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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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Why Aren't Consumers and Businesses Spending More?

Uploaded: Jul 15, 2010
There are two "political" answers in this important policy debate.

One is a version of "Obama is terrible for business" and cites uncertainty and fear of higher taxes and regulation. In response the administration sometimes offers the "George did it" explanation that all bad economic events are tied to Bush administration policies.

I offer a more common sense, no blame explanation.

Consumers account for the majority of spending in the economy and they have every right to be cautious. Consumers face high unemployment and losses in home and retirement wealth. They accumulated large debts over the past decade and need to stop spending more than they earn in order to reduce debt balances.

Until the economy, housing and stock markets recover more, there is no prudent reason for consumers to go on a spending binge.

What about businesses -- large and small?

Actually business investment in two areas is increasing. Spending on efficiency in the form of new equipment and software has been growing for three quarters. And venture capital funding has begun to grow during the past year.

What is not increasing is investment in structures, i.e. new factories and facilities. This is despite increasing profits and large cash reserves for corporations as well as low interest rates.

But this disinterest overall in expanding facilities makes perfect sense for most companies, certainly most non-technology companies, as they have large excess capacity and have been laying off workers in response to low levels of sales and customers. You don't need any presidential guilt theories to explain the reluctance so far of companies to expand capacity.

Although the debate about the contribution of Keynes has morphed into a debate about the wisdom of more federal spending stimulus, the original contribution was the argument that recessions are not really self correcting and that government policy intervention to boost spending is appropriate.

The U.S. economy has been hit with several negative events simultaneously and the argument that the economic recovery needs a continuing government stimulus "bridge" seem compelling to me.

While I have argued that extending unemployment insurance, continuing aid to state and local governments and additional infrastructure spending are good ideas, there may be temporary tax policies such as suspending payroll taxes or targeted investment incentives that are also good ideas.

For all of these ideas we will have to pay the money back when times are good but fear of future deficits is not a sufficient reason to sit by and let the recovery drag on for years.

Comments

 +  Like this comment
Posted by Paul Losch, a resident of ,
on Jul 16, 2010 at 12:33 am

Paul Losch is a registered user.

The US economy, and increasingly the global economy, is a supership, not a speed boat. Consequences of policy actions are slow to be felt, and slow to be ocrrected (righted?) when it becomes clear either they did not work or no longer are working. This has nothing to do with who is in charge. Although some ship captains come across to me as having better judgemment and persuasive skills than others. What is rare is the political leader who has both.

I am not certain that we learn lessons from behaviors that have led to economic crises. Most vivid in recent years was the stupidity of many dot.com business models that were going to "revolutionize" all sorts of areas of commerce that did not derive meaningful value from being pure on line plays, the subprime housing bubble, and the deriviatives monkey business by the likes of Lehman Brothers and Bear Sterns, RIP.

I am skeptical of anything GOP Senate Leader McConnell says, because I perceive him as having an over-riding strategy of not co-operating with the Dems on Capitol Hill or at the White House on anything. I find it amazing that he had such negative things about this financial services bill that just passed, as if the status quo ante had led to some good outcomes, like the Great Recession.

Too much policy was deferred for too long, and I am not sure we are as yet staring it entirely in the face. And this is true at all levels of government and by both parties. I am of the mind that the shifting demographics in terms of age and ethnic mix, and it is affecting spending behaviors that are very different than what we experienced reviously.


 +  Like this comment
Posted by a nit?, a resident of ,
on Jul 16, 2010 at 9:43 am

Hi, Steve -

A little off-topic, but I am wondering what the numbers I hear on the radio about unemployment mean and how they are obtained. (Since government organizations often have a clear agenda, I am a bit skeptical about the numbers. These days it seems the government is almost expected to spin every number they provide by including or excluding whatever they think will help them with something or other).

Specifically, I often hear about "% unemployment" which apparently doesn't include those who have "dropped out of the labor market."

