Hello all, below is a presentation you might find interesting. However, if you perceive this presentation as being offensive it was not intended to be of that nature. Please feel free to comment your feeling and beliefs in the area provided. Thanks, BCC
Click on link. http://www.takeabc.com/files/5694/Times%20&%20Changes.pdf
Sunday, January 30, 2011
Monday, September 13, 2010
Bringing in the Big One (Business Essentials)
The last few years have been very unique in many ways. This blog is an attempt to talk about something that perhaps I shouldn’t, but because I want to, it makes it hard not to give in to the desire not to do so. It’s like catching the largest fish in the ocean only to have it eaten by sharks before you bring it back to market. When you get to land you find that it has been eaten in such a way that only the head and the skeletal parts remain intact. A fisherman who knows his craft understands how not to go too far out in the waters thereby leaving less chance for failure. It is the mark of a tradesman, to know when too much is in the net and when to pull in the anchor and head back to less intense waters. Even if bad weather, turbulence, or maybe sharks, which are constants to fisherman, stay the same there can still be a chance of the unknown overshadowing the little success which remain. I guess most business people saw early signs in other parts of the country of a downturn which signaled change underway and gave some a warning and the potentiality of coming peril. So, would this be the same story in business when such a matter as running a business gets blind sided with unknown challenges as it goes further into uncharted waters. The textbooks of course give us an equal playing field where capitalism works to the letter of the law. However, you can’t expect a consumer to buy unless there is some type of certainty that they can have to buy tomorrow or for that much will the seller have to sell tomorrow. This being so, should a business’s budget include government incentives if the market for goods and services are operating at less than full capacity? Is this resuscitating death back into the economy or taking life out through increasing the long-term tax burden?
I won’t talk about the tax burden in this blog but I will start by talking about the government’s role toward unemployment or what most definitely should be done to boost our local economy. I am very sincere & passionate about the success of business, but at the same time I have an awareness of the big picture of business and government interactions to sustain economic stability. In my opinion neither can truly function without the working of the other. Milton Friedman (Economist & Statistician) felt that the role of government was to build an infrastructure by unrestricting free trade and property rights. However there is a complimentary role through the use of spending and monetary policy to a more certain degree.
Overview of the Trade
Is there a role that government has toward shoring up jobs? As the most recent economic report indicates, the economy is rebounding but job growth is flat. The report states that we are out of the worst of the recession based on indicators that job growth and consumer spending are up. Indicators are pointing out that the business sector is spending on new plant and equipment but has not fully committed toward filling job vacancies. My question would be whether we can depend on the private sector for new hires even if there are signs of increased consumer spending. If so, how long will it be before we see a consistent positive change in unemployment figures? To the contrary, this is what should take place:
· The Bureau of Labor Statistics “More than 90 percent of the jobs created are likely to be in the private sector. Many of the government jobs are likely to be professionals whose jobs are saved from state and local budget cuts by state fiscal relief“(1).
· Another report indicated that “the credit crunch, the collapse of the housing bubble, and harmful economic policies have made the economy less hospitable to entrepreneurs. This bad business climate discourages business owners from expanding. Employers took 1,647 mass layoff actions in June that resulted in the separation of 145,538 workers” (1).
· Newsweek indicated that “many of the firms that slashed pay or cut 401K matches haven’t restored them even though their balance sheets and profits are now healthy (2).
The consensus of these reports suggests that big business should rain through prolonged consumers (goods & services) and government (taxes) spending without continued economic data to offset still other pessimistic signs of slower growth. It could be like a snowball tumbling down the hill as momentum grows it turns and turns (circular flow), but in this case momentum lacks the key element of purchasing (households) and inventory turnover (product). Even the 10 year projected trend points toward slower growth and “total job openings during the 2008-18 periods projected to be 50.9 Million and 19.6 million of these jobs are expected to be short-term on –the-job training category. Sixteen of the 30 detained occupations with the most job openings will have short-term on-the –job training as the most significant source of education and training”(1).
