The vast chasm between the haves and the have-nots

Urban Street

Back several year ago (actually a lot of years ago) I found myself in Philadelphia for the first time ever, in a rental car, in the middle of January, very lost. I just needed to get on the freeway pointing to the airport.

Me and my travel companion got out at a gas station and asked someone how to get to the freeway. The man did not know. After several minutes, I realized this man was not being intentionally unhelpful, he just simply didn’t know. He had never driven a car in his life and had no reason to ever use the freeway. He probably never ventured outside his neighborhood his whole life.

….

Jobs

Barack Obama on Labor Day

I was going to skate past Thursday and not comment on this big jobs speech that President Obama is going to deliver tomorrow, but then @caroljsroth tweeted this morning:

I want to know what #jobs creation efforts/policies you are looking for as a small business owner. What would incentivize smallbiz to hire?

Oh, crap! I took the bait and replied:

Guaranteed customers. Seriously, that’s what I want.

I know, I know, it was flippant and snarky but it was what bubbled up on my brain at that exact moment. And I just blurted it out. I think a lot of other small business people are thinking the same thing. Washington and the media keep asking the wrong damn questions.

Here is the small business reality: Yes, we know that by hiring someone, that person will then spend money into the economy and eventually, when there are lots of other small businesses hiring, that will create more demand for the goods and services we provide. We get that. We really, really get that.

Theoretically.

But on a practical level, we’re all sticking our heads out the store front, not seeing any potential customers and saying, “I’m not gonna try it; you try it.” just like the Life cereal Mikey commercial.

In the back room, the banks — who have nothing to lose because they will get bailed out — are pressuring us for personal guarantees on any loan we sign. If I am the first to stick my neck out and nobody else follows, it is MY house and MY car and MY retirement fund that I will lose. And my government will not give a puppy’s pooch about me. Same with the SBA and other government-backed loan programs. Modern-day natural selection.

But back to the original question.

The president will most likely do some tax policy deal. Ugh. Tax policy tinkering never works for small business because the only thing we hear is the ear-piercing screaming of our CFO who just got back from a workshop learning about all the changes to the tax code from the last time Congress messed with taxes. Yeah, we all hate paying taxes, but taxes are a sign of success. If you make money, you pay taxes. If you spend money, you pay taxes. If you are neither making nor spending money, taxes don’t matter; even if they are set at 100%. 100% of $0.00 is still $0.00! Congress can’t give us a big enough tax incentive to hire anyway, so just quit trying. Please quit trying.

Policy change #1: Quit farting around with the tax code. When you make these “deals” it only sounds like someone is getting screwed somewhere. And that someone be us. Leave it.

Put your money where your mouth is. US government, YOU hire people to do stuff. Start with writers, artists, sculptors, filmmakers and musicians to create works open to the public. If we see that work, chances are people you are paying will start buying our goods and services and we’ll have to hire people to staff up. Pretty soon, the private industry employees every other small business is hiring will start spending money on our stuff and Uncle Sam can quit hiring people. We’ll probably offer better wages and benefits anyway and then those government jobs will just dry up.

Policy change #2: Direct hiring. Do not give money to the states and private contractors to hire people. They will just use the cash to shore up their bottom lines and bloat their stock prices.

That’s pretty much what I want to hear tomorrow. I’m not going to, but that is what it will take.

Otherwise, it will be the same ol’ waiting game we’re all playing right now.

The stock market spiral. It may not be what you are being told

Stock market downturn august 2011

The broadcast media loves a good, tight narrative. Here is the narrative for the stock market downturn for the recent events happening on Wall Street.

Congress squabbles over debt ceiling, Tea Party was obstinate about debt and deficit, we came close to default, S&P drops rating, stock market reacts. Package that up with some pundits, repeat over and over and it becomes fact. Next story.

Only part of this is true.

Here is what I think is happening with the stock market. It is about as simple as the narrative, but admits that human behavior is behind all the numbers so that is always scary territory for economists. But we’ll give it a go anyway.