How does the government know someone has dropped out of the labor market? Suppose they don't qualify for unemployment insurance for any of a variety of reasons but are looking for a job - how are these people counted?

What about people hustling to make various deals; flipping houses etc. Are they counted as employed?

More generally, how is information about how many people are looking for jobs obtained? Why isn't a ratio of 'total number of people working' vs. 'total people in the US able to work' sufficiently meaningful to be counted and discussed? I would think that ratio would tell a lot about our employment situation.

TIA


 +  Like this comment
Posted by stephen levy, a resident of ,
on Jul 16, 2010 at 11:24 am

stephen levy is a registered user.

Here is the official U.S. Bureau of Statistics website that addresses your question.

Web Link

Look at the sections called Who is Unemployed and Who is Not in the Labor Force. It answers many of your questions.

This is a brief summary.

Unemployment statisics are estimated from a telephone survey that asks respondents whether they are working or looking for work.

People who are not looking for work are NOT counted as unemployed. This includes mostly people who are regularly not in the labor force but also includes people who have dropped out from discouragement.

The unemployment rate also does not include people who want full time work but are only working part time.

This is a survey so you are counted as employed if you say you are employed, which can include self employment and starting a new business even if you have no customers yet.

From the website

"Discouraged workers" are a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of four reasons:

1.They believe no job is available to them in their line of work or area.
2.They had previously been unable to find work.
3.They lack the necessary schooling, training, skills, or experience.
4.Employers think they are too young or too old, or they face some other type of discrimination.

Able to work is a tricky concept to measure and raises the question of interpreting someone who is physically able but does not want to work. This is why unemployment is measured against the number of people who are both able and wanting to work.

I hope this is helpful. Thanks for the question.


 +  Like this comment
Posted by Stimulus FOR WHO?, a resident of ,
on Jul 18, 2010 at 3:19 pm

Obama wants to create jobs... yes stimulus will also help in creating jobs.

The only problem is that the jobs end up getting created in India - not the USA. Which was not the intended ...

The 'jobs' problem is here in USA - not in India !!


 +  Like this comment
Posted by common sense, a resident of ,
on Jul 19, 2010 at 1:11 pm

To answer the Title question, one must only ask yourself why you aren't spending more. Then keep tracing it back until you find out what caused this vicious cycle in the first place.

Recommend any of the following books on economics by Thomas Sowell to get a good understanding. I began with Basic Economics, then moved into Applied then Myths and Race. Skimmed the Housing Boom and Bust one, but this I know from personal experience, so didn't need to read it to understand what happened there.

APPLIED ECONOMICS

BASIC ECONOMICS

ECONOMIC FACTS AND FALLACIES

THE HOUSING BOOM AND BUST

THE ECONOMICS AND POLITICS OF RACE


 +  Like this comment
Posted by JD, a resident of ,
on Jul 19, 2010 at 6:12 pm

I agree the stimulus money is probably not staying in US. The manufacturing base in US is quite weak at this point. How can this be quantified?

The businesses get low cost loans and invest in factories in other parts of the world. In a globalized economy businesses will get the lowest cost capital and spend it where it makes sense.

So businesses are profitable but they end up spending elsewhere :-(


 +  Like this comment
Posted by Been there..., a resident of ,
on Jul 19, 2010 at 8:04 pm

What low cost loans? Don't you guys realize that the entire "bank capitalization" was part of the hoax and chains we voted in? There AREN'T any business loans available for us to capitalize our inventory, this is one of the many reasons we aren't spending..the money is dried up. The money went to buy up banks that were going under, so that bankers sat there bragging about how well capitalized they were while denying us our business loans to keep our business going.

What "stimulus money"??? Please find me the stimulus money..there isn't any here, unless it was for the census workers and growing the government employee base and giving them raises so that now government workers make on average more than their private counterparts.

Those signs we see on Highways saying "Stimulus Funds paid for this construction" are hoax. It was eggshell game playing with budget funds from State to Feds and back to make it look like the Stimulus money is being spent.

