A local business owner on CentrePointe, Lexington, Kentucky, and the world.
Mitt Romney has taken multiple-choice campaigning to dizzying postmodern heights, demonstrating a well-documented, disturbing adeptness for adopting any position which provides a momentary political advantage.
But in last night’s debate, he disqualified himself from the presidency. Rachel Maddow nailed the very human costs of Romney’s strategic “issue position-switching”:
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In the past 48 hours, we’ve seen some truly epic logical contortions from Mitt Romney’s Republican presidential campaign.
Yesterday, hoping to slow his public opinion nosedive two weeks ahead of the Michigan primary, Mr. Romney attempted to defend his infamous 2008 “Let Detroit Go Bankrupt” editorial with a second editorial in the Detroit News.
In his new valentine to Michigan and the auto industry, Mr. Romney somehow managed to simultaneously take credit for and attack President Obama’s successful 2009 bailout of the industry. Witness (my emphasis):
Ultimately, that is what happened. The course I recommended was eventually followed. GM entered managed bankruptcy in June 2009 and exited it a month later in July.
Then, two short paragraphs later:
By the spring of 2009, instead of the free market doing what it does best, we got a major taste of crony capitalism, Obama-style.
“They did what I told them to do, and it was a disaster.”
Not only was yesterday’s editorial internally inconsistent, it was also inconsistent with Mr. Romney’s 2008 editorial, which actually called for increased goverment involvement and investment, rather than simply leaving the “free market” to its own devices.
On Monday, Mr. Romney pre-empted President Obama’s 2013 budget release in an e-mail to reporters (my emphasis):
This week, President Obama will release a budget that won’t take any meaningful steps toward solving our entitlement crisis.
The president has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors.
I believe we can save Social Security and Medicare with a few common-sense reforms, and – unlike President Obama – I’m not afraid to put them on the table.
Mr Romney starts by attacking Mr. Obama for not addressing entitlement spending.
Then he attacked Mr. Obama again for addressing entitlement spending.
Then he attacked Mr. Obama a third time for not addressing entitlement spending.
And Mr. Romney accomplishes this amazing flip-flop-flip in three successive sentences.
And to make Mr. Romney’s linguistic artpiece even more mind-blowing: all three assertions are demonstrably false. Mr. Romney is lying.
First, President Obama’s 2013 budget proposes cutting $360 billion in Medicare and Medicaid spending over 10 years.
Second, the Affordable Care Act did not cut benefits for seniors. It created provider-side efficiencies which reduced future Medicare spending to the tune of $500 billion.
Finally, Mr. Obama proved all-too-willing to put entitlement reforms “on the table” during last year’s debt ceiling negotiations. (It is worth noting that Republicans walked away from the difficult discussions, not Obama.)
Mr. Romney was already renowned for his serial flip-flopping.
It seems that Mr. Romney has now taken his fact-free postmodern candidacy to a new plateau with his most recent linguistic art project.
His new statements don’t just thoroughly contradict previous ones; Indeed, Mr. Romney’s most recent statements thoroughly contradict themselves.
Mitch McConnellYesterday, despite having support from a majority of the Senate, the $60 billion Rebuild America Jobs Act was blocked from even being debated on the floor of the Senate by Kentucky’s own Mitch McConnell and Rand Paul – along with every other Republican senator.
The Act included $50 billion in direct spending for roads, bridges, and other infrastructure, as well as $10 billion towards starting the National Infrastructure Bank. Both ideas have traditionally enjoyed bipartisan support.
The bill would be paid for by a 0.7% surtax on incomes over $1 million.
The Department of Transportation estimated that the Act would create about 800,000 new jobs.
McConnell was unapologetic for blocking debate on the bill:
“The truth is, Democrats are more interested in building a campaign message than in rebuilding roads and bridges,” said Senate GOP Leader Mitch McConnell of Kentucky. “And frankly, the American people deserve a lot better than that.“
800,000 jobs seems like more than a campaign message.
But these national numbers are a bit hard to get our arms around.
It’s worth evaluating the impacts of this bill on a more local level. What would the Act do here in Kentucky?
Over 200,000 Kentuckians are out of work. That’s nearly 10% of the labor force.
And since September, one of two major bridges crossing the Ohio River in McConnell’s hometown of Louisville has been shut down after inspectors found cracks. Another bridge between Kentucky and Cincinnati has been deemed “structurally deficient”.
Rand PaulThe bill McConnell and Paul voted against would have spent over $450 million on roads and bridges in Kentucky, and would have created 5,900 jobs.
Why would Mitch McConnell and Rand Paul reject 5,900 jobs for Kentucky? Why would they oppose fixing Kentucky’s infrastructure?
Maybe they’re concerned with raising taxes. As McConnell said on Meet the Press, “We don’t want to stagnate this economy by raising taxes” on those who make over $1,000,000, who Republicans are fond of calling “job creators” and “small business owners”.
So let’s take a look at who makes over $1,000,000 in Kentucky. According to Citizens for Tax Justice [PDF Link via Greg Sargent] out of Kentucky’s 4.3 million citizens, there are 1345 Kentuckians who would be affected by such a tax, and they make an average of nearly $3.5 million.