In 2008, the economy came to a grinding halt. Millions of people lost their jobs, many were on their way to losing their homes and since poor people don’t spend money, millions of businesses quit stocking inventories.

Corporations shed jobs and cut expenses and immediately became more productive and profitable just in the way we measure these things. When the economy started growing slowly, they did not re-hire people; they replaced them with technology that shows up every day, do not need a medical plan and will never saddle the corporation with a pension plan. Investors like that so they buy more of that company’s stock. And they bought a lot in the past two years, pushing stock prices higher. Investors were getting richer.

But you can not cut your way to long-term profitability. The life span of a “cost-cutting to profitability” plan is about 18-24 months. After that, if you are not growing revenues, your profitability will start to decline. Business knows that but they also know that the average “dip” between recessions is about 18-24 months. After that, people get tired of austerity, they start spending, jobs get created and the economy kick-starts itself into gear.

Investors also know this, but they never know exactly when they should be selling the stock. But the smart ones know they will sell the stock eventually because companies will start hiring based on product/service demand and their stocks will take a hit before going back up. Investors hate when companies hire; it means lower short-term profitability and long-term obligations. They like to sell before that “hit” happens.

The underlying reason businesses are not hiring is because they have no need to hire. There are few customers on the horizon. Regardless of what the GOP spins about tax cuts and regulations, the number one — and only reason — businesses are not hiring is because they do not see any customers. Period.

Taxes and regulations are things to either comply with or figure out how to get around when you really, really want to get to the dollars on the other side. To date, I have not met a businessperson who does not believe that in his/her heart. Have you?

We are at about the 24 month mark when the economy should be swinging upward. Only it isn’t and the only organization with the will and means to spend money to get things kick-started — the US Federal Government — is now in a Tea Party-forced cost-cutting frenzy. Even if the President were to introduce a jobs bill, he could never get it funded. What the market heard during the debt ceiling debate and Mitch McConnell’s comments afterwards is the government is going to keep cutting way past the 18-24 month window. Way, way, way past.

“Holy crap!” think investors who are looking at history and know they are at or near the end of the “cost-cutting to profitability” plan of most corporations. “I’m not going to lose my butt in the private sector. I’m going to buy the most secure stuff that exists; US Treasuries.”

Standard & Poor’s did the only thing they knew how to do; lowered the rating for the US Government. Not entirely the best strategy, but they could do little else. S&P also gave a narrative as to why they did something, anything. But neither side heard the rationale. I’m not a fan of S&P as they have been wrong more often than right, but this time, I think they got it right, even if their math was off.

The problem does not lie in the math; it lies in the human assumptions behind the math.

And that is exactly what is going on, regardless of what rating Standard & Poor’s gives the US Government.

Now, all we need to do is package that in a nine-second sound byte.

*Sigh*

None of your reality is really real

North Clayton Village, Clayton Ohio

This is the town center of North Clayton Village in Clayton, Ohio. It has a nice wide Main Street, store front shops, a coffee shop, a park around the corner and apartments on top of the shops. It has everything you would ever want in a village.

Only it is a fake.

….

.

You are a deadbeat piece of crap

help wanted cheap

When did the United States of America go from “shoot for the moon” to “circle the wagons?”

We appear to be on a race to become the sickest and dumbest of the developed nations where nothing is going to be possible. The enemy this time is not the Communists, Soviets or al-Qaeda. The enemy is your deadbeat neighbor who is sucking your hard-earned money out of the tax coffers to finance his lavish lifestyle. He is buying big-screen TVs with his unemployment checks and taking extravagant vacations with his Social Security checks. If he is a teacher, he is enriching his pension plan from your sweat and aching back. If he works for the government, he is an over-paid lazy bum who is the reason your health insurance plan at the plant stinks.

Do we really want armed police officers and firefighters hired by municipalities at bargain-basement prices? How stupid and ill-trained do you want the teacher to be teaching your children? Have we abandoned the notion altogether that good schools increase property values? We seem to accept the argument without question from the Right that the public employees need to lower their expectations of compensation and the value of work rather than the private sector workers increasing their expectations.