Besides, whatever "Stimulus" money has been spent has been spent as we take it from the next generation.

Hoax, hoax, hoax.




 +  Like this comment
Posted by Sharon, a resident of ,
on Jul 19, 2010 at 8:58 pm

People are not spending more because they believe Obama is in over his head and drowning-- when he gave his employment report it turned out that the vast majority of new jobs were temporary census workers

This dog don't hunt, as they say in Chicago-- this is an insignificant one term presidency at best-- it was the triumph of hope and change over experience and reality--


 +  Like this comment
Posted by Been there..., a resident of ,
on Jul 20, 2010 at 5:43 am

As well, anyone with money dried up investments and hiring the moment Obama was elected ..,remember the plunge from over 9,000 Dow to 6,000 from Nov 5 2008 to Inauguration 2010? This is one reason why Web Link

Those of us with anything to grow or invest knew our country had completed the socialist circle, which would punish us by taking from us in any way possible, and "distributing" wealth and health care "fairly" to those who hadn't earned it. Why should we risk and work anything more only to have it taken?

Since then we have been proven right. Taxes are rising ( have you looked at the 2010 tax tables compared to the 2011? And wait until all the tax "cuts" sunset this year.) "Fees" ( taxes) are rising, and the removal of our individual ability to make choices is rising. ( Note, the Health Care destruction Bill, the recent Financial Market Destruction Bill and the upcoming Energy Destruction bill.

What do you call the opposite of the Golden touch...leaden touch?

Lead poisons. We are feeling it.

And no, this is not simply polemics or theory...I, personally, and millions like me, feel it, having lost our business directly because of the consequences of heavy government intervention in what SHOULD have been individual risk assessment decisions between mortgage companies and home buyers ( but which was overruled by the the perversion of the Community Reinvestment Act, many times discussed on these threads, so look it up).

Our former 50 employees feel it, now that they are no longer employed by us, having been laid off when our business went belly up.

The employees laid off from stores we no longer buy as much from feel it, a direct result of us not having the money we used to have nor the confidence that we WILL have the money again.

etc etc.

Follow the logical progression of economics, and that will answer this question.

This is not simply an exercise in "theories", this is something we all need to learn, and learn well, about the realities of government interference.

It will take years to restore our ability to use our own good sense again, and years longer to restore our confidence. The damage to our system, from Health care to Finance and now to "Cap and Trade" is inestimable and systemic, and very, very scary to think about when the full "bite" will be felt..especially since the full BITE of just the simple little Community Reinvestment Act of 1978 just now, 30years later, was felt by us.

What have we done to our kids?



 +  Like this comment
Posted by Been there..., a resident of ,
on Jul 20, 2010 at 8:50 am

At the risk of being deleted for multiple postings, but finding yet more different approaches to post on the thought of this thread, here goes.

The better question to ask would be "Why should businesses and consumers spend more?"

Here is a link to yet more reasons not to spend more. This Admin is exercising truly out of bounds power..now blocking news reporters from the Oil spill ( remember trying to use the power of the White House to intimidate those who disagreed on Health Care, by establishing a white house dot gov site to report your neighbors who disagreed? This is an extension of that same mentality, the Chavez-like mentality of Venezuela, who has managed to shut down virtually all reporting in oppostion to him)

Web Link

And here is a quote from James Carville on Cooper's show a couple days ago

Anderson Cooper said, "What else do you want people to know about what's going on right now down in New Orleans? I mean there's a new moratorium that's going to be in place, that's a huge concern, but now it sounds like people on the presidential commission are backtracking, saying it may not take six months."

CARVILLE: The people here have been so let down. The federal government let us down. They're killing the economy here. People in the interior department that issue these things don't have the foggiest idea about life here, they don't have the foggiest idea about what's going on, and they have got to do something about this because the federal government is about to kill us.

