how would you address unemployment in america?

[kwirl]

Obama is trying to push a 30 billion dollar bill that would eliminate capital gains taxes on small business among other things, but I know a lot of people exist on the right end of the spectrum who do not think of that as a solution.

With unemployment being the epidemic that it is, do any of you know of better or more efficient solutions to unemployment in the US?

**Hint: saying there is no job problem and only laziness is preventing people from finding work is not really an answer.

[Corth]

Another way of asking the same question is how do you improve business conditions enough to the point that private employers start hiring more people? My answer would be to decrease taxes and government spending.

[kiryan]

Stability and predictability are paramount to business. That is one major problem right now, what are my taxes goign to be, what new fines and fees is the government going to impose. How much more regulation is the government going to burden me with. Sarbanes Oxley was a ridiculous bit of government over regulation. It sounds good on paper, but the actual practical result is hundreds of millions spent in compliance either from 3rd party consulting or internal overhead. Businesses that don't make money, don't hire people and don't stay in business.

Would you invest or make a loan to BP right now? Its currently trading for less than its assets value, but who knows what criminal and EPA fines and lawsuits are coming its way. WHo knows what level of regulation is going to be imposed to "make sure this doesn't happen again" and what fees are going to be levied against the entire industry to build a "fund" to clean up in the future (and if you think the money is going to sit in that fund and not be spent by our congresses in the future you are f*king crazy).

but really, none of this is the biggest problem. To have jobs, you have to sell things. To sell things you have to have buyers who can buy things. To be a buyer who can buy things, you have to either have credit or cash. Which we don't have either of because we've been borrowing for 30 years, what cash we have now is going into debt maintenance... the rest is going to rebuilding our retirements due to the collapse and the unlikliehood that SSI will be around when we die.

[Corth]

Kiryan's last paragraph is very important to consider. In essence he is describing a decades long credit bubble that artificially inflated the economy in the first place. What we are now seeing is a slow deflation of that bubble, as collectively, individuals, corporations, banks, and even governments have gotten to the point that they cannot continue to service their overwhelming debts. If that's the case, and I believe it to be so, then really there is not much that can be done to help the employment situation other than to allow the execesses of the credit bubble to liquidate over time so that we can start again from a stronger economic foundation. My feeling is that any proactive steps for government to 'stimulate' employment through deficit spending are doomed to failure, as you cannot solve a debt crisis by simply adding more debt.

[teflor the ranger]

As we've seen with the failure of the Cash for Clunkers program to actually stimulate the economy (link), simply throwing money to buy off voters and to reward political supporters (including businesses in bed with the Obama administration, like BP) does not do anything to stabilize or promote a friendly business environment.

I would address unemployment in America by ceasing political favors to powerful special interests like labor unions and other top dollar campaign donors like BP and Goldman Sachs, and instead actively pursue policies that promote healthy business environments in a manner that strongly protects the right of Americans and their business ventures to hold different ideals and approach their industries with different philosophies but still be equally American.

[kiryan]

sorta kinda related... in the "stability of the business environment" but from a private perspective.

Congress is pondering whether or not to take some sort of coercive action to prevent people from defaulting on their home loans when they can afford the payments. Talk includes preventing you from being on government programs, but once they open up this pandora's box, I'm sure more forceful laws can be legislated... you know how you are not allowd to default on student loans ect...

Seriously, we have been just completely upending the rules of the game for 2 straight years now. Junior creditors being given preference over senior secured ones, some banks bailed out, others allowed to fail, some got haircuts, others were paid full price. Unprecedented demands and threats against BP... The revision of bankruptcy laws 4 years ago. Cash for clunkers, cash for appliances... Who is going to make investments in this kind of environment... homes or business. They are constantly picking new winners and losers.

The government's involvement in changing the rules makes for a really unstable environment. You don't know whether you should stay or go, make your payments or don't so you can get on a foreclosure assistance program ect... Banks don't know whats going on, government doesn't know what its going to do, how the hell are you supposed to make any kind of personal financial decisiosn, let alone start a business. Meanwhile if you are already running a business, you're paying a bunch of people to try and guess what the evnironment is goign to be like or running bare bones just in case.

By its actions, the government is making itself more and more responsible for everything because no one else can do anything other than react and lobby.

http://blogs.wsj.com/developments/2010/ ... -standard/

[Corth]

That's an excellent post Kiryan. You are certainly right that uncertainty discourages investment. The further we slide from the even and predictable playing field of the free market, to the ad hoc socialism of the current and previous administrations - where government decides who wins and loses almost at random, the less capital we will be able to attract from investors, foreign and domestic. It's the beginning of that slippery slope to Zimbabwe.

