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Political Lies and Small Business
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Brace for a storm of platitudes, recycled myths, and just old-fashioned
political lies.It will all start with President Obama when he addresses a joint session
of Congress on Thursday about the jobs deficit. Whatever he says will be
followed by scorn and abuse from the Republicans. All the hoary old claims
about the absence of leadership, wasteful spending, punitive regulation
and the need to cut taxes will be regurgitated.The president will have a TelePrompTer full of enchantment tales. He also
will talk of cutting some taxes; maybe because he thinks this will endear
him to the undecided voters, or mollify some Republicans, or because he
consistently tries to make his way in a viciously partisan political world
by endeavoring to sound like the voice of detached reason. It will make no
friends and infuriate the Democratic core. It will be another betrayal to
them.All of the tax ideas, presidential and Republican, will be wrapped in cant
about small business. Oh, do politicians love small business. Apple pie is
good, mom is noble but small business, and small business alone, can cause
the entire Congress of the United States to genuflect.They love the travel agent with six employees with the same passion that
they adore General Electric. The machine tool repair and maintenance
contractor with 40 employees – he is the very embodiment of American
exceptionalism. The woman with a wholesale jewelry business that she
operates with her husband and grown daughter — they are the stuff of
American legend.Nonsense.
If Congress knew anything about the small business world, it would
stop forcing the wrong medicine on the patient. Incorrect therapies won’t
help, no matter how vigorous the applications.To the political establishment, small business is suffering because of
taxation and regulation. Fiddle with these twin bugaboos, the political
narrative goes, and small business will bloom like the bluebells in
spring.Have any of these people ever talked to small business operators? Small
business has many problems, but taxation is seldom one of them. Do they
really think the garment manufacturers on New York’s 7th Avenue are on the
phone, schmoozing about the rate of corporate taxation? More likely they
are talking about why the banks won’t lend, even against collateral, to
heretofore good customers; why imports from all over Asia are laying waste
to their customer base; and why the traffic in the cross-town streets is
horrendous.Like all small businessmen, they don’t agonize over the frustration of
having to meet OSHA and EPA standards — these are irritants. Instead,
they agonize over whether there will be enough money to meet payroll.
Taxes, if any, come once a year, but the payroll keeps the small
entrepreneur anxious all year. It is the ogre that visits every two weeks.To many, government is the problem; but not in the way legislators think.
The problem is the growing shortage of federal and state funds. This
affects many small businesses like builders, excavators, asphalt-layers
and the service industries that owe their survival to small contracts:
social service providers, translators, software writers, and consultants
in just about everything.If you cut budgets, you cut small business.
Then there is the “chaining” of America. Local diners, hardware stores,
pharmacies and other retailing are crushed, annihilated when the chains
move in. The chains are not inherently evil, but they are manifestly
merciless. Walmart is but one of the chains putting small business to the
sword.If those who administer government want to know something about small
business, they should spend a weekend at a strip-mall bakery or any other
firm with less than 50 employees. The experience would radically adjust
the rhetoric. It’s too late for Thursday, but don’t believe what you hear.–For the Hearst-New York Times Syndicate
- 4 responses
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On Tax Cuts, GOP Should Think like Business
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Mythology in Washington holds that when it comes to economics, Republicans know best. The root of this myth is another myth, which goes like this: When it comes to business, especially small business, Republicans know best.
All of this doesn’t matter until you get to taxes, when the Republicans, buttressed by their mythological understanding of these things, believe they know best.
And what the Republicans believe they know best is that when you cut taxes, everything gets better: Government shrinks, business booms and tax revenues go up.
It’s not that there aren’t shards of truth here; it’s just that everything has to be in the right conjunction to get one or all of these benefits.
Business doesn’t go along with these myths but, like everyone else, it hates paying taxes, so by and large it endorses the Republican position.
The thing is, business believes in a more durable truth: price.
Price means revenue, and business, therefore, believes and practices aggressive pricing. When business needs to exceed the gap between cost and revenue, it increases the price. If the market refuses to pay the price, business exits that market or fails.
Sometimes, however, and increasingly in these hard times, business pulls a con. It lowers or maintains the price, but adds other charges to gain income. The airlines are doing this. The banks make as much or more on fees than they do on consumer loans. Catalog companies do it with “shipping and handling” fees.
Publishers have experimented more with price than most businesses, and their conclusion is to stay on the high side. If the market rejects your high-priced publication, so be it.
I’ve spent a lifetime studying pricing in publishing. All I’ve learned is this: Defend your price.
In London, Rupert Murdoch engaged his Times in a costly price war with Conrad Black’s Daily Telegraph. In the middle of fierce cost-cutting, Murdoch’s camp, with more resources, was triumphant.
Cheap papers were selling.
But when it was all over, the relative positions of the publications had not changed by much and millions of British pounds had been lost. The hope had been that the victor, Murdoch’s papers, would gain so many more readers that they could make up the circulation revenue losses with higher advertising rates. It didn’t work.
Taxes are different, the GOP has averred. Not really. If they’re too high, they will stifle business, choke enterprise and cause businesses to go offshore. Clearly, marginal rates that exceed some magic number (well south of 50 percent) would stifle business.
At one point after World War II, they reached 90 percent in Britain with disastrous results and a few comical ones. The titled, moneyed families fled to Kenya and Rhodesia and the show-business types took up residence in Switzerland. Actor David Niven and playwright Noel Coward were among these.
Now that the tax cuts enacted in the early days of the George W. Bush administration are about to expire, it may behoove us to examine these with a question: What would business do? Things looked pretty bright when these cuts were enacted with the prospect of years of surpluses. But that was before 9-11, two big wars and a recession.
Therefore, if you looked at the tax issue from a boardroom point of view, the unanimous decision would be to go for the revenue and review the result later. Boardroom-loving Republicans ought to know this.
In business, they laugh at people who believe that lower prices automatically will produce compensating revenue. The joke goes something like losing a little on everything and making up with volume.
Many years ago, I had lunch with George Will and Trent Lott. All three of us were speakers at the American Petroleum Institute’s annual meeting in Houston. At the time, Lott and Will agreed that we were an under-taxed country, given the demands on government.
Back then, Republicans thought like business people.
- 2 responses
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