And, lastly, there is this. We have an Admin that wants to give Civilian Trials in the USA to non-citizens caught red-handed on the battlefield..but puts a US citizen on a "kill list" without a trial

Web Link


So, we have a White House/Congres that is completely out of constitutional control, believing it is above our laws, flexing muscle from squelching the press to shutting down businesses, from suing States that are trying to follow the Federal laws already on the books to going after private individuals and calling them out as "jackasses" ( remember that?) and "greedy" ( remember that?), denigrating entire cities and their industries ( remember Las Vegas, encouraging folks to report their neighbors, basically showing total contempt for all that is individual, private citizens in this country...), consistently siding WITH other countries and their citizens AGAINST our country and our citizens...

And you have to ask WHY those of us who have any money left at all are afraid to let any of it go? We are too busy trying to figure out how to protect ourselves against our own government, that is why.


 +  Like this comment
Posted by Perspective ..last post today, a resident of ,
on Jul 20, 2010 at 11:29 am

Ok, last post..today anyway. Gotta get to work myself ( though with the unemployment benefits I am hearing about, looking at my take home and comparing it to what I would take home in benefits and cash if I were unemployed, combined with the jobless security the Dems want to give me, maybe I will just give it up and let my neighbors take care of me...)

yet more reasons why we aren't spending...

Web Link

we are facing having to transfer yet more wealth to those who don't earn it, this time "health care for" undocumented residents ( the new form for illegal aliens).

Those of us with anything left are gripping our wallets as tightly as we can, like they do in Europe, knowing that we are facing out of control power from our government. The GOVERNMENT picks winners and losers in Europe, and apparently we have gone that same route.

Not exactly encouraging for entrepeneurs, hard workers and risk takers.


 +  Like this comment
Posted by Perspective, a resident of ,
on Jul 28, 2010 at 4:29 pm


Web Link Link to the Small Business Assoc pdf on facts about small businesses. You can also follow it to find supporting data for the rest of what I write here.

There were about 30 million small businesses a couple years ago..now there are about 26 million. If we assume only 1 employee ( the owner) for each of the lost 4 million businesses ( recall..this is PRIVATE SECTOR), then that alone is millions of lost private sector jobs.

Of course, a lot of us lost our businesses that had even 50 employees, and they all lost their jobs. So, of course, it is much, much more private sector loss than the "mere" 4 million lost businesses. But I don't want anyone accusing me of hyperbole, so I am keeping it conservative.

Now, there is more..follow me here, and it relates to the question posed in this thread.

About 6 million businesses are "small" ( employees <500)

Do the math about why businesses are spending less as they face upcoming huge tax increases.

1) Here is the breakdown of one facet in a nice little table

Annual Cost of Federal Regulations by Firm Size,
All Business Sectors (Dollars)
Type of Regulation
Cost per Employee for Firms with:

<20 Employee 500+ Employees
All Federal Regulation

$7,647
$5,282
Environmental
3,296 710
Economic
2,127 2,952
Workplace
928 841
Tax Compliance
1,304 780
Source: The Impact of Federal Regulations on Small Firms, an Advocacy-funded study by W. Mark Crain, 2005 (www.sba.gov/advo/research)

Small businesses get hit at a higher percentage than bigger businesses for every new rule and every tax increase, and they see nothing but ever rising costs from an ever increasingly regulatory environment from Feds ..so they see upcoming rising costs of doing business.

Where will the business owners get the money to pay for these rising costs?


2) Here is a nice NY Post Article on the upcoming 25% increase in taxes on small businesses. Web Link

We will speak strictly in averages..the average effective tax rate on small businesses is roughly %20..now, if it is going up 25%, that means it will be an effective 25% tax rate, that translates into a LOT more money per year in taxes.

So, in real terms, if up until now a business was paying $200,000 in taxes per year, the owner can look forward to paying $250,000 next year and every year after that.

Think about it...where will that extra $50,000/year come from?

