interest funds to be used for the loans were approved by the U.S. Treasury Department.  Only $4 billion of the $30 billion allocated to the fund was actually approved—13%. 

The GAO is polite in its assessment of how Treasury administered the SBLF.  I’ll be more direct.  Treasury screwed it up royally.  I’ve told Administration officials this in person. 

Treasury blew it and our economy and small businesses are still paying the price.  Had Treasury put as much emphasis on making the SBLF work as they did in bailing out the big financial institutions, our economy would be growing much faster today and Treasury’s boss, President Obama, wouldn’t be under attack for our slow job growth.

The 99% need help

Yesterday the Senate failed to move forward the President’s plan to invest $35 billion in the states to help keep teachers, law enforcement personnel and firefighters from being fired due to budget shortfalls.  The 60 votes were needed to keep the measure alive but all 50 of the GOP Senators voted against it.

So what was the reason for voting against keeping more of these essential workers on the job and thus keeping more money on Main Street for our small businesses? 

The plan would have been funded by a 0.5% increase in taxes on income over $1 million.  That’s not five percent; it’s one half of one percent.   But in spite of 64% of the public agreeing that asking millionaires to pay just a little more to help with jobs, the Senate Republicans said no.  Not only did they say no, they said that they were just protecting 300,000 small business owners having a hard time with cash flow and credit. 

Now, I don’t know if that 300,000 figure is accurate or not.  The real number of taxpayers with some business income and making over $1 million is only 1% according to the Tax Policy Center.  I’ll let someone else do the math.

But using any small business owner making over $1 million a year as an excuse not to help our nation’s economy is a ridiculous and illogical argument.

Any small business owner taking home this kind of massive income is not struggling with cash flow and credit problems.  Period. 

If a small business can afford to pay its owner over $1 million in compensation, that owner can afford to pay a half a penny more in taxes on every dollar over a million to help keep teachers and first responders on the job and more customer demand for the other 99% of small businesses.

Let upper-end Bush-era tax cuts expire

By Frank Knapp, Jr.
The Hill's Congress Blog
September 21, 2011

 

President Obama’s call for cutting the deficit by $3 trillion includes the roll back of the Bush-era tax cuts on the top income tax brackets, a move expected to bring in about $800 billion over the next 10 years.

As expected the defenders of the wealthiest two percent of taxpayers, such as Speaker John Boehner, trotted out their bogus criticism of the proposal saying that it hurts small businesses, the “job creators”.

First, the data clearly shows that only 2 to 3 percent of tax filers reporting some income from a small business have family incomes of over $250,000 a year, the filers who would be impacted by the proposal. This minority of “small business owners” consists largely of very successful attorney’s, physicians, hedge fund managers, K Street lobbyists, high-powered consultants, Wall Street bond traders and the country’s wealthiest millionaires.  An incremental tax increase on these Americans will not affect the number of employees they hire one bit.

But while the critics of President Obama’s plan are disingenuous as to who it would impact, at least they continue to remind the public that most net new jobs are in fact created by small business.  Now if they would only support proposals that directly target small business for assistance.

When the President announced his jobs plan earlier this month, my reaction was, “Finally, a jobs plan that actually helps the largest jobs-producing sector to create jobs—small business.”

It was not just another trickle-down proposal for job growth.  The American Jobs Act would infuse money into Main Street by putting more dollars in the hands of consumers, cut payroll costs for small businesses to help their bottom line and reward small business with tax credits for hiring the unemployed especially veterans.

Tax credits for small businesses creating jobs is a particularly sound government policy.  It’s not a tax cut for big business and cross your fingers that they will hire.  It’s a tax credit that a small business gets only if it hires a new employee under specific conditions.  No hiring, no expenditure of government funds.  This is a common sense job creation proposal.



Unfortunately, Mr. Boehner did not endorse any of these proposals to help small business in his subsequent speech at the Economic Club of Washington. In fact, Mr. Boehner disparaged the proposed job tax credits for small businesses saying that this would make reforming the “tax code more complex”.

It is time for Congress to put actions behind their loving praise for small business and quit holding us up as a shield to protect the wealthiest individuals and corporations.

Hands-on small business owners are not Lloyd Blankfein of Goldman Sachs who received $800,000 last year due to the upper-end Bush-era tax cuts; or Rex Tillerson of Exxon Mobil who netted $1.454 million in 2010 because of the tax cuts; or Rupert Murdoch of News Corporation who saved $1.2 million last year from the controversial tax cuts.