Smart people are being driven out of politics by zealots and bullies under the mis-guided notion that small government is good government. But a small government that enables corporations to rape the human resources unchecked for the sake of profit only is not a good small. Even small government must be balanced.

The secret to getting cheap labor appears to be convincing everyone that they are not worth the salary or benefits they are asking. From the Tea Party to the GOP to the media, the message appears to be consistent — human beings are just too darn expensive.

Break out the torches and pitch forks, folks. We are turning against each other and it isn’t a healthy debate.

The debt the next generation will be paying was not started by our government, but by ourselves

Alice Paul c. 1930s

In her article in the WSJ, Peggy Noonan uses an example that has been kinda turning over in my head ever since I read it early yesterday morning. In it, she quotes Rep. Marsha Blackburn of Tennessee that many in the Tea Party crowd are grandmothers and that:

“Women are always focusing on a generation or two down the road. Women make the education and health-care decisions for their families, for their kids, their spouse, their parents. And so they have become more politically involved. They are worried about will people have enough money, how are they going to pay the bills, the tuition, get the kids through school and college.”

Ms. Blackburn suggested, further in the conversation, that government’s reach into the personal lives of families, including new health-care rules and the prospect of higher taxes, plus the rise in public information on how Washington works and what it does, had prompted mothers to rebel.

And that really got me thinking about who these “grandmothers” and women are, the timeline of their lives and the unintended consequences of history.

These women — who are older and are now “livid,” concerned and intuitive — were most likely responsible for inadvertently starting the ball rolling toward our ever-increasing crushing debt load by supporting the most politically and socially active woman’s issue of the time; the Equal Rights Amendment.

Now before you all start in on me for beating up on grandma, just hang with me for a moment. Growing up Catholic and as a kid of a mother forced to go to work second shift to afford us, my formative years were spent at ground zero of this issue. One thing that came out of the ERA was that women were an emerging force in the employment scene. With the political and cultural tides turning the way of equal pay for equal work and looking like the ERA was going to be ratified, companies slowly, reluctantly began paying women more and promoting in an effort to ward off legislation. Women were also becoming more educated and getting better jobs. The country was getting used to the dual income. And that flush of cash was too tempting for corporate America not to scheme a grab.

And grab they did. From 1964-1980, the average house price went up from $13,050 to $68,700 while average income went from $6,000 to $19,500 per person. That calculates to 217% of annual income for a house in 1964 v 352% annual income in 1980. In addition, a car which cost an average of $3,500 in 1964 now cost $7,200 in 1980. In 1964 when most families were single income, they only needed one car. In 1980 when the dual income family had firmly taken root, a second car was necessary. So was out-of-the-home day care. Women had fought the right* to be equal in the workplace, but so too had this fight created a dependence on a dual income for a typical family to afford a home to live in. Women could no longer leave the employment world at will and their men could no longer afford them to.

Life got too expensive to maintain and none of this was due to the Federal government meddling with significant entitlement programs (except Medicare, which every senior in the Tea Party loves and would kill any candidate who takes it away.)

But we really didn’t learn that large social shifts will always be taken advantage of by our free market economy and corporations incessantly hungry for more profit. In this last decade before the Recession, universities were watching the housing market climb up and up and jumped into the fray with their version of the cash grab. They raised their tuitions, knowing full well the middle class would dip into their easy home equity to pay for Johnny and Suzie’s education, regardless of cost. Now, their grandkids are saddled with large bundles of debt nobody is willing to forgive.

And men are losing their jobs at record rates, reducing the dual income family to a minority. And I was left wondering, “Were the grandmothers in Ms. Noonan’s article the same women who foresaw the staggering and unsustainable private debt we are now faced with as they marched for women’s rights back in the early ’70s?” All these women wanted was the right to be treated equally and have the right to do the same job as a man so they could have a higher quality of life. Unfortunately, all corporations saw was an opportunity to grab more disposable income.