[kiryan]

http://www.huffingtonpost.com/2010/06/1 ... 11989.html

Another great example of what we are talking about. First of all, its titled "Sebelius Warns Employers Not To Jack Up Health Care Costs". Warnings from this adminisration and congress are very very thinly veiled threats. When the healthcare law went into effect it forced big companies to report huge charges (because of a past financial law). First thing congress wanted to do was haul them in to testify why they were taking charges when the healthcare reform bill promises only to save and reduce costs. Unfortunately, the democrats figured out that CEOs testifying that they had to take billions of dollars in charges was not a good idea.

Anyhow moving on, basically the mechanisms of the threat, your employer can keep their healthcare plan as long as they don't make any changes. Any of a series of changes can cause your plan to lose grandfathered status. I would assume that department of health and human services will be in charge of making this determination... and probably for some of the criteria that determines whether you are disqualified. One of the final paragraphs sums it up pretty well:

"It's a big unknown," said Steve Wojcik, vice president of the National Business Group on Health, which represents human resources managers at major companies. "It definitely sets boundaries where plans have been used to considering all kinds of changes to both improve quality and control costs."

Which ostensibly is a good thing... if we didn't have an anti business, anti profit administration in office.

[kiryan]

http://www.cnn.com/2010/US/06/14/gulf.o ... tml?hpt=T2

I thought about speculating on this a couple days ago, but decided not to. Basically, if you are BP you would be stupid to agree to the demand by the administration to setup an escrow fund for future claims. Besides the money being tied up whether its needed or not for years and years and years, the first thing this administration would do is make a power grab for it. Take control away from BP to evaluate claims and make payments.

Well here it is... "David Axelrod, the senior adviser to Obama, recently said the plan would call for an independent third party to handle the claims process."

next up... Put a bunch of environmentalist scientists in charge of determining the scope of the spill and economic conesquences ect... No wonder the environmentalists are silent, they are going to make a fricking fortune.

[Sarvis]

http://www.cnn.com/2010/US/06/14/gulf.oil.disaster/index.html?hpt=T2

I thought about speculating on this a couple days ago, but decided not to. Basically, if you are BP you would be stupid to agree to the demand by the administration to setup an escrow fund for future claims. Besides the money being tied up whether its needed or not for years and years and years, the first thing this administration would do is make a power grab for it. Take control away from BP to evaluate claims and make payments.

Well here it is... "David Axelrod, the senior adviser to Obama, recently said the plan would call for an independent third party to handle the claims process."

next up... Put a bunch of environmentalist scientists in charge of determining the scope of the spill and economic conesquences ect... No wonder the environmentalists are silent, they are going to make a fricking fortune.

So the other day a few of us go to see some comedy at a bar. My friend Emily, who is a Republican, shows up a bit early, and when I get there she tells me how the bouncer hadn't charged her when the last show was exiting since she got there early. A little later the bouncer walks up to our group and asks if he missed anyone since he wasn't at the door the entire time. Everyone but Emily paid up, honorably.

Now, can you infer from that story why we shouldn't trust BP to just pay up when they should?

[kiryan]

conversely, a government and an administration that have already demonstrated heavy handed no holds bar winner take all tactics on legislation. They have already gone on TV made a bunch of statements painting you and your industry and for profit capitalism in negative tones since they took office. They continuously talk about increasing taxes and fees and fines and criminal prosecution. Their scientists have come out with figures that are 20x higher than yours. Oh and btw, you know they associate with and bankroll the elements of society that are most extremely in opposition to your company.

Can you see why they might be a little hestitant to just trust them with 10 or 20 billion dollars that could make or break you, your company and your employees and share holders? What are you getting in return for giving up your seat at the helm? Good will? That'll get used up on the first hardship case about some poor fisherman; it'll be right back to evil BP.

[Sarvis]

for profit capitalism

The same capitalism that led to sacrificing safety measures in order to reduce the bottom line?

[kiryan]

and when the same thing happens in a communist / socialist country because everyone is too lazy and too incompetent, is it still the fault of greedy for profit capitalism? There was an epic accident, BP may or may not have been grossly negligent in the way their operations were handled, but I guarantee you EVERY oil drilling operation is furiously reviewing their practices and investing in better safety because of what is happening to BP and what is likely to happen to BP. This is happening in a capitalist system without the need for regulation threats and other coercion. How would you handle it in a socialist society? Shoot em?

More on the unpredictable environment.

http://online.wsj.com/article/SB1000142 ... ns_opinion

Then came the President's suggestion that BP suspend its dividend, which is crucial to the retirement of thousands of shareholders. BP may decide it is prudent to suspend its dividend while it gets a better handle on its ultimate liability. But the White House has no legal basis to compel such a decision. Meanwhile, Democrats in Congress are preparing to lift their own $75 million liability cap and apply that retroactively to BP, another move of dubious legality.