This takes us to an even bigger question: why would a large company create jobs or try to expand employment if the instantaneous payoff to a large firm is less than that of staying the same size (precautionary demand for labor)? What business would want to expand through employee growth when to do so take away the competitive advantage of a continuous pool of skilled labor which adds up to is lower employee cost? Isn’t this a dream come true for businesses or what? When businesses have a control over workers who leave for better pay they also benefit from the cost of replacing workers, and at the same time profiting from downsizing. Could this means that the sharp drop in the new jobs creation is a deliberate strategy of the private sector? There are other reasons why companies are not filling positions so quickly. What about:
It has been and still remains a fact that starting a small business is risky where the chance of success is slim and roughly 50% of small businesses are unsuccessful within the first five years (3). Also there are limited resources toward marketing research, promotions, and training such as having to spend all resources on products and services. Despite the risk involved the Small Business Administration says “The view of many small business economists is that small businesses are a shock absorber for the economy, so the belief is that small growing firms would not fluctuate as much as large established firms (3). Creating jobs during periods when employment is growing as well as during periods when employment is declining are both factors of the need of small business growth and the use of government policy. Small business supplies the additional expansion where government and big business are not as effective. Any imbalance of supply and demand results in the increase of substitutes of consumer goods & services which balances the cost of goods sold and aggregate growth. This affects the private sector (manufacturer, wholesaler, retailer…etc) where projected profit margins depend on inventory turnover, price increases, and new growth. The article entitled “Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity” suggested that “entrepreneurial capitalism…continues to provide radical ideas that meet the test of the marketplace and play a central role in the system” (4). In most sectors the small firm compliments larger corporations through temporary service, niche product offerings, transportation, technology, consumer preferences, the fortunes of various industries, financing, self-employed services, and countless other factors. The Small Business Administration says that “most small firms play a large role in the employment share of the private sector is a reflection of economies of scale, which are largely affected by the economy as a whole, technology, consumer preferences, the fortunes of various industries, financing, and a myriad other factors”, and “firms with fewer than 20 employees averaged 1.01 establishments per firm while firms with 20-99 employees averaged 1.32 establishments. These two categories constitute 99 percent of all firms in the US. Most firms with 1-99 employees start and stay small (3). Growing industries will attract new firms through the growth in product and market expansion consisting of those without employees (or non-employer businesses), and those with paid employees (or employer businesses). Below shows how small businesses relate to sales and total number of employees.
I won’t talk about the tax burden in this blog but I will start by talking about the government’s role toward unemployment or what most definitely should be done to boost our local economy. I am very sincere & passionate about the success of business, but at the same time I have an awareness of the big picture of business and government interactions to sustain economic stability. In my opinion neither can truly function without the working of the other. Milton Friedman (Economist & Statistician) felt that the role of government was to build an infrastructure by unrestricting free trade and property rights. However there is a complimentary role through the use of spending and monetary policy to a more certain degree.
Overview of the Trade
Is there a role that government has toward shoring up jobs? As the most recent economic report indicates, the economy is rebounding but job growth is flat. The report states that we are out of the worst of the recession based on indicators that job growth and consumer spending are up. Indicators are pointing out that the business sector is spending on new plant and equipment but has not fully committed toward filling job vacancies. My question would be whether we can depend on the private sector for new hires even if there are signs of increased consumer spending. If so, how long will it be before we see a consistent positive change in unemployment figures? To the contrary, this is what should take place:
· The Bureau of Labor Statistics “More than 90 percent of the jobs created are likely to be in the private sector. Many of the government jobs are likely to be professionals whose jobs are saved from state and local budget cuts by state fiscal relief“(1).
· Another report indicated that “the credit crunch, the collapse of the housing bubble, and harmful economic policies have made the economy less hospitable to entrepreneurs. This bad business climate discourages business owners from expanding. Employers took 1,647 mass layoff actions in June that resulted in the separation of 145,538 workers” (1).
· Newsweek indicated that “many of the firms that slashed pay or cut 401K matches haven’t restored them even though their balance sheets and profits are now healthy (2).