In most of the States, that amount is a livable wage and benefit package for one employee. How many millions of workers will be laid off, or not hired in the first place, to pay for the new taxes?

And then what happens? So the business pays more taxes, which pays the salary of some government employee to distribute whatever is left to the now unemployed masses.

Wake up people.... remember,socialism works only until we run out of other peoples' money, and the more we destroy businesses, the less of "other peoples' money" we have. We had the most tax revenue in the history of our nation in 2005, ( unfortunately immediately spent), yet some of the lowest tax rates in the last 40 years. Think about it.

++++++++++++++++

If you were a small business owner looking toward the future, would YOU be spending money that you won't have?


 +  Like this comment
Posted by Perspective, a resident of ,
on Jul 28, 2010 at 4:30 pm

OH, ..I put the table in to this little posting box correctly, but it went up odd when I hit submit. Well..ignore the table I guess, and if you want to see it, just go to the SBA site.


 +  Like this comment
Posted by Perspective (new post), a resident of ,
on Jul 29, 2010 at 8:49 am

Web Link

AP story : "The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists."

Wonder why?

This is a vicious cycle we must break. Bring back small business owner confidence that they can keep what they earn from risk/hard work, and not be hassled to death by Fed regs, and we will begin to recover our economy.

Our economy rests on the millions who start and build businesses in the PRIVATE sector. Stop punishing them for their hard work and risk taking.


 +  Like this comment
Posted by stephen levy, a resident of ,
on Jul 29, 2010 at 12:50 pm

stephen levy is a registered user.

We have been through a terrible recession and are in the beginning of what will be a long, slow recovery.

Most of the job losses and contributing factors happened long before Obama became President, before there was a health care and financial reform package. If people want to make everything about how bad Obama is then we will continue to have public responses about how it was Republicans' fault and little progress is possible.

I still think the common sense perspective on why we are where we are is that many consumers have less income to spend and most businesses have excess capacity and a shortage of customers.

Some of the stuff posted here about small businesses comes from an alternate universe.

Most small businesses make nowhere near $250,000 a year and are unaffected by any proposal to let tax cuts expire for higher income groups. This argument that most small businesses will pay higher taxes is not true. And small businesses will be beneficiaries of the health care reforms.

So what would help small businesses besides more customers?

Small business owners argue that lack of credit availability is their major barrier--many who are ready to expand find themselves being turned down by lenders. Maybe the lenders are being prudent, maybe overly cautious as is their right.

So the administration has proposed a small business lending fund along with tax breaks and Republicans who claim to support small businesses vote to block the bill. Read any of today's papers.

Go figure!! Maybe Democrats would have done the same thing in an election year.

Maybe consumers and businesses are noticing that our politics has gone bizarre and that is another reason for their caution. If Town Square is any example, the number of people interested in solving problems rather than repeating partisan positions is rather small.


 +  Like this comment
Posted by Richard, a resident of ,
on Jul 30, 2010 at 7:51 am

Mr. Levy,

I fail to see yur logic.

On the one hand you say:

"many consumers have less income to spend and most businesses have excess capacity and a shortage of customers"

Then you say:

"Small business owners argue that lack of credit availability is their major barrier--many who are ready to expand find themselves being turned down by lenders"

If customers are not buying, then why are small businesses expanding?

You also say:

"Most small businesses make nowhere near $250,000 a year and are unaffected by any proposal to let tax cuts expire for higher income groups. This argument that most small businesses will pay higher taxes is not true"

You fail to mention that most small business income will be taxed at a higher rate...high enough that it could well inhibit hiring a new worker. The reason for this, as you know, is that most small business income comes from those businesses which make over $250k per year. Small businesses which make less than $250 a year, even though they are a majority of SB owners, are less likely to expand than those above that level.

So, focusing on the SB owners who make more than $250 per year, and who, you say, are needing more credit to expand, how does taking away their money via higher tax rates help them? You are basically saying that these SB owners should be able to get a loan (and pay interest on that loan) in order to pay higher taxes.