The more pertinent question is whether BP will survive, despite its ample cash flow, once the U.S. political and liability systems are done making the company pay. Neither punishment-by-bankruptcy nor extralegal looting will help Gulf victims.

Senate Democrats have graciously advised BP to start its payments to the fund at $20 billion.

The White House knows it has no legal authority to demand such a corporate ATM card, but it is counting on public anger to coerce BP to go along.


By contrast, a government-administered fund more or less guarantees a more politicized payment process. The escrow administrator will be chosen by the White House, and as such would be influenced by the Administration's political goals. Those goals would include payments to those harmed by the Administration's own six-month deep water drilling ban. That reckless policy will soon put thousands of Gulf Coast residents out of work, but the White House knows that BP isn't liable under current law for those claims.

BP is financially responsible for the Deepwater Horizon gusher, and the White House should want the company to stay healthy enough to honor those obligations. Instead, the Administration's denunciations and legally dubious demands are compounding the damage.

[Corth]

If BP had to shoulder the true costs of it's negligence it would be out of business. It will need help from the government - some sort of liability cap - in order to avoid bankruptcy. Hence the reason they will voluntarily do anything the administration asks of them, including speedy independent claim evaluation procedures. Frankly I think they should be allowed to rot. They undervalued risk in the same manner that financial institutions undervalued risk leading up to the financial crisis. It's a 'too big to fail' mentality that is crushing free enterprise. Capping BP's liability is just another form of bailout.

[kiryan]

BP may be headed for bankruptcy. I don't want the administration to protect them or bail them out.

On the other hand, BP is not going to get a fair shake if they lose all control of the claims process and the money is set aside in a government administered account. I don't want to see them financially destroyed to score political points and give a bunch of gulf residents a windfall profit for something as nebulous as "headaches and nausea" or last year I made 10 million shrimping but I don't have any documentation. This administration does not see business as entities with valid interests.

[Tanras]

Obama is trying to push a 30 billion dollar bill that would eliminate capital gains taxes on small business among other things, but I know a lot of people exist on the right end of the spectrum who do not think of that as a solution.

With unemployment being the epidemic that it is, do any of you know of better or more efficient solutions to unemployment in the US?

**Hint: saying there is no job problem and only laziness is preventing people from finding work is not really an answer.

I think this policy is fine, but he is also raising individual capital gains significantly. That hits entreprenuers extremely hard. I think the goal of this was to get more taxes from Wall Street folks, but for people like me who start businesses as a career, I am making big bets with my own capital in order to make money down the line. That money is capital gains and the government is going to be taking about 10% more of that income when the change goes into place. I am very not excited about that personally, but I also think it is misguided as it reduces incentives to start companies. . .and create jobs.

We should be very careful about short term measures that are not sustainable as ultimately, a truly healthy, lower debt economy is going to be the only thing that creates long term, sustainable job growth.

[teflor the ranger]

I would propose that the gulf states be given a cut of future revenues from off-shore drilling as a punitive measure.

It's no wonder people are up in arms about the Federal government and the Obama administration not doing enough. They're the only ones getting a cut of the profits.

[kiryan]

very true teflor, the states get no say in permitting or operation and they get no profits from these wells... they are in the US territorial waters, federal jurisdiction, not in state waters.

The capital gains tax "loop hole" is interesting. Fund managers who are rewarded for good management with millions of shares worth millions of dollars for performance are being paid a bonus... not reaping an investment gain. It should be taxed at their income level, not at the 15% investment gains rate... Small business owners who funnel all their earnings through their corporations are in the same manner are perhaps gaming the system too much. John Kerry's 450k salary for 4 years and 21 million in "investment" income is probably abusive. I generally disagree with leaving taxes the way they are in this area.

Warren Buffet complained one year that he made a ton of money and paid something like 18% tax. A secretary in his company making obviously a lot less paid 2-4% more than he did. He made millions and paid a lower rate than someone who made I think 40k. I think most people find that offensive even though Buffet paid in real cold hard cash hundreds of times more $$ than she did in actual taxes.

I setup a new S corp company 2 weeks ago and if all goes according to plan, I'll be signing a $40k consulting contract in the next few days. Setting up a corporation takes 15% off your taxes right off the bat. (6.2% social security, 6.2 social security that the company pays, and 3% medicare). There is something just not quite right about a scenario where $150 in filing fees saves me $6,000 in "unavoidable" taxes. Now true it doesn't exactly save me those taxes since I would be building up some sort of ssi interest, but it gives me great latitude to decide how to invest these $$... whether back in the business or in social security or whether I do it in IRAs or stocks ect...

[teflor the ranger]

for profit capitalism

The same capitalism that led to sacrificing safety measures in order to reduce the bottom line?

Bullshit, everything sacrifices safety measures. Just ask the socialist workers of old at Chernobyl.