The "Job Creators" Manifesto?

By Steven Pearlstein, Published: September 29, 2012

I am a corporate chief executive.

I am a business owner.

I am a private-equity fund manager.

I am the misunderstood superhero of American capitalism, single-handedly creating wealth and prosperity despite all the obstacles put in my way by employees, government and the media.

I am a job creator and I am entitled.

I am entitled to complain about the economy even when my stock price, my portfolio and my profits are at record levels.

I am entitled to a healthy and well-educated workforce, a modern and efficient transportation system and protection for my person and property, just as I am entitled to demonize the government workers who provide them.

I am entitled to complain bitterly about taxes that are always too high, even when they are at record lows.

I am entitled to a judicial system that efficiently enforces contracts and legal obligations on customers, suppliers and employees but does not afford them the same right in return.

I am entitled to complain about the poor quality of service provided by government agencies even as I leave my own customers on hold for 35 minutes while repeatedly telling them how important their call is.

I am entitled to a compensation package that is above average for my company’s size and industry, reflecting the company’s aspirations if not its performance.

I am entitled to have the company pay for breakfasts and lunches, a luxury car and private jet travel, my country club dues and home security systems, box seats to all major sporting events, a pension equal to my current salary and a full package of insurance — life, health, dental, disability and long-term care — through retirement.

I am entitled to have my earned income taxed as capital gains and my investment income taxed at the lowest rate anywhere in the world — or not at all.

I am entitled to inside information and favorable investment opportunities not available to ordinary investors. I am entitled to brag about my investment returns.

I am entitled to pass on my accumulated wealth tax-free to heirs, who in turn, are entitled to claim that they earned everything they have.

I am entitled to use unlimited amounts of my own or company funds to buy elections without disclosing such expenditures to shareholders or the public.

I am entitled to use company funds to burnish my own charitable reputation.

I am entitled to provide political support to radical, uncompromising politicians and then complain about how dysfunctional Washington has become.

Although I have no clue how government works, I am entitled to be consulted on public policy by politicians and bureaucrats who have no clue about how business works.

I am entitled to publicly criticize the president and members of Congress, who are not entitled to criticize me.

I am entitled to fire any worker who tries to organize a union. I am entitled to break any existing union by moving, or threatening to move, operations to a union-hostile environment.

I am entitled to a duty of care and loyalty from employees and investors who are owed no such duty in return.

I am entitled to operate my business free of all government regulations other than those written or approved by my industry.

I am entitled to load companies up with debt in order to pay myself and investors big dividends — and then blame any bankruptcy on over-compensated workers.

I am entitled to contracts, subsidies, tax breaks, loans and even bailouts from government, even as I complain about job-killing government budget deficits.

I am entitled to federal entitlement reform.

I am entitled to take credit for all the jobs I create while ignoring any jobs I destroy.

I am entitled to claim credit for all the profits made during a booming economy while blaming losses or setbacks on adverse market or economic conditions.

I am entitled to deny knowledge or responsibility for any controversial decisions made after my departure from the company, even while profiting from such decisions if they enhance shareholder value.

I am entitled to all the rights and privileges of running an American company, but owe no loyalty to American workers or taxpayers.

I am entitled to confidential information about my employees and customers while refusing even to list the company’s phone number on its Web site.

I am entitled to be treated with deference and respect by investors I mislead, customers I bamboozle, directors I manipulate and employees I view as expendable.

I am entitled to be lionized in the media without answering any questions from reporters.

I am entitled to the VIP entrance.

I am entitled to everything I have and more that I still deserve.

Good News (sort of) Regarding Credit Card Debt

Good news, Americans are strengthening their balance sheets by paying down credit card debt...
Oops, bad news --- Americans are spending their "excess" funds on reducing debt rather than buying things and promoting our economic recovery ...
But more good news --- because of lower debt levels, Americans will have the capacity to spend more in the future which will support economic growth ...
Oops, but maybe more bad news --- our partisan Congress doesn't seem too interested in doing anything significant to foster economic recovery --- and what are the prospects that will change after the November elections?

The Republicans Charge "Class Warfare" -- They're Right

New York Times Editorial, September 18, 2012

It turns out that Mitt Romney was right. There is class warfare being waged in the 2012 campaign. It is Mr. Romney who is waging it, not President Obama, and he’s stood the whole idea on its head.