The CEO’s of the biggest multinational corporations are just some of this country’s wealthiest people who the President is asking to sacrifice just a little more so that the small business owners of the local retail shops, plumbing companies and restaurants can have more customers and create more jobs.


Mr. Knapp is the President and CEO of The South Carolina Small Business Chamber of Commerce.

Source:

http://thehill.com/blogs/congress-blog/labor/182961-let-upper-end-bush-era-tax-cuts-expire

No Extra Credit

By JOE NOCERA
The New York Times
September 20, 2011

What if everything that is happening in Washington right now is just meaningless noise?

What if the Obama jobs plan, the coming deliberations of the supercommittee, the debate over taxing millionaires — what if none of it is likely to make a whit of positive difference for the economy? What if the only thing that matters is something Congress and the president rarely mention, and can do nothing about?

I’ve come to believe this is the case. What is killing the economy is lack of credit. In the aftermath of an asset bubble, invariably the result of too-loose credit, banks don’t just tighten their standards; they practically shut down.

This was true during the Great Depression, and it’s been true during the Great Recession. And until normal credit standards return, economic growth will continue to be stunted. “Overreaction to the credit bubble is now the knee on the throat of the economy,” says my friend Lou Barnes, a mortgage banker at Premier Mortgage Group in Colorado.

Not long ago, Lou sent me a powerful new piece of evidence, a presentation put together by Paul Kasriel, chief economist for Northern Trust. Titled “If Some Dare Call It Treason, Was Milton Friedman a Traitor?” (the title will become clear shortly), it has the force of revelation.

The first part of the paper is spent “dispelling the nonsense” (Kasriel’s words) that factors besides credit are the root of the problem. He persuasively mocks the idea that “uncertainty” is holding back companies from borrowing. (“Uncertainty,” Kasriel told me, “is the last refuge of economists who can’t explain what is going on.”) Ditto for onerous taxes, record budget deficits and lack of demand.

He then documents “a post-WW II record” credit contraction, before moving on to a surprising solution: more quantitative easing from the Federal Reserve, which is essentially the buying of bonds from investors by the Fed, using money it prints, as Kasriel freely admits, “out of thin air.”

That this solution is controversial is not lost on Kasriel; his title is an obvious play on Rick Perry’s comment that continued quantitative easing by the Fed chairman, Ben Bernanke, would amount to borderline treason. But that’s where his reference to Friedman comes in. Kasriel is absolutely convinced that if the great conservative economist were alive today, he would be leading the charge for quantitative easing. It’s all we’ve got left.

In the 1930s, the Fed’s tight money policy compounded the lack of credit and sent the country into the Depression. Decades later, Milton Friedman was the economist who most persuasively proved that point. Bernanke, a student of the Depression, took that lesson to heart; his willingness to flood the system with liquidity during the financial crisis prevented a repeat.

It is also what led Bernanke to try the first two rounds of quantitative easing. “Banking under normal circumstances is a transmission mechanism from the Fed to the economy,” Kasriel told me. “That transmission mechanism is broken.” Quantitative easing is not nearly as efficient at expanding credit as having the banks involved, but it does work. During the decade of stagnation in Japan, Kasriel points out, Friedman urged its central bank to expand the money supply and buy bonds — exactly what Bernanke has been doing.

The main argument against the printing of money is that it raises the odds of inflation; even the esteemed Paul Volcker is worried about it, as he wrote in Monday’s Times. But Kasriel is convinced that the bigger fear right now is deflation, and that the expansion of credit by the Fed should be seen in combination with the contraction by the banks. In that larger context, the Fed’s move no longer looks inflationary. It looks instead like the only means we’ve got right now to create badly needed credit.

There is much resistance to another round of quantitative easing, not just from G.O.P. presidential hopefuls, but from many in the political establishment. Yet it’s worth noting that the reason Volcker is esteemed today is because, 30 years ago, as Fed chairman, he stuck by a monetary policy — a severe tightening, in his case — that he believed in despite fierce denunciations. His willingness to chart an unpopular course led directly to the economic revival of the 1980s.