And it’s worth noting that The 1345 are folks who don’t just have $3.5 million – enough to qualify them as multi-millionaires. These are people who clear $3.5 million per year.
The 1345 are the ultra-wealthy. And businesses which help their owners reap $3.5 million per year are not ordinarily considered “small”.
And what is the onerous burden the “millionaire’s tax” would place on The 1345?
Out of their $3.5 million in income, The 1345 would pay $17,409 more to fix Kentucky’s roads and bridges which they undoubtedly benefit from more than Kentucky’s other 4,338,000 citizens.
So: McConnell and Paul blocked the creation of 5,900 jobs and the improvment of roads and bridges for all Kentuckians in order to protect The 1345, a tiny group of ultra-wealthy Kentuckians who would pay only $17,409 to rebuild the infrastructure they use more than anyone else.
McConnell claims he doesn’t want to “stagnate the economy” by taxing The 1345, which raises the question: What have these ultra-wealthy “job creators” been doing with this money while they’ve kept it?
Because they certainly haven’t been creating jobs.
Mitch McConnell and Rand Paul chose to protect The 1345 at the expense putting 5,900 Kentuckians back to work. At the expense of our crumbling roads and bridges. At the expense of the other 4,338,000 Kentuckians.
And frankly, the American people – and Kentuckians – deserve a lot better than that.
I’m a job creator. And job creators are important.
At least that’s what we’ve been hearing from Republicans lately.
House Speaker John Boehner cited “job creators” and “job creation” 26 times in a speech about the economy last week.
And in that speech, the Speaker invoked us job creators to attack the Republicans’ Unholy Trinity: taxes, regulation, and government spending:
Private-sector job creators of all sizes have been pummeled by decisions made in Washington.
They’ve been slammed by uncertainty from the constant threat of new taxes, out-of-control spending, and unnecessary regulation from a government that is always micromanaging, meddling, and manipulating.
To hear Boehner’s version of events, the government stands as the sole obstacle to us job creators as we valiantly attempt to create more jobs.
Indeed, the entire Republican establishment keeps talking about the special role we job creators play in our fragile economic recovery.
In their “House Republican Plan for America’s Job Creators” – a 10-page, large-type tome [PDF link] about the same length as this blog post – the House Republican leadership repeatedly promise to slash the Unholy Trinity of tax, regulation, and spending. On Sunday talk shows, more of the same.
If only we job creators paid less money in taxes, Republicans say, we would hire more.
If only we were free from government regulation, we would hire more.
If only we were less concerned about government spending, we would hire more.
As much as I appreciate Republicans’ apparent concern – their willingness to dump money in my pocket, their longing for my freedom to pollute with abandon, their eagerness to drive the nation to the edge of default to keep government spending in check – here’s the thing:
Their efforts won’t help me create a single job.
Not one.
In fact, Republican attacks on taxes, regulation, and spending do quite the opposite, because Republicans are thoroughly wrong on the mechanics of hiring.
I don’t hire because I have extra jingle in my pocket. I don’t hire because I can avoid complying with some regulation or tax. I don’t hire because the government is spending less. I hire because there’s more work to do.
No responsible businessperson is going to hire simply because they have extra money lying around or because they can dump motor oil in the sewer. As generous as I might be, I won’t hire out of charity.
Entrepreneurs hire because they have work to do, and a new employee can help them get that work done. They hire to help meet demand. And demand is fueled by customers who have money to spend.
And that’s the fallacy of the Republican job creator mythos: Job creators don’t “create” jobs. Our customers do.
And the evidence proves the Republican fallacy. Taxes are at historic lows [PDF link]. Corporate profits are at record highs. Government spending has collapsed. These are the very conditions under which, according to Republicans, we job creators should be creating jobs.
But we aren’t.
Despite these supposedly wonderful conditions for job creators, one in six Americans remain unemployed or underemployed. Income and household wealth has stagnated for over a decade. Instead of hiring in this environment, corporations are hoarding record stockpiles of cash in the face of weak demand.
No demand, no jobs.
That’s not to say that we entrepreneurs – let’s just drop the “job creator” garbage – are powerless. We can foster conditions which promote growth (the right business model, the right service, the right people); but we need customers with a willingness to spend to make our businesses grow and to create an environment where hiring is possible and profitable for us.
Bottom line: Give me money, and I’ll sock it away in the bank. Give me customers, and I’ll give you jobs.
In late July, one of our technicians left our award-winning auto repair shop to return to his hometown. He has been our only employee to leave since I bought the business over two years ago.
His departure raised a question for us that a lot of small businesses have faced in this economy: Do we accept the risks of hiring a new employee to replace him?
The answer, I think, is instructive for many of the economic and political issues facing our country.
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Impatient voters punished Democrats two weeks ago for not giving enough focus to our nation’s sputtering economy after the near-implosion of 2008.
With our nation’s unemployment rate hovering just under 10% (and ‘real’ unemployment much higher), voters sent a clear signal that they want government to focus on creating jobs and growth.
