What/Who Is a "Job Creator?" Paul Losch's Community Blog, posted by Paul Losch, a resident of Palo Alto, on Sep 19, 2011 at 3:37 pm Paul Losch is a member (registered user) of Palo Alto Online
Am I the only over-educated slob who owns a small business and is confused by what constitutes a "job creator," and what incentives such a "creator" will most enable such a party to create jobs?
I doubt it.
Here some things that prevent my small business from bringing on more employees:
--cutback in orders from customers, due to cutbacks in purchases from their customers,
--difficulty in maintaining working capital credit to deal with business seasonality--a normal thing that the banks seem to no longer understand in recent economic times.
--THIS ALSO IS KNOWN AS NO LOANS FOR SMALL BUSINESSES
--absurd costs of various types of insurance, workman's comp and health insurance being the most egregious, but liability and property not far behind
--other overhead such as rent and utlities showing no sign of appreciating supply and demand--less demand? Jack up the rates on the rest of the remaining suckers!
--gaining enough customers to make up for those who have closed in the recent economic times
A pox on all in our nation's capital. The W Administration and the Obama Administration both have talked about helping small business. What did they mean?
My small business will not hire as a result of tax or employment credits. Such things are "downstream" from what it takes to bring on that next employee.
Nor is my small business threatened or compromised by the notion of higher taxes for those who earn over a million dollars a year. I would be delighted to pay more taxes if I were running a small business making such money. Most don't, and most hang on for dear life--owning and running a small business, even a succesful one, does not generate such earnings.
This "job creator" rhetoric has crossed two Administrations, and I don't get it. Who is potentially benefitting from this vapid stuff? I would like to meet such a person.
Posted by stephen levy, a resident of the University South neighborhood, on Sep 19, 2011 at 3:51 pm stephen levy is a member (registered user) of Palo Alto Online
Good question. Nice post.
As you note most small businesses need customers in order to "create" jobs. There are probably some in the VC commmunity who are developing really new products or services in anticipation of finding customer approval. But most businesses thrive or not with the overall health of the economy, here and abroad.
As you note most businesses report that they need customers with money to spend, not tax incentives, in order to expand hiring--along with the other factors you mention.
So, while the private sector does most of the hiring and we treasure successful entrepreneurs, the customers determine which businesses can expand.
And at times when the economy is struggling as now, the government helps support customer income so folks have money to spend at businesses.
None of this detracts from the positive aspect of private entrepreneurial activity but the "job creation" is a partnership between customers and entrepreneurs--at least for most goods and services.
Posted by Sean, a resident of the Midtown neighborhood, on Sep 19, 2011 at 3:56 pm
Successful small businesses, especially in hard economic times, provide services/goods that people need to survive. Basic stuff, actually, like plumbers and electricians and roof repair folks.
If one is not in such basic business, it will not get the customers necessary to survive. Small businesses are always failing, nothing new. The ones that survive are the ones that fulfill a real demand. Period.
Posted by Honest answer from an ex-business owner, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 4:14 pm
1) Cutbacks in purchases from their customers causing yours to cut back: Why are the customers of your customers cutting back? Could it be fewer employed? Those employed making less? Fear of the future so holding on to what they have? Lower home and retirement values scaring soon to be retirees? What could stabilize these customers of your customers? What could infuse them with confidence that they can MAKE MONEY AND KEEP IT so they spend some now? Perhaps a consistent rule of tax and corporate law without fear of the rug being pulled out next year would help. I mean, really...just 7 months ago our President promised 2 years no tax raises..and suddenly he is out there saying "oops, sorry, changed my mind" and here we go again. We have a loose cannon careening around scaring the poop out of all of us, so we are afraid to spend!
2) Banks understand well working capital: The problem is that DC now regulates what they are allowed to lend and not allowed to lend. Local market, local bank-customer relations, are broken. Many of us are suffering from our banks saying "sorry, our hands are tied"..and losing our businesses as a result of not having working capital.
3) Absurd costs of insurances: When unemployment is extended and re-extended, to be almost 2 years now, of course insurance rates go up....When the only health insurances allowed to be sold must cover everything and the kitchen sink, of course rates go up. When local municipalities vote to raise property taxes..well, of course the cost of business and home ownership go up. When anyone can sue anyone for any silly reason, and win, with no downside of suing and losing, of course liability insurance goes up. All these costs freeze money which could be risked in hiring people to grow a business.