Where is the logic in your approach?


 +  Like this comment
Posted by Perspective, a resident of ,
on Jul 30, 2010 at 6:54 pm

simply go to the Small Business Assoc site to see for yourself that the assertion that "most" small businesses make nowhere near $250,000 is not true.

in any case, like with the tax on millionaires some time ago, I continue to assert on general principles that theft is theft, whether it is by government fiat or by gun point in an alley, ...anyone taking money they haven't earned is wrong, whether someone makes $50,000 per year or $1,000,000 per year. It is still theft. I have the strong memory of that Luthern priest who wrote "first they came for the jews, but I wasn't a jew so I didn't help, then they came for the catholics, but I didn't care, then they came for me and there was noone left to defend me". It is the same with appropriating taxes..when is it "enough"? The AMT, for example, was supposed to be for "the rich"..well, most of us now are in that bracket and paying that "rich" person's tax.

We have to stop thinking we have the right to simply take what we haven't earned.

Next: How can ANYONE continue to believe we are in a "recovery", slow or not, when our unemployment continues to rise ( now 10.1%) and our GDP shrink ( the worst since 1946 now!!)...

This is truly Orwellian times. NO signs of "recovery" anywhere that I can see. No growth in private sector, anywhere. Please, anyone, give me a clue for where to find the "recovery".


 +  Like this comment
Posted by Perspective, a resident of ,
on Jul 31, 2010 at 6:21 am

Or, if you prefer to read an article that summarizes the upcoming huge hit on small businesses and refutes the claim that it won't affect "most" businesses, read this article by the Investors Business Daily.

Here is a quote from the beginning of the article. For those who don't know "canard", it basically means "lie".

"If you've heard it once, you've heard it a thousand times: When the top two income-tax rates go up in January, it will "only affect the top 2% or 3% of small businesses and families, and they're all rich, anyway."

This misleading canard has been repeated again and again by President Obama (going back to when he was Sen. Obama), Treasury Secretary Tim Geithner, congressional Democrat leaders such as Speaker Nancy Pelosi and Majority Leader Harry Reid, and numerous ideological fellow-travelers in Washington.

It's the talking point of choice for the Left as they try desperately to avoid getting blamed for the largest tax increase in history coming this January."

+++++++++++++++

Recall that small businesses already pay a much bigger percentage/employee in taxes and regulations than do big corporations with many more employees. Gosh, let's make it that much harder on the section of the business world which creates well over 90% of all new jobs in this country.

If we do that, then only the really big corporations, or the very small barely struggling to survive mom and pop one, will be able to survive. This will truly go one step forward into cementing a "class" society where the haves keep on having and growing, and the have nots keep on having not.

Way to go!2ill opportunity!

I am betting 10.5% unemployment by November. Who thinks it will be higher?



 +  Like this comment
Posted by Perspective, a resident of ,
on Jul 31, 2010 at 6:33 am

Last post..hope this isn't deleted because of "multiple posts by same " whatever. It is because I just found this article.

Here is an article by even YAHOO that is finally saying the truth..recession deeper than GOVERNMENT previously thought ( finally, not saying the famous anonymous "economists" previously thought, because most economists actually knew what was coming once we had only McCain and Obama as choices. Heck, most investors knew..the Dow began really plummeting after the nominees were chosen, and remember the drop in Dow from 9,000 something to 6,000 something from Nov 5 to Jan 20 once furthest-left was the final choice?)

Web Link

It is unfortunate that Yahoo continues to repeat the new definition for when a recession begins. In fact, by every definition prior to the bush hating era, the recession actually began in the summer of 2008. No big shock, as we saw what was coming down the pike.

By the "new" definition, the Clinton recession didn't begin in the summer of 2000, it began in December of 1999. But somehow I don't think that we will ever hear that reported by the MSM.

In any case, this is yet another answer to why millions of us aren't spending. I trust the vote of milllions and millions of wallets a lot more than a few government officials and a few government/media appointed economic seers.




