With IMTS in full swing at the time this is written, one can’t help but think back two years to the last mega-show and how much things have changed since then. Back in 2008, the big buzz on the show floor was the rise in oil exploration and production which was a rising tide floating a lot of manufacturer and shop boats.
This year, because of the BP accident, President Obama has declared a drilling moritorium. Bang! A .44 magnum shot to the back of the head. Add to that the growing liabilities of the health-care bill which contained 2,000+ pages and is still being defined, and the threat of rising taxes and the future for business seems confusing and uncertain.
Businesses hate uncertainty. If they can’t make an educated guess as to what may happen in the next six months or year, most will hunker down and take a wait-and-see attitude. That’s not the way to keep an economy going.
Take for instance the proposed Small Business Jobs Act our Beloved President proposed. According to the Wall Street Journal, “The bill contains $12 billion in targeted tax cuts, such as a 100% exclusion of capital gains income for certain small start-ups, expensing for certain capital purchases, and new deductions for start-up expenses…”
As Yogi Bera is reputed as saying, “it’s deja vu all over again.” Some of its provisions sound almost Reaganesque in their aid to small business, but there are poison pills to go along with the candy. Some small businesses are delaying capital purchases in hopes of the bill’s passage. The bill may sound like a way to get the economy rolling again, businesses are putting off purchases now in the hope of a tax cut in the future. Actually, this “wait-for-the-break” purchasing strategy is unnecessary for most small businesses since they can currently expense 100% of machinery purchases up to $250,000 per year or opt to depreciate the amount over seven years… a policy the Bush administration put in place. Without this crucial piece of information, it may be a case of “jam yesterday and jam tomorrow, but never jam today.” With that attitude we can keep our fingers crossed for a “spring of recovery” since this summer seemed to be a bust.
It’s another case of uncertainty and doubt that’s keeping businesses in the bunkers. The administration offers these anemic carrots, but bundles them with a load of sticks: new 1099 reporting requirements for purchases of $600 or more; Executive Orders 13496 and 13502 which require compulsory unionism for government contractors and federal construction projects; a boost in the inheritance tax to 55 percent; the appointment of a consumer finance “czar” accountable not to the senate, but only to the president himself; and the list goes on.
Parenthetically, I heard of a case where the owner of shop died and left the business to his children. Sounds like something every parent would wish to bequeath. Then the government stepped in. Because the owner had spent more time developing the business instead of finding tax loopholes, the kids had to take out loans against the business in order to pay the inheritance tax. The alternative was to sell the business to pay the death tax. So, what was a debt-free, independent business is now partially owned by a bank. A fine way to keep the economy rolling.
Adding to the fear and loathing is the Beloved President’s constant campaigning. It seems that at every one of his whistle stops he takes a shot at business, banks, and Wall Street. Now, many of these organizations deserve some flogging, but the constant haraging projects a distinct anti-business attitude that drains confidence.
It’s not like any of this was unexpected. During his campaign, one of the president’s off-Teleprompter comments to “Joe the Plumber” was his goal to “share the wealth.” That’s a wonderful platitude, but in practicality it means taking away from those who have worked hard for their success and giving it to those who have not. I’m sure many shop owners out there are doing better than I. I expect that after you finish reading this, you’ll get out your checkbook and send me my “fair share” of your profits. Oh, wait, why don’t we just call that “taxes.”