3) Rent: Move to a landlord who will rent to you for less. Tell your current landlord you are moving out...see if s/he sees the writing on the wall and would prefer some rent to an empty suite. Utilities: vote for measures that lowers the cost of utilities. Other than that, we are stuck.
4) You are right.. a one time "employment credit" or "tax credit" is not how businessmen/women think. We think long term. What will the cost be 5 years from now against the potential gain? These little drops in the bucket for one year mean nothing. We need stability to take our risks on. On the other hand, why take a huge risk with money and time, only to not be able to realize as much in a few years because capital gains taxes are doubled? You and I both are less likely to invest if we have to pay 30% tax rate on our gain in 5 years ( or more, if our governing rhetoric continues). Better to not risk it.
5) The "job creator" rhetoric of the last admin actually worked. Lowest unemployment, most tax revenue..ever. Started a business myself at that point, even after 9/11, on the bet it would work and we would get rich. Of course, we were stupid and didn't realize how the Community Reinvestment Act had been perverted to subvert house lending, which caused foreclosures to rise in an election year and the house of cards to collapse. But that is a long and tired subject from another thread. Bottom line, the rules changed by government and many people suffered as a result. Keep govt stable, don't change rules, let folks plan and risk according to the rules of the game..and keep the gain if they "win", lose the losses if they "lose".
5) Tax on those who make a million or more per years sounds great, but simply isn't true. To those who pay attention, there is much more.
We also see the huge increase in taxes coming from selling our properties next year, and the increase coming next year for the "Health Care bill", along with a never ending chorus of "more taxes on those who make (fill in the blank, usually $200,000 or more per year).
We can't trust that next year there won't be a big increase on $100,000 per year or more. There is no end, no "wall", no "enough" built into the left rhetoric. So of course we hunker down and fear spending/investing/hiring.
Which brings us back to your musings. If you wonder why you have less business, read the above points. Many of us have either lost our businesses and our employees, or are simply "making do" with what we have, waiting for stability to return. Until then..hunker down.
Posted by Paul Losch, a resident of Palo Alto, on Sep 19, 2011 at 4:16 pm Paul Losch is a member (registered user) of Palo Alto Online
You are abosolutely right, to a point.
There are numerous small businesses that work with nation-wide or world-wide customers who are dealing with these challenges. It presents a whole host of issues that have less to do with customers, and more with all the other stuff that attends keeping a business running.
Posted by Honest answer from an ex-business owner, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 4:23 pm
Mr. Levy said "And at times when the economy is struggling as now, the government helps support customer income so folks have money to spend at businesses."
No, when the govt takes money from someone who earned it and gives it to someone who didn't, it takes a huge cut for itself to pay for its own life/employment/benefits, then gives what is left over to an oppressive regulatory board, a failing business or a person who didn't earn it. This is not good economics. Better to have left the money with the one smart enough and hard working enough to earn it, and let them hire someone smart enough and hard working enough to build more profit.
Until this ends, until smart, hard working people with money/time to risk in a business or idea see that there is a decent chance for them to not be oppressed out of business by our govt , and keep what they earn if they earn anything ( and lose on their own merit if they fail), we will simply hold on to what we have. Some with money they can afford to lose are playing craps in the field of venture capital, mainly in government funded and supported endeavors, and more power to them!! I hope they win and win big! But those of us with not much simply can't afford to take the risk.
Posted by Honest answer from an ex-business owner, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 4:31 pm
Don't mean to post multiple times, but to just finish painting the whole picture: We are also looking at massive inflation ( which has already begun...) in everything from food to fuel. And higher transportation costs such as air travel for business travel from "carbon taxes" starting next year.
Overall, the cost of doing business is out of our control...affecting our choices. Business owners really don't like feeling that they have no control over their outlays.
Posted by Honest answer from an ex-business owner, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 4:37 pm
Paul, wasn't trying to sound anything other than a peer. Been there, done that. Glad you are still surviving in business...we lost everything. Perhaps you are hearing some left over anger..anger at ourselves for trusting that we knew "the rules of the game", anger at trusting our federal govt and watching as it repeatedly chose exactly the opposite response it needed to for reassuring us we could survive (from bail outs to financial regulation "overhaul", from overturning bankruptcy law in the Auto industry scaring away investors, to taking the power in its own hands to simply shut down entire businesses..this govt has scared the poop out of us!).