 +  Like this comment
Posted by stephen levy, a resident of ,
on Aug 1, 2010 at 8:07 pm

stephen levy is a registered user.

Here are three points readers might ponder.

One, small business owners habitually rank taxes as their biggest concern. In the late 1990s when job growth, mostly at small businesses was at an all time high, taxes were the largest concern of small businesses and continued that way for more than two decades but

That ended in 2008. Recently for the first time in history more small businesses rate lack of sales as their number one concern over taxes.

Second, some posters have argued that the 3% of small businesses where owners make more than $250,000 account for most of the small business job growth. This is without evidence, without common sense and insulting to the 97% of small businesses who contribute to the economy.

Finally some posters have argued that it is inconsistent to say that there are no customers but that small businesses are affected by the lack of credit. That is not truel.

The credit crunch affecting small businesses is serious as it affects not only those businesses who want to expand (some businesses are interested in expanding even in recessions) but mostly affects businesses whose existing lines of credit are not renewed as bankers tighten lending requirements as they have for homeowners. Thus the lack of credit can force businesses to downsize, which is why blocking the small business loan bill as was done last week is so counterproductive.


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Posted by Paul Losch, a resident of ,
on Aug 2, 2010 at 4:47 pm

Paul Losch is a registered user.

Steve,

I heard you on the Forum Program this morning on KQED Radio.

I am becoming increasingly pessimistic about the economic matters at hand.

The folks elected to dwell in the Capitol building in Sacramento are clearly dysfuntional. The great State of Calfornia will be California only. Nice place to visit, don't want to live there.

I really question that our national policy makers understand what the right "business strategy" is in light of the economic globalization that is taking place.


 +  Like this comment
Posted by Perspective, a resident of ,
on Aug 20, 2010 at 6:33 am

Web Link

God save us from people trying to "help us"..in this case this dear professor of law ( I am always so delighted to read yet another attorney who thinks she or he can posit economics) telling us that the mortgage interest rate deduction "imprisons" us and we need to be freed from such a trap! She wants to save us from ourselves by removing the mortgage interest rate tax deduction!

And you wonder why we aren't spending?

Every time we turn around there is yet another hare-brained scheme to change the rules of the game in favor of hurting producers and our economy yet more.

Always, of course, in the name of "helping" us!

Please, please, don't "help us" any more or we will collapse! 65% of us own our own homes in this country...more than any other country in the world, ever. It is the single biggest avenue toward financial independence and wealth building we have. So, some silly attorney, along with Democrats ( Obama first raised this specter in March), wants to destroy a tax break that helps people gain financial independence...and in the process destroy home values yet more, and take yet more from the very people with "skin in the game"...why? Because our government simply can't stop spending.

No need to ask why those of us who actually produce aren't buying.

A few Jeffersonian quotes

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not. -- Thomas Jefferson

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. -- Thomas Jefferson

My reading of history convinces me that most bad government results from too much government. -- Thomas Jefferson

Last, go to "sick of spending dot com" if you want more info.


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Posted by Richard, a resident of ,
on Aug 27, 2010 at 12:47 pm

"The credit crunch affecting small businesses is serious as it affects not only those businesses who want to expand (some businesses are interested in expanding even in recessions) but mostly affects businesses whose existing lines of credit are not renewed as bankers tighten lending requirements as they have for homeowners"

Mr. Levy,

You have my head spinning! We have all recently experienced a period, during which credit was made excessively easy for homeowners, and this led to the mortgage meltdown. Out of that mess came the demand that banks go back to traditional levels of risk...thus we have the fallout comprised of massive foreclosures. It will take several years to work our way out of it, and there could easily be more down than up during this workout.

Now you seem to want us to extend a credit bubble to small business. Banks are waiting for qualified small busniesses to come talk to them, but the problem is that many small businesses are not qualified for safe loans. Are you suggesting that we subsidize bad credit risks?