According to the Small Business Administration [PDF Link], small businesses like ours make up 99.7% of employer firms, and account for two-thirds of new job creation.
Both Republicans and Democrats have reiterated the importance of getting small businesses hiring to get our country’s economy moving again.
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This week, congress reassembles in the wake of the elections to consider extending temporary tax cuts implemented under the Bush administration in 2001 and 2003.
Republicans want to extend the entirety of the Bush tax cuts, which would add $5 trillion to the national deficit over the next ten years, and vastly expanded the national debt over the past decade.
Democrats want to extend the tax cuts as well, but would let them expire for the highest-income households which make over $250,000 per year. The Democratic plan would cost almost $700 billion less than the Republican plan over the next ten years.
Republican leaders claim that giving tax breaks to top earners is critical to generating the new jobs that the economy needs to recover.
Unfortunately, they’re wrong.
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Just how would the Republican proposal affect small business jobs? A hypothetical example from my industry might help us get to an answer.
A very healthy auto shop might have annual sales of $1,000,000 – an amount which would put it well into the top 5% of shops nationwide. If that shop is exceptionally well-run, it might see net profits of 30%, or $300,000.
For those few shop owners in such a fortunate situation, what are the implications of extending the Bush tax cuts for those making more than $250,000? Under the Republican plan, that shop owner would save an incremental $1,500 in taxes over the Democratic tax cut plan.
As a small business owner, I’d happily take the $1,500. But such a small amount would give me zero incentive to undertake the much greater expense – and risk – of hiring a new employee.
So while extending the Bush tax cuts would certainly line my pockets, they would do little to encourage me to create jobs in my small business.
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Some observers might contend, as incoming House Budget Committee Chairman Paul Ryan did on CNBC yesterday, that most job growth comes from larger “small” businesses and that my example above isn’t really that relevant to job creation.
So let’s pretend, for a moment, that our hypothetical business is actually 10 times as large as the example above: It has annual sales of $10,000,000, and its owners see profits of $3,000,000 per year.
Under the Republican plan, that business owner would save an additional $125,000 in taxes over the Democratic tax cut plan. Now, this seems like an amount which might let a business hire a couple of additional employees.
But while the tax savings might be enough to hire additional employees, it provides little actual incentive to use that newfound money to hire in an uncertain economic environment.
A tax windfall fails to meet a prudent business owner’s criteria for making a hiring decision. Business owners don’t hire because we have extra money laying around. We don’t hire out of charity. We hire when there is more work to do.
Again, I’d happily take the $125,000. But I’d also know that a drop of just 1% in my sales – a fairly likely risk in our current economy – would wipe out my tax savings. If I were that business owner, I’d stash my cash as a hedge against an uncertain economy. Net effect: no new jobs created.
The criteria for hiring is scalable: Whether a business has $1 million, $10 million, or $100 million in sales, the decision to hire is based on needing employees to meet demand – not on having spare cash supplied by tax cuts.
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In my shop, the economic slowdown – coupled with a nearby street closing for almost a year – contributed to a sales decline of over fifteen percent from our record 2008 levels. The declines would have been worse if not for our solid reputation, our increased community involvement, and our vigorous marketing.
In fact, our business has more customers than ever before; It’s just that each one is investing far less in their cars. We see a lot more folks putting off needed maintenance and hoping that their cars won’t break down.
And as I look at replacing the technician who left in July, this drop in sales has been my primary consideration.
An extra $1,500 from tax cuts wouldn’t induce me to hire a new technician. Neither, frankly, would an extra $125,000.
I’ll hire when our core business is better – when there is more work to do – and not just when I have a convenient pile of cash.
And to make our business better, we need more customers with more money – and more willingness to spend.
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To encourage small business hiring, policymakers need to encourage spending. In particular, they need to encourage the kind of spending which reverberates through the economy as that money is spent and respent in the form of wages, further buying, more wages, and – ultimately – hiring.
This respending feedback loop is key to creating enough demand that businesses like mine will start to hire again. It is key to driving our nation’s self-sustained economic growth.
The fatal flaw of tax cuts for the wealthy is that the cuts don’t foster respending at a scale which drives significant hiring. As seen in my examples above, a large chunk of each dollar given out in tax cuts to the wealthy is stowed away in savings – thereby stunting the benefits to the economy.
Mark Zandi, Moody’s Chief Economist, has found the same phenomenon in his research (Full PDF Here).
Tax cuts to the rich don’t yield as much overall economic benefit because the wealthy don’t need to (and won’t) spend that money, thus diminishing the virtuous feedback loop.
Government spending which goes to those in need – the poor, the unemployed, state governments – does get respent (often out of necessity) and the feedback loop is much, much stronger than with tax cuts.
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If I’m looking at my bank account, the tax cuts seem like a fantastic idea. More money for me!
But if I’m looking at my business, my employees, their families, and my community – I want the government to focus on assisting those in need. I want the government to encourage buying (especially from small, local businesses). That’s what will help my business for the long term. That’s what will – ultimately – encourage me to hire.
Lose the tax cuts. Give me customers instead.