So, again..glad you are still surviving, and hope that you somehow can keep on going with it..we failed and lost. Mostly over the bitterness, but perhaps it leaks out sometimes. At this point, just hoping we turn this ship around ( our country) so that our KIDS have the chances we had ( but we are teaching them to watch closely what the government is doing and try to anticipate the downside much better than we did)
Posted by Demand, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 4:51 pm
"This morning, the President proposed the "Buffett Rule," which would require those earning more than $1 million a year to pay the same share of their income in taxes as middle-class families do.
This proposal makes sure millionaires and billionaires share the responsibility for reducing the deficit. It would correct, for example, the fact that Warren Buffett's secretary currently pays taxes at a higher rate than he does.
The other side is already saying it's "class warfare" -- that's their rhetorical smokescreen for providing millionaires and billionaires special treatment.
As the President said this morning, "This is not class warfare -- it's math.""
Why SHOULDN'T billionaires pay the same rates as the rest of us?
Are they less patriotic than working Americans, or just greedier?
Posted by Sean, a resident of the Midtown neighborhood, on Sep 19, 2011 at 5:12 pm
"Why SHOULDN'T billionaires pay the same rates as the rest of us?"
Perhaps because they invest their money, instead of earn it as a salary. Investment comes with a big time risk. Ask any investor. If a billionaire's secretary want to take her/his salary as stock in the company (and take the risk), then his/her earnings will be taxed at the same rate as the billionaire.
I actually did work for a billionaire's corporation, for a while, and I was given the choice of stock or salary. I took the salary, and glad that I did. I earned a decent living, before the place went belly up.
The real bottom line is that it is very hard to make a profit. You really need to have the right product, at the right time.
Posted by Demand, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 5:24 pm
"Perhaps because they invest their money" They choose to invest their money.
Paris Hilton or some other trust fund baby sits by the pool (thanks to the analogy used on another thread!) and buys treasuries (no risk) and Exxon stock. Neither creates jobs (Exxon makes nothing on Exxon stock trades.)
Why should her income be taxed at half of what real hard working Americans get taxed at?
Posted by Honest answer from an ex-business owner, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 5:29 pm
Demand: Sigh.. Because the rate that is being changed is on capital gains taxes. Capital gains are from INVESTMENTS...which "won". In other words, succeeded and made money. They are bets that "won". However, it isn't like betting a buck on the lottery. These are individual or pooled investments in risky businesses.."speculating" if you will. This is the money which seeds the businesses. Many of the seeds never grow, and the money is lost. Many grow, but very little. Some grow well, and after years end up producing some money back..some a LOT. To encourage the risk-taking of investing,an investor has to have some bit of "gambler" in him. Would you bet $100 bucks for a 50% chance of losing it all, and a 50% chance of "winning" it back plus $20? I doubt it. But would you bet $100 for a 50% chance of losing it all, but a 50% chance of "winning" $500,000? Yes.
That is all this is. Lowering the odds of "winning" big, so lowering the number willing to risk. Which lowers the number of 'seeds" planted in businesses, lowering the chance that a business can make it and hire in the future.
Lots of experience in this area, I know how investors think... Pity we haven't anyone with business experience or knowledge running our government right now.
Posted by Demand, a resident of the Meadow Park neighborhood, on Sep 19, 2011 at 6:02 pm
"Pity we haven't anyone with business experience or knowledge "
And the Goldman guys littered thru the government haven't much "business experience"? Funny. What did you post about the last guy? In fairness, since you brought up the subject...
The previous administration that was run by a guy who drilled dry wells in Bahrain - not an easy thing! Tanked three oil companies before being handed the ranger job because of his name. Then traded Sosa.
"With the U.S. economy in meltdown mode, a campaign commercial made 14 years ago suddenly seems painfully prophetic. In 1994, when George W. Bush was challenging Ann Richards to become governor of Texas, she deployed the slogan “Can we afford the business experience of George W. Bush?”
In a television commercial that became notorious in the race, she ticked off a list of failed companies Bush had been associated with—from Arbusto to Harken Energy—and concluded the companies’ collective losses totaled $371.6 million.