The consensus of these reports suggests that big business should rain through prolonged consumers (goods & services) and government (taxes) spending without continued economic data to offset still other pessimistic signs of slower growth. It could be like a snowball tumbling down the hill as momentum grows it turns and turns (circular flow), but in this case momentum lacks the key element of purchasing (households) and inventory turnover (product). Even the 10 year projected trend points toward slower growth and “total job openings during the 2008-18 periods projected to be 50.9 Million and 19.6 million of these jobs are expected to be short-term on –the-job training category. Sixteen of the 30 detained occupations with the most job openings will have short-term on-the –job training as the most significant source of education and training”(1).
This takes us to an even bigger question: why would a large company create jobs or try to expand employment if the instantaneous payoff to a large firm is less than that of staying the same size (precautionary demand for labor)? What business would want to expand through employee growth when to do so take away the competitive advantage of a continuous pool of skilled labor which adds up to is lower employee cost? Isn’t this a dream come true for businesses or what? When businesses have a control over workers who leave for better pay they also benefit from the cost of replacing workers, and at the same time profiting from downsizing. Could this means that the sharp drop in the new jobs creation is a deliberate strategy of the private sector? There are other reasons why companies are not filling positions so quickly. What about:
· Health insurance & benefit cost as a big expenditure
· The risk of losing productive workers through attrition is not as much of an issue,
· There are a larger pool of skilled temporary or contract workers
· The cost of training the new hires
· Inability to pass higher costs on to consumers
· Most of the time, what lends to the sum of new hires are quits and displacements (work turnovers) which are much larger than the change in the number of employees in times of low unemployment.
It has been and still remains a fact that starting a small business is risky where the chance of success is slim and roughly 50% of small businesses are unsuccessful within the first five years (3). Also there are limited resources toward marketing research, promotions, and training such as having to spend all resources on products and services. Despite the risk involved the Small Business Administration says “The view of many small business economists is that small businesses are a shock absorber for the economy, so the belief is that small growing firms would not fluctuate as much as large established firms (3). Creating jobs during periods when employment is growing as well as during periods when employment is declining are both factors of the need of small business growth and the use of government policy. Small business supplies the additional expansion where government and big business are not as effective. Any imbalance of supply and demand results in the increase of substitutes of consumer goods & services which balances the cost of goods sold and aggregate growth. This affects the private sector (manufacturer, wholesaler, retailer…etc) where projected profit margins depend on inventory turnover, price increases, and new growth. The article entitled “Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity” suggested that “entrepreneurial capitalism…continues to provide radical ideas that meet the test of the marketplace and play a central role in the system” (4). In most sectors the small firm compliments larger corporations through temporary service, niche product offerings, transportation, technology, consumer preferences, the fortunes of various industries, financing, self-employed services, and countless other factors. The Small Business Administration says that “most small firms play a large role in the employment share of the private sector is a reflection of economies of scale, which are largely affected by the economy as a whole, technology, consumer preferences, the fortunes of various industries, financing, and a myriad other factors”, and “firms with fewer than 20 employees averaged 1.01 establishments per firm while firms with 20-99 employees averaged 1.32 establishments. These two categories constitute 99 percent of all firms in the US. Most firms with 1-99 employees start and stay small (3). Growing industries will attract new firms through the growth in product and market expansion consisting of those without employees (or non-employer businesses), and those with paid employees (or employer businesses). Below shows how small businesses relate to sales and total number of employees.
As can be seen, smaller firms play a larger role in filling the niche market’s expansion of new products and services and at the same time, the larger firms (above 500 employees) play the greater role in annual payroll although fewer in number. There is a close relationship in size & payroll only when annual sales are below $768 million based on firms with less than 500 employees. Or as seen below there is a close relationship between the number of firms with greater than 5 employees and less than 500 when there is a proportionate share of job growth. However as seen recently, the share of small businesses tends to decline as the economy is sluggish and increases as the economy improves which reflects the tendency of firms to expand as consumer spending pushes total demand and average firm size increases through new equipment purchases and labor additions.