When you think of class warfare, you probably think of inciting anger, resentment and jealousy among the have-nots against the haves. That’s what Mr. Romney has accused Mr. Obama of doing, but those charges have always been false. The truth is that Mr. Romney has been trying to incite the anger of a small slice of the richest Americans who need no government assistance but get it anyway, against the working poor, older Americans, the disabled workers and veterans, and even a significant chunk of middle-class Americans.

That was the message of remarks that Mr. Romney made in May at a private fund-raiser held at a private equity manager’s estate in Florida, a moment when he thought he was safe from annoying reporters and cameramen, and other Americans who are not rich enough to have bought a ticket to the event. 

A video made public on Monday by the magazine Mother Jones showed a Mitt Romney who felt free to speak candidly about his campaign and how he would conduct a presidency. In that safe zone, Mr. Romney spoke with a bone-chilling cynicism and a revolting smugness. If he is elected, he said, capital will come back and “we’ll see — without actually doing anything — we’ll actually get a boost in the economy.” That’s the state of trickle-down economics in the 21st century. 

Gone was the pretense that he will be a president of all Americans. Mr. Romney rather neatly divided the country between the people who matter and the 47 percent he does not care about. 

To Mr. Romney, that 47 percent consists of people who do not make enough money to be required to pay federal income tax. They are freeloaders, he said, “who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it.” It is not his job, he said, as a candidate nor apparently as president if he is elected, “to worry about those people.” 

By his definition, those undeserving freeloaders include workers in low-paying, menial jobs (sometimes more than one job) who don’t even earn $9,750 a year, the amount at which they would start to owe federal income tax. Also included are older Americans whose Social Security pensions are too low to be taxed, disabled veterans and people who were maimed on the job. 

This group also includes some middle-income Americans who make, say, $50,000 a year but are not required to pay taxes after they take advantage of child credits, marriage penalty relief and other tax breaks, many of which are part of the Bush-era tax cuts that Mr. Romney backs with a blind ideological fervor. 

But, of course, Mr. Romney was not talking about the Americans who make so much money that they are able to avoid paying any tax at all or who, like him, are able to shelter their incomes in overseas banks or tax loopholes that permit them to pretend that ordinary income comes from investment and thus pay lower taxes. Mr. Romney has been paying, by his own account, about 13 percent to 15 percent of his enormous income in federal income taxes. Just compare that with your own tax return.

Everything about Mr. Romney’s characterization of this mythical slice of lazy, shiftless Americans was wrong. A vast majority of Americans pay federal taxes, either income tax or payroll taxes for Social Security and Medicare — or both — as well as other federal fees. They also pay state and local taxes and sales taxes.

The government’s revenue problem does not start with the poor but with the richest people, through the Bush tax cuts and other changes. The tax cuts for the richest people should expire now, and the middle-class cuts should do so eventually. But that will not happen as long as people like Mr. Romney protect the rich by turning the working poor and middle class into the enemy. 

Mr. Romney may have been talking about electoral tactics: those people are going to vote for Mr. Obama, so let’s concentrate on our kind of people. It’s also possible that he was mouthing the words of the extreme right without really believing them. But all the possible explanations say terrible things about Mr. Romney’s character. 

The right wing has long been whining about people who don’t pay taxes and who, therefore, don’t deserve a say in government. They have it backward. The shame is not that those people don’t pay income taxes. The shame is how many poor people there are when the top 1 percent can amass uncountable fortunes fed by tax breaks and can donate tens of millions of dollars to political candidates to keep it that way.

Remember the Day!

I Prefer This Eastwood ... The One Who Challenges Americans To "All Pull Together"

A Good Question ...

And how would you deal with a repeat of the same partisan
extremism that you're encountering in your first term?

Here's The Thing - We All Built It!

Recent political dialogues (or, perhaps, monologues) have been about who "built" businesses and other entities that are integral to our nation's economic dynamism.  Many conservatives have been challenging President Obama's recent assertions that we're all in this together, that there is an acceptable role for government and that no man is an island (see John Donne for a  pre-Obama perspective).

The extreme conservatives (and libertarians and Ayn Randians) really would have you believe that each individual is fully and only responsible for his/her own success - that there is no reason to give credit (or tax $) to a goverment that has provided an infrastructure and a judicial system and a protection system (think police and fire departments) and an education system so that economic success can be achieved by the hard working/persevering individual.  And, while I would not want to detract from the credit due to hard work and perseverance and the economic success that flows from those efforts, I also believe that such success is a function of individual industriousness combined with the framework that we, as a nation, have built over the past 230+ years.  And yes, "luck" and being at the right place at the right time is important.