Richards lost the election and Bush went on to become President of the world’s largest economy. But with the markets plunging, and a $700 billion government bailout underway, Richards, who passed away in 2006, would have some new losses to add to her tally. "
and just prior to the insider trading charges:
"After Bush’s father was elected president in 1988, some business came to Harken simply because Bush was who he was. In 1990, Harken received a contract to drill for oil in Bahrain, located in the Middle East on the Persian Gulf—a contract Harken got most likely because Bush’s father was president. Of the two wells Harken drilled in Bahrain, both came up dry. “Can you believe it?” a Texas political insider commented. “George W. goes to the Middle East and he can’t even hit oil there. Midas he is not.”"
Posted by musical, a resident of the Palo Verde neighborhood, on Sep 20, 2011 at 3:04 am
I own a very large company, or I should say a micro-part of it as a shareholder. Looking deep into the annual report, I find that 31% of "my" profit got eaten by "Income Tax Expense." From what's left over I get a small dividend on which I pay another 15% to the IRS. I hear complaints that 15% is too low, and the first 31% somehow doesn't count?
Social Security withholding phases out for employees earning more than $106,800. That's a tax break? On average the lower income people get back more than they put in, and higher income people don't. The formula is a bit complicated, but retirement benefits replace a much higher percentage of a low earner's wages.
Last I heard, the interest on Treasuries (and Savings Bonds) is fully taxable at your Federal income bracket. California tax authorities get done out, but make up for it by issuing bonds that are not taxed by the IRS. In either case, it makes public borrowing cheaper, which seems like a win-win to me.
Another win-win is the tax break (though AMT-limited) that I get donating to schools, colleges, the Red Cross, and conservation organizations. I'd need to be about 35% less generous if I couldn't deduct it (state & federal). Do we really want to sap this life-line to non-profits? They do employ some people.
The one that bothers me is the Roth IRA. I can put a few thousand after-tax dollars in there and compound it for 50 years and pull out a million completely tax free? I guess it was the government's way of encouraging savings by making it too good to be true. Of course the way things are going, you'd be lucky to pull out what you put in.
But this blog topic is "job creator." I obviously doubt that higher taxes are an answer. I appreciate the perspective of the local business owners here. Unfortunately I'm hearing a pessimistic message.
Posted by mj street, a resident of the South of Midtown neighborhood, on Sep 20, 2011 at 3:15 pm
"Looking deep into the annual report, I find that 31% of "my" profit got eaten by "Income Tax Expense." "
You should have invested in Exxon or GE - they get tax credits on their billions in profits.
or a bunch of others -
"NEW YORK (CNNMoney.com) -- Nearly two-thirds of U.S. companies and 68% of foreign corporations do not pay federal income taxes, according to a congressional report released Tuesday.
The Government Accountability Office (GAO) examined samples of corporate tax returns filed between 1998 and 2005. In that time period, an annual average of 1.3 million U.S. companies and 39,000 foreign companies doing business in the United States paid no income taxes - despite having a combined $2.5 trillion in revenue."
Posted by Sean, a resident of the Midtown neighborhood, on Sep 20, 2011 at 3:41 pm
"You should have invested in Exxon or GE - they get tax credits on their billions in profits."
That is the problem with the income tax. All sorts of exceptions are made by politicians, in order to support various interests. Not only busniess depreciation (depletion) rates, but also home mortgage and charitable giving deductions. It will never end, because it is the nature of the income tax.
Posted by mediabias, a resident of the College Terrace neighborhood, on Sep 20, 2011 at 4:10 pm
A downward economy coupled with an unstable, unpredictable Obama administration is a job blocker and/or job killer. The thought of increasing our taxes to fund a bloated and irresponsible government that refuses to reform the tax code, substantially cut spending or balance the budget is absolutely ludicrous. We should be outraged about increasing taxes on anyone or any corporation, which many of us are connected to through employment and pension or retirement investments, because it will be spent inefficiently and foolishly and have NO positive results. This is not about greed or being pro-billionaire, but about COMMON SENSE. Why don't we give money to drug addicts? Because they use the money to buy drugs, get high, feel good for a couple of hours, then they beg for more money from people that have it. Don't be in favor of the government getting high on our money. Make them do their jobs by passing legislation that makes investment and entrepreneurship easy and rewarding and by making difficult choices to cut spending. Just like many of us had to give up a land line, satellite TV and dining out to live within our means, the grown-ups in congress should start the process. And that means Dirty Harry Reid needs to bring legislation passed by the House of Reps to a Senate vote. It is unconscionable that bill after bill is being passed in the House and sent to the Senate without so much as a vote. I understand that it's "politics" but we should be calling Dianne and Barbara every day to tell them to do the job they were elected to do.