Today, Ben Bernanke is every bit as vilified as Volcker was back then. Yet the Fed remains politically independent, and like Volcker, he has the right to chart the course he believes best, without political interference. The course he has charted is quantitative easing. Kasriel is utterly convincing that this is the right course. Bernanke should make the Fed’s independence matter.

http://www.nytimes.com/2011/09/20/opinion/nocera-no-extra-credit.html?_r=1&nl=todaysheadlines&emc=tha212

Cash flow and job tax credits

In my blog on Monday, I made the following observation about the job tax credits within the President’s proposed American Jobs Act.

Tax credits are taken when tax returns are prepared, not at the time of hiring.  If a business doesn’t have the capital to do the initial hiring, the tax credit months later won’t do them any good.

Therefore, small business must have access to lines of credit and loans for the job-creating tax credits to succeed.  We must step up our efforts to prod financial institutions to provide access to capital for small businesses qualifying for these tax credits.

Apparently I am not the only one to have indicated concern about the tax credits not being available but only once a year.  Cash flow for small business is always a major issue.  Getting a financial incentive later doesn’t help you if you can’t afford to hire today. 

Yesterday Karen Mills, the head of the U.S. Small Business Administration, was reported by the North Carolina News Network to have heard the same concern when she talked to small businesses.

So we said to them what's the most important thing you need and they said a tax credit that comes into my hand week by week, month by month, I don't want to wait until the end of the year, I have more cash so I can go out and market more, get more business so I can go out and hire that next person

I am trying to track down the story on this.  Is the Administration intending to allow small businesses to take the proposed tax credits for hiring the unemployed throughout the year? 

This is a critically important issue.  If the answer is yes, the jobs tax credits will be much more effective in creating jobs.  If not, then it’s back to my comments from Monday.

I’ll let you know.

We need customers

The Census Bureau reported yesterday that the United States now has 46.2 million people living below the poverty line—up 2.6 million people since last year.  Median household incomes fell below 1997 levels. 

No wonder the biggest threat to small business is the lack of customers, not taxes or regulations. 

Last week I told you about a McClatchy Newspaper survey that indicated that taxes and regulations were not holding back small businesses.

Kathleen Madigan, blogger for the Wall Street Journal (champion of the concept that regulations and taxes are the root of all evil) is on board with the lack of demand being the number one issue for small business.  She acknowledges that President Obama’s American Jobs Act seeks to increase consumers for business. 

Now we just need Congressional Republicans to get on board too.

Read Ms. Madigan’s blog below.

Small Business Hangs ‘Demand Wanted’ Sign

By Kathleen Madigan
Wall Street Journal
September 13, 2011

"Nobody knows the trouble I’ve seen.” That’s the song small-business owners around the U.S. are singing. But it isn’t regulation, tax policy or credit constraints causing the woes. It’s the lack of customers.

The widely watched survey of small businesses done by the National Federation of Independent Business shows optimism in August was the lowest since July 2010 when the recovery last hit a soft patch. The drop to 88.1 was the sixth consecutive decline — a record string of declines in the index.

The NFIB bleak view isn’t one dark cloud in a blue sky. Half of respondents to an August survey done by Newtek Business Services are pessimistic about the outlook, and 69% don’t plan on hiring over the next 6-12 months.

Small business-owners are worried because sales are falling and there’s no pickup in sight. The NFIB index covering sales expectations for the next three months is at its lowest since the recession.

Falling sales expectations are bad news for the jobs outlook because companies are not going to add workers if they do not think demand will increase as well.

Jonathan Basile, director of economics at Credit Suisse, points out the NFIB’s sales-expectations index is 10 points below its current hiring index. A negative spread between sales and current employment is rare, he says, and the gap has not been this large since the last recession.

What happened back then when demand kept falling? Small businesses cut jobs with a vengeance, as indicated by the NFIB survey as well as the tally of small-firm employment done by payroll processor ADP.

For now, hiring plans are still slightly positive. But if small businesses do not see more customers coming through the doors or ordering on-line, don’t expect the hiring index — currently at 5 — to stay above 0 for long.

President Barack Obama‘s jobs plan tries to answer the demand challenge by putting more money into workers’ pockets (by expanding the Social Security withholding cut) and by initiating construction projects.

Republicans, however, are voicing opposition to any new spending programs, so that aspect of the bill looks dead.

It seems more likely that the tax cut will go through. Yet it isn’t a sure thing that workers — scared about getting laid off — will spend the money. Higher savings, while a long-run economic positive, mean less demand now when the recovery needs it.

Small businesses have hung out the “Demand Wanted” sign. Until that need is satisfied, however, they won’t be posting a “Help Wanted” sign in the window.