I’m finding it hard to believe the average grandma is more “livid” and worried about the US Government going broke from entitlements than they are about their own grandkids being $50,000+ in debt from student loans and not being able to afford a house to live in because homes are priced to a dual-income standard. Maybe I’m missing something.

*I know, the ERA Amendment is still shy of 3 states ratification and died in 1982, but it gets reintroduced every year. Maybe someday. But for purposes of creating a dependence on dual incomes, women have won these rights.

Real patriots die at 55

When you turn fifty in America, you are old. When you turn fifty-five you are too old and should consider dying to make room for the next generation of revenue-producing units. It’s the patriotic thing to do. Hear me out on this.

When you turn fifty-five, the human resources department is looking for a legal way to get rid of you despite what they say about you having vital experience. You’re making too much money, you don’t go to as many training classes as they think you should, you are not as mobile with that family and mortgage anchoring you down and you are starting to contribute a whole lot more to the 401(k) than they had planned for matching funds. They will lay you off in a heartbeat and you will not be able to find another job. Ever. Not in this economy.

When you turn fifty-five, the health insurance premiums for the plan you had to buy on your own because your employer could no longer afford to provide benefits will double over last year. Your out-of-pocket health care costs will also go up and you will start racking up pre-existing conditions, making you ineligible for any other insurance. But you only have ten more years to go to qualify for Medicare, so maybe… oh, wait, they are going to raise that to seventy. You’re screwed.

By the time you are fifty-five, you should have already produced at least one, maybe two future revenue-generating units for the corporate consumer machine. They were far more expensive than you thought they would be, but you’ve put off saving for retirement until they finished school and left. You are now ready to front-load your 401(k) and mutual fund portfolio…

But wait! CNN tells you that you have only about a 30% chance of outliving your retirement plan at the rate you’re going. Oh, sure you’ve helped fuel the economy by having kids, buying a larger house than you could afford, paying for their tuition and feeding and clothing them, but now, you are on the taking end of the economy. Whoa, there! Your country frowns on those who take out of the system, regardless of much you’ve contributed in.

Business wants your money. They tell you this all the time by marketing to Boomers. But they don’t want you actually working for them, drawing a salary and sucking up the benefits. Heck, those young GenY brats will work for half what you need and still think it a fortune. Thank God Walmart hires old people as greeters. Oh, you can’t stand for eight hours a day because your sciatica has been acting up? You should go see a doctor about that. Insurance? Man, that’s tough luck buddy.

Next!

The business of America is business and you are standing in the way when you start getting old. Manup and die off when you hit fifty-five. Your country needs you to make that sacrifice to help reduce the unemployment rate and the federal deficit all at the same time. Moreover, you are likely to have life insurance and your kids could sure use that money to prop up retail sales.

Have you lost hope yet? Really? The great United States of America does not need its future derailed by negative-thinking pinheads like you. Is you or is you ain’t a patriot? Time to decide.

Things are uneasy, and leash laws are top of the heap

dogleash

Things are a bit uneasy out there with the average citizens. Anxiety is high, people feel they have little control of their own destiny and they are on edge. Know how I can tell? Is it news of the economy streaming over the 24/7 cable news? Politicians screaming from podium microphones? Former governors hawking tell-all-know-nothing-stir-up-hate books? Movies predicting the end of the world in two years?

Nope, none of that. It is even simpler.

They care about leash laws.

And local laws on how tall you’re allowed to grow your lawn. And how long you can park your car in front of your house. And if you need a permit or not to build that on your deck. And if you can legally store your boat in your back yard.

And not so much that they care about these laws, but they hike up their sleeves and don’t hesitate to tell you that you better fall in line. There.

I don’t have any data to prove my assertions, so take them with a grain of salt. But, I sense that when people feel overwhelmed and lose a sense of control over their own fate, they turn to really small things that they feel they have the right to enforce.

Like leash laws.