Posted by nottrue, a resident of the Southgate neighborhood, on Sep 20, 2011 at 4:33 pm
Clinton created a dot.com bubble, with which Greenspan tried to control with housing bubble along with 911, two wars, i believe if Clinton was in the office, he would do that just like Bush the second.It is in american's blood to be the world policemen.The greed the politics everything went wrong way.
Posted by mj street, a resident of the South of Midtown neighborhood, on Sep 20, 2011 at 4:57 pm
nottrue - you don't have to believe me, try this fair and balanced news source
Bush tax cuts kill jobs.
From Fox News -
"Under Bush, the economy produced 3.7 million new jobs from January 2001 through December of last year based on nonfarm payroll figures collected by the Labor Department's Bureau of Labor Statistics.
That figure is likely to be higher — perhaps by an additional 810,000— when the government releases annual revisions based on more complete information next month. However, that doesn't change the basic historical picture.
When Clinton was in the White House, the economy generated 17.6 million jobs during the corresponding period — from January 1993 to December 1998. Under Reagan, 9.5 million jobs were created from January 1981 to December 1986.
Those are the two most-recent two-term presidents before Bush. Some 2.6 million jobs were created during the four-year term of Bush's father, who took office in January 1989.
Reagan had two recessions — one of which began in July 1981 and ended in November 1982. It was the most severe recession since the Great Depression, pushing the monthly unemployment rate as high as 10.8 percent. Read more: Web Link "
Posted by Steve, a resident of the St. Claire Gardens neighborhood, on Sep 20, 2011 at 6:48 pm
Amazing, even in Palo Alto, Americans cannot agree on which way we want to be led!
@mediabias -- I have a proposition for you. If you can get Mitch McConnel of the formerly great state of Kentucky to allow votes on judicial nominations submitted by the President, I will agree to call, fax, email, etc Boxer and Feinstein every day demanding votes on House passed legislation, as long as said legislation in intended to create actual jobs for actual American taxpayers. More taxpayers is the best way out of this mess, but they can't agree how to do that, so the President must settle for more taxes from those who can pay. Present evidence suggests they are not creating jobs anyway, so instead of Exxon style profits, maybe we can put construction workers back to work building things we need anyway. If you don't like construction unions, move to Texas where hundreds die every year in the nation's most dangerous construction industry.
Posted by mediabias, a resident of the College Terrace neighborhood, on Sep 21, 2011 at 11:20 am
@mj street "Democrats own California." Is that something to brag about or that you're proud of? How's the general agreement of the silent majority of Democrats working out for this state? Horribly, in case you hadn't noticed. Here in Silicon Valley we're removed from the plight of whole neighborhoods being turned into ghost towns where squatters have taken up residence in foreclosed or abandoned homes, where strip shopping centers have shutter 75% of their stores. You should thank every noisy Republican for demanding a return to fiscal conservatism.
@Steve - Votes should be taken on all legislation and judicial nominees, regardless of which party holds political majority. As voters, we will hold our representatives responsible for the votes they cast.
Posted by mj street, a resident of the South of Midtown neighborhood, on Sep 21, 2011 at 12:48 pm
"Is that something to brag about or that you're proud of?"
Not bragging. Didn't point out the facts as a matter of pride, either.
I pointed it out so casual readers might easier understand the loud minority in the Bay Area are indeed that - a minority, a shrinking one at that.
Statewide, Dem lead R's in voter reg by party ID 44 Dems for every 30 R's. We all know that in the beautiful Bay Area, it's a much bigger tilt against the R's. A shrinking minority, with some on that edge being the most shrill. Therefore, be skeptical of the fringe's shrill theories.
California's economic problems, relating to party control? Republican fiscal conservatism like the fiscal conservatism involved in the Texas Miracle? The Texas miracle that took a reasonably balanced budget to a $25 Billion shortfall this year?