When the Business is not Striving
Should the business answer the question of why? The business owners would definitely know what waters are insufficient for long term sustainability it would seem. The large layoff numbers that show up in the media reports are a few large companies, however the significant amount of layoffs are through small businesses affected by the larger ones causing downsizing, closing, and adjusting to sales forecast. This cannot be counted or seen in some cases but it is seen most vividly through local communities which are hit hardest through the loss of business. They are those where consumer spending is at or below medium income, where there has been a consecutive drop in the Consumer Price Index (CPI), where there is an inability to spend as the recession persists, and where there is loss of jobs due to the competitive advantage of other nations. This is probably why the Bureau of Statistics projected that “Two major occupational groups—professional and related occupations and service occupations—will provide more than half of the total employment growth during the 2008-18 period. Production occupations are projected to decline (1).
The strongest areas for job creation are through new technology and service-providing sector as the fiscal stimulus package was designed to create jobs quickly. Creating new jobs are necessary by taking advantage of the large labor pool and lower commercial rents. As small banks, which are the catalyst for small business lending, adjust, small businesses must maximize smaller budgets for new hiring and new equipment and government funded programs. One government program that could benefit small businesses is The Hiring Incentives to Restore Employment (HIRE). HIRE provides employers with incentives to hire and retain new employees by exempting employers from paying the employer share of Social Security employment taxes. Still another incentive allows business owners to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Together with an improving housing market, these financial rescue measures could provide the proportionate growth needed for long term sustainability and small business survival. Maybe in the end, adding to the fisherman story, he can hire workers whereby bringing in the big one won’t be as difficult. This essentially helps the local economy by adding more jobs, increasing consumer spending, and perhaps changing total demand.
Thursday, August 26, 2010
Tea Party (Boston?)
March 5, 2010
In 2008 out of growing frustration for government, taxation, and spending a bipartisan group of citizens formed to repel how monies was being spent formed what is called the “ Tea Party” movement. This group’s initiatives demonstrate their free speech rights rallying to reduce the size and wasteful spending of government among other goals. The words of Thomas Jefferson to Richard Price said” it is to me a new consolatory proof that wherever the people are well-informed they can be trusted with their own government; that whenever things gets so far wrong as to attract their notice, they may be relied on to set them to right”. Tea Parties are not centralized in leadership but each group is allows self-governance of each localized group. A lot of the demonstrations over health care reform of late are primarily Tea Party members based on media sources (Huffington, Fox, CBS, and others).
The expression associated with the name “Tea Party” reminds me of the first known tea party where the original 13 colonies were being taxed by Parliament imposing restrictions on the purchase of tea . The dumping of 342 crates of tea in the Boston Harbor was a way of renouncing British rule. A maturing nation desires more independence and fewer restraints while the goal of the monarch should be to facilitate this endeavor without the use of an overbearing governing. Notwithstanding the battle of 1776 ensued and the many lives that were loss their actions or inactions in hind sight can be a lesson to many. Could Britain have learned better leadership qualities by being more proactive instead of reactive? Would the original 13 colonies been better off if they would have tried harder to reach an amicable agreement? Could either side have offered a more win-win resolution?
