SmartMoney: how the the expiration of the Bush tax cuts affects you

I think this sums it up nicely. Thanks.

 

You must spread some Reputation around before giving it to GladiatoRowdy again.

 

Seriously you just need to stop it's getting pathetic:

William Dunkelberg, chief economist for the NFIB, says more small businesses aren’t hiring because demand for their goods and services isn’t yet strong enough for them to justify bringing new talent on board. “If you don’t have any sales, you don’t need to hire anybody,” he says.

http://seekingalpha.com/article/204361-small-business-still-not-hiring-why

Owners complained that poor sales are their top problem, and there is no need to hire with no new customers. In this sales environment, it is hard for workers to earn their pay. Owners cannot pay workers more than the value they add to the firm.

http://www.csmonitor.com/Money/The-...sses-still-not-hiring.-Tax-credits-won-t-help

Drew White, Sageworks’s chief financial officer, said the survey results representing “tens-to-hundreds of thousands” of U.S. privately-held companies, showed a marked decline in 2009 revenues. White said 2009 fourth-quarter sales, by small private businesses with less than $10 million in annual reported revenues, were down 6.4 percent (see the full report). That was a significant decline from the previous year, when 2008 fourth-quarter sales increased 2.4 percent. Pre-recessionary 2007 figures showed an increase of 5 percent. As a barometer, White said a 3-percent growth rate was “reasonable.”

“Seeing a 6-percent decline is pretty dramatic,” admitted White, who noted it was a good indicator of the degree to which small businesses have been hammered during the current recession. “It’s almost like a 10-percent differential – huge.”

White said as long as consumers refrain from spending, small businesses will continue to remain in survival mode, which likely means reductions in overhead, such as payroll and advertising.

“Everything has gone down when revenue goes down,” said White, who pointed out that over the last four years small businesses have reduced their payrolls – as a percentage of total sales – from 19 percent to 15 percent. This despite the majority of private companies being able to reduce their debt-to-equity ratios from 2.7 percent to 2.25 percent. “You would think if they kept their employees and sales went down, payrolls as a percentage of sales would go up, well it’s actually gone down as a percent of sales and sales have gone down, so they’ve really cut.”

http://blogs.reuters.com/small-business/2010/03/26/gdp-numbers-not-so-rosy-for-small-business/

And on and on and on.....small businesses are not hiring without customers no matter how may taxbreaks you throw their way. Perhaps a few large corporations are hiring a few hundred people, but as the Cons love to point out it's the small businesses that drive hiring and tax cuts won't help them a bit.

 

Ok, the multiplier for tax breaks is 1.02; for expanded unemployment insurance if 1.61. The multiplier for money in a money market fund must be closer to 1.0 than 1.02. Can you have a negative?

 

thanks, guys. A very educational thread.

 

Multiplier effects cannot be accurately measured. Especially government spending funded by a deficit that fails to calculate how borrowing that money is paid off in the future.

 

That's not really relevant in the short term calculus. Further it's pretty simple to calculate that money that is spent, will result in 100% of the amount being spent.....and money that is given as a tax cut will result in spending less savings.

 

Considering our debt load, it should be relevant.

Do you agree that a 1 year FICA tax holiday would be an effective stimulus?

 

Why should it be relevant? Borrowing costs are at record lows. Inflation is nonexistent and instead we are trending towards deflation. Further, the debt load in the future is almost entirely a function of entitlement spending and medicare which dwarfs drop-in-the bucket programs.

If you can borrow money and an ultra-low interest rate today, inject it into the economy and see some immediate multiplier effect today and hopefully spend on a project (such as infrastructure) that will tend to increase prosperity tomorrow - why would you not do it?

Maybe, but if you're really really concerned about future debt which is due to entitlements then this should be the last thing you would suggest, given what FiCA goes towards.

 

Because health care should be a right given the reality of the situation in every single industrialized country save ours.

 

That question answers itself.

The question is actually why anybody would be dumb enough to argue otherwise in the face of reality.

Wrong answer, and you're going to get trolled on for it - the economics alone dictate that government intervention health care reform is necessary.

 

This is a big part of the "reality" that I referred to in my post.

 

The problem with most analysis is that its reviewing the recent past of which most business are reacting to current market positions and not strategically preparing themselves for the future. I believe that a small percentage of people pave the way for great success, and usually there are a few companies that grow dynamically and are managed in a way to create overflow for society.

I again return to the companies founded during a recession:

Microsoft
General Electric
Hewlett Packard
Federal Express
CNN

We can look at averages of all companies of which we're including industries that are on life support including housing, mortgage, areas of finance, luxury goods etc., but for every failure and shift there is an opportunity for new players to step in.

I simply believe in affording the opportunity to do so for the people that took the chance to start a company and may have the ability to expand or benefit from the de-leveraging of other companies.

I'm for keeping taxes low during a recession to encourage spending and investment. Is this such a difficult concept to understand?

Treasury bonds are yielding next to nothing anyway and the market for them is quite strong. We shouldn't be directly or indirectly raising taxes on anyone in this environment. Eventually inflation may come anyway which benefits government spending now at shockingly low interest rates.

 

I'm still reading through this thread but did want to point out that firms like Goldman increased their market share recently thanks to a government loan and in the case of B of A acquiring Merrill to government orchestration.

 

I tend to agree on both points...giving people access to money doesn't guarantee people will spend it and circulate it which we so desperately need...companies small and large aren't hiring because sales are down and that doesn't justify hiring...once we get consumer confidence back, free spending, then and only then can it make a difference...

Besides, there is no right or wrong, everyone has an opinion, but we can all agree the economy is *****ed...

 

Having read through this thread and as a small business owner, who has hired and fired people I can tell you that I find Rocketman1981 contrary to his own argument to be the one who seems wrapped up in theory rather than dealing with reality.

In principle you, Rocketman1981, argument is correct and at a very broad level I agree with it but in practice I don't find it has much bearing. To tie back into another thread it works very nicely if the economy and society were a realm of Randian cardboard cutouts of Producers versus Moochers but not so much with the current situation.

The biggest problem that I have as a small business owner, and I mean small (2 people both owners at this time), is that tax cuts are nice but they don't do anything to advance my business because when revenues are low we aren't paying much in taxes anyway. A tax cut really doesn't benefit me much at all.

Now what would be a huge benefit would be something like universal healthcare that would remove having my business pay for health care for employees and taking money out of my pocket directly to pay for my own health care.

 

Federal funds rate ≠ interest rates avail to small businesses

 

Just to follow up on this point. Tax cuts that primarily benefit the upper income isn't going to benefit our economy, particularly the manufacturing base that everyone is so worried about, because we primarily have a consumer based economy. A millionaire isn't going to take their tax cut and go out and by a million refrigerators causing the Amana to hire more people.