For Business, It’s 1920 All Over Again
by Thomas Del BeccaroAmerican political fortunes have long been tied directly to the economy… so you would think that politicians would do a better job understanding how to improve the economy. We know consumer demand is down – because consumers don’t have the money or home equity they used to have. That alone is keeping the economy down. Businesses, however, are said to have money but they are not spending or investing it. Why? Because for them it’s the early 1920’s all over again.
Our so-called brilliant, Nobel Prize-winning President, for months, has exhorted American businesses to hire employees and invest – as if wishing for an economic recovery would make it so. Recently, however, Democrat and mega-businessman Steve Wynn told the country – and Obama, if he was listening – why cash rich business is not hiring and investing. According to Wynn, “this administration is the greatest wet blanket to business, and progress and job creation in my lifetime . . . those of us who have business opportunities and the capital to do it are going to sit in fear of the President . . .”
President Calvin Coolidge used to say, “The chief business of the American people is business.” Even so, business doesn’t invest just for fun – they invest for profit – and they don’t invest if they think the risk of not making an acceptable profit is too high. I wrote “acceptable” because business weighs the fact that even if they make money, it will be taxed. As such, a business must decide not only if it will be able to make a profit, but will the profit be so much that it would be worth the trouble/risk after taking taxes into consideration. Keep in mind business knows that it carries all of the downside risk and that government will take a good portion of any upside. If at some point the risk gets too high, business investment and spending is stalled.
Today, Steve Wynn, and much of American business, believes that the risk of not making a decent profit is too high for several reasons. For instance, business doesn’t see sufficient consumer demand – so they don’t stock their shelves or expand production as they otherwise might. Regulations and the threat of more regulations are so high that they hold back money to pay for future costs. Taxes and the threat of higher taxes are also high – and that too causes business to hold back spending in order to pay those future taxes. As a result, business investment and spending is stalled.







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