As a child back in Memphis I would jokingly talk about throwing tea into the Mississippi river. Reared in a family of 9 siblings I would make a threat of going without food to try and get what I wanted. My siblings had no problem with these initiatives since it meant more for them. The lesson I learned was to be sure to have something worthy of debate and for safe measures have a stash of food hid away because leftovers were futile. Point and case is that the Tea Party rallies may be the best thing to show opposition but its partisan agenda makes it more like a far right wing coalition. I am wondering whether they have even bothered to consider if their rallying is still worthy or should they move on to something else. Below are the spending cost of the 4 previous presidents, and the current projected (2010 -2015) cost based on the most recent government expenditure report;
TOTAL GOVERNMENT EXPENDITURES BY MAJOR CATEGORY OF EXPENDITURE AS PERCENTAGES OF GDP: 1980–2015 (http://www.whitehouse.gov) | |||||||
Fiscal Year | Total Government Spending | Defense and International Spending | Health Reform Allowance (Spending) | Federal Payments For Individuals | Veteran Medical Care | Medicaid | |
Social Security and Medicare | Other | ||||||
1980 | 31.3 | 5.4 | 5.5 | 4.7 | 6.5 | 14.0 | |
1981 | 31.5 | 5.6 | 5.9 | 4.8 | 7.0 | 16.8 | |
1982 | 32.8 | 6.1 | 6.3 | 4.8 | 7.5 | 17.4 | |
1983 | 33.3 | 6.4 | 6.5 | 5.0 | 8.3 | 19.0 | |
1984 | 31.6 | 6.3 | 6.2 | 4.3 | 8.9 | 20.1 | |
1985 | 32.5 | 6.5 | 6.2 | 4.1 | 9.5 | 22.7 | |
1986 | 32.5 | 6.5 | 6.1 | 4.1 | 9.9 | 25.0 | |
1987 | 32 | 6.3 | 6.1 | 4.0 | 10.3 | 27.4 | |
1988 | 31.6 | 6.0 | 6.0 | 4.0 | 10.8 | 30.5 | |
1989 | 31.5 | 5.8 | 6.0 | 3.9 | 11.3 | 34.6 | |
1990 | 32.5 | 5.5 | 6.2 | 4.0 | 12.1 | 41.1 | |
1991 | 33.5 | 4.9 | 6.4 | 4.6 | 12.9 | 52.5 | |
1992 | 33.4 | 5.0 | 6.6 | 5.1 | 14.1 | 67.8 | |
1993 | 32.4 | 4.7 | 6.8 | 5.2 | 14.8 | 75.8 | |
1994 | 31.8 | 4.3 | 6.8 | 5.0 | 15.7 | 82.0 | |
1995 | 31.6 | 3.9 | 6.9 | 5.0 | 16.4 | 89.1 | |
1996 | 31 | 3.6 | 7.0 | 4.9 | 16.6 | 92.0 | |
1997 | 30.1 | 3.5 | 6.9 | 4.7 | 17.1 | 95.6 | |
1998 | 29.5 | 3.2 | 6.8 | 4.6 | 17.5 | 101.2 | |
1999 | 29 | 3.1 | 6.5 | 4.4 | 18.2 | 108 | |
2000 | 28.8 | 3.2 | 6.3 | 4.4 | 19.5 | 117.9 | |
2001 | 29.2 | 3.1 | 6.5 | 4.5 | 21.0 | 129.4 | |
2002 | 30.4 | 3.5 | 6.7 | 5.1 | 22.3 | 147.5 | |
2003 | 31.3 | 3.9 | 6.8 | 5.4 | 24.1 | 160.7 | |
2004 | 30.9 | 4.1 | 6.7 | 5.2 | 26.9 | 176.2 | |
2005 | 31 | 4.3 | 6.8 | 5.1 | 28.8 | 181.7 | |
2006 | 31.1 | 4.2 | 7.0 | 5.0 | 29.9 | 180.6 | |
2007 | 30.9 | 4.2 | 7.3 | 4.8 | 32.3 | 190.6 | |
2008 | 32.3 | 4.5 | 7.4 | 5.3 | 37.0 | 201.4 | |
2009 | 36.1 | 4.9 | 8.3 | 6.4 | 41.9 | 250.9 | |
2010 | 5.5 | 46.2 | 275.4 | ||||
2011 | -7.0 | 49.4 | 296.7 | ||||
2012 | -17.0 | 51.7 | 273.7 | ||||
2013 | 1.5 | 53.1 | 292.1 | ||||
2014 | 29.5 | 54.5 | 313.0 | ||||
2015 | 72.5 | 56.1 | 336.2 | ||||
The fact that the Tea Party believe that health care is unconstitutional was founded on the same issues that the bill was passed. Do Americans need a government sponsored plan? The bill by many looks like an idea whose time has come from the many times it was voted down in the House of Rep. I personally wish that the GOP would have supported a version of a health care bill or made the current one more bipartisan. Currently 10 states are trying to repeal the bill on the grounds that it is unconstitutional based on their lawsuit. Let us hope that the history books will view the current Tea Party uprising as positive as it did the original Boston Tea Party that brought independence.
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