Economic Stimulus
January 29, 2010, 8:48 am
If Obama really wanted to get small businesses to start investing again, he could announce that both cap-and-trade and the health care bill are dead-dead and will not be disinterred this year. These two bills affect nearly 2/3 of our company’s cost structure. Since we have single digit margins, small changes in the wage and fuel cost lines can completely wipe out our profits. Not knowing what 2/3 of our costs were going to look like into the future, we have been sitting on our hands.
Unfortunately, this may not be enough. The third leg of the uncertainty stool is income taxes, and its seems likely that some huge increase almost has to be forthcoming given Congress’s predilection for taxes and marked unwillingness to cut spending in any meaningful way.
Here is a very specific example. We have an opportunity to invest about a half million dollars in a new operation in Texas. Financing is available. But in my evaluation spreadsheet, small changes in income tax rates combine with a potential 8% health care tax on wages and an unknown fuel tax increase to move the net present value by enormous amounts. I am not going to risk a half million dollars on a 20-year investment when the government is considering so much legislation that will arbitrarily move the value of this investment.
This is why Obama’s offer of small business financing is meaningless. In the last decade, government sponsored cheap money lured people into housing “investments” that eventually went upside down. Are they now luring small businesses into a new trap, encouraging them to take on debt, only to slam the door on them with future increases to their operating costs and taxes?
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Fred from Canuckistan:
When you spend other people’s money and are not responsible for success or failure, you don’t have to care about “stability” or trusting that the rules won’t be drastically changed right under you own nose.
Governments spend other people’s money and are not responsible for success or failure and they derive their personal stability from having more power, more programs to manage, more decisions they can make.
Too bad governments don’t generate any wealth.
Too bad the Obama Administration doesn’t understand this.
January 29, 2010, 11:47 am
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