Small business is usually defined as those businesses that gross $25M or less per year. Alternatively, they are sometimes defined as those which have 100 or fewer employees. The majority of small business income is earned by owners who earn more than $250K per year. This means that you, Mr. Levy, want to tax the income of small business, in the middle of a major recession. Can you please explain how taxing the majority pool of income in small business helps small business to hire people?


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Posted by Perspective, a resident of ,
on Aug 27, 2010 at 7:10 pm

Just keep hanging in there until we vote in a road block in November to this abominable ideology rampaging through our country. The Dems will then try to ram through absolutely everything possible since their goose is cooked, and we will have to fight tooth and nail to stop them...

once the party of not only no, but hell no to any more destruction puts up their road block in January, we should start seeing a recovery of some sort, though anemic, as investors and businesses realize that the worst has been done, peek their heads out of their shells, and survey the landscape to begin rebuilding.

Of course, "Obama and Dems" will claim that their "plan" is finally working, but the reality will be that we will know that they can not destroy anything else, and that will leave us some ability to trust in the future a little bit, at least for a few years, and rebuild.

So, don't give up...


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Posted by Perspective, a resident of ,
on Sep 8, 2010 at 6:00 pm

The fear is out in full force, I note today.

The San Jose Merc has not 1, not 2, not 3 but 4 pieces supportive of Democrats and anti-Republican opinions on the opinion page,

Ranging from the absurd ( the Repubs are saying no to Repub ideas in the Editors Opinion Piece..of course, with no back up of this idea..if Obama had a free-market idea, there would be resounding YES..Repubs are finally learning to STOP INCREASING SPENDING, which is what made the whole mess worse in the first place in our panic in 2008),

To the Cartoon that is about the Repubs and Voters have learned nothing, ( half way agree..but Repub Elites are learning as Tea Party candidates win)

to the even more absurd and predictable: Paul Krugman has his usual "we didn't stimulate enough" diatribe, trying to convince us that FDR simply hadn't gone far enough when he finally quit growing the debt in 1938. It was a "government save us" moment with a Dem Congress pulling Hoover that led to FDR, just like a "government save us" Dem-led Congress led Bush to lead us to Obama. Took them longer to learn than we did in this modern era, but that is understandable. It was the first time we pulled hard left in this country, and they didn't have the internet for folks to source their own news.

And, finally,

the ( yawn) assertion that the wars have cost us 3 Trillion dollars. The implication being, of course, that this is the cause of our debt, not socialism/marxism...without any understanding whatsoever about the financial cost:benefit analysis of victory in Iraq, for example. By the same reckoning, WW2 was just money down the drain, no international trade build up as a result, no international investments and mutual build up of wealth.

Must be getting close to election time.

++++++++++++++++++++++++++++++++

On this note, recommend the following

In 1939, ten years after the crash on Wall Street, the Secretary of the Treasury, Henry Morgenthau, Jr., told the House Ways and Means Committee:

"We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong…somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…I say after eight years of this administration we have just as much unemployment as when we started…And an enormous debt to boot!"

After ten years of research, professor of history, Burton Folsom, Jr. has published "New Deal or Raw Deal? How FDR's Economic Legacy has Damaged America" ($27.00, Threshold Editions).

To get an idea of just how bad the U.S. economy was during the 1930's, Folsom notes that, even though the U.S. had budget surpluses in 1930 and 1931, government spending "ballooned and far outstripped revenue from taxes." It was the Wall Street Crash of 1929 that precipitated the Depression, but it was FDR's "solutions" that deepened and lengthened it, actually preventing any solution.

+++++++++++++++++++++++++++++

Sound familiar?




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Posted by Sharon, a resident of ,
on Sep 8, 2010 at 6:18 pm


The reason is that the banks are not lending money--- we bailed them out-- but they are just hanging on to the money and building interest-- another incompetent move by the Obama administration-- welcome to Chicago--



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