It's time to reject the YOYO strategy ("you're on your own") of extreme conservatives and libertarians and Ayn Randians (and, yes, of Romney and Ryan if they want to be embrace a YOYO strategy for this country).  It's time for bi-partisan recognition of what an efficent, effective government can accomplish for the 100% of this nation's citizenry.

The Nicholas Kristof article that follows is an excellent thought-provoking piece on entrepreneurial success...

August 28, 2012
The Secret Weapon: All of Us
By NICHOLAS D. KRISTOF 

The Republican National Convention opened by smacking President Obama with the theme “We Built it.”

To pound that message, Republicans turned to a Delaware businesswoman, Sher Valenzuela, who is also a candidate for lieutenant governor. Valenzuela and her husband built an upholstery business that now employs dozens of workers.

Valenzuela presumably was picked to speak so that she could thunder at Obama for disdaining capitalism.

Oops. It turns out that Valenzuela relied not only on her entrepreneurial skills but also on — yes, government help. Media Matters for America, a liberal watchdog group, documented $2 million in loans from the Small Business Administration for Valenzuela’s company, plus $15 million in government contracts (mostly noncompetitive ones).

In a presentation earlier this year, Valenzuela described government assistance as an entrepreneur’s “biggest ‘secret weapon.’ ”

Someone has set up a parody Web site, using the name of Valenzuela’s company, First State Manufacturing, to mock the Republican message. The site, FirstStateManufacturing.com, declares, “Thank God government was there for me.”

In short, the Republicans are inadvertently underscoring the point that President Obama was expressing in his “you didn’t build that” comment in July. Obama noted then that “if you’ve been successful, you didn’t get there on your own.” He pointed to public investments in roads and bridges that enable businesses to flourish, and then he inelegantly added, “If you’ve got a business, you didn’t build that.”

Fox News erupted in outrage, selectively editing the clip to confirm Republican prejudices that Obama doesn’t understand the private sector. This fits into the Republican narrative that business executives are heroic job creators when they aren’t held back by regulations and taxes imposed by quasi-socialist Muslims born in Kenya.

Democrats tried to highlight a flaw in that narrative when they released a new ad pointing to Mitt Romney’s outsourcing of jobs and telling him, “You didn’t build that — you destroyed it.”

Yet to me, that Democratic line of attack on Romney as a serial job destroyer feels unfair. Sometimes the way to save a company is to cut labor costs or outsource jobs, and almost nobody wants to ban trade or overseas production even though they can cost jobs.

What is fair is to observe that the Republicans’ claim that they are the great job creators is a fiction.

Prof. Robert S. McElvaine of Millsaps College examined employment data for the 64 years from the beginning of Harry Truman’s presidency to the end of George W. Bush’s. He found that an average of two million jobs were created per year when a Democrat was president, compared with one million annually when a Republican was president.

More pointedly, and unfortunately for Romney, business executives have only a mediocre record when transferring their skills to government. In the last great economic mess, this country was led by a Republican who had been stunningly successful in business: Herbert Hoover. Hmm. More recently, President George W. Bush staffed his cabinet with C.E.O.’s who had been stellar in the private sector — and that didn’t work out so well, either.

Obama’s point about our shared undertaking was made last year, more eloquently, by Elizabeth Warren, the Massachusetts Democrat running for Senate:

     “There is nobody in this country who got rich on his own — nobody!” she said. “You built a factory out there? Good for you. But I want to be clear: You moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you all were safe in your factory because of police forces and fire forces that the rest of us paid for. ...

     “You built a factory, and it turned into something terrific or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.”

In short, taxes don’t just smother. They can also fuel growth — when they’re invested in highways or the Internet, in colleges or early childhood education. They can create opportunities, as they did for Sher Valenzuela.

Or for Romney himself. He built his Bain empire partly because he was smart and hard-working, but also because of a great education and because of tax breaks for debt financing. Tax loopholes helped him build his fortune, and other loopholes gave him the low tax rates to retain it.

If the Republican convention wishes to highlight and explain Romney’s success, it should have a moment of silence to honor our infernal tax code.

Who built this country? Entrepreneurs, yes. But so did schoolteachers and railway construction workers. Doctors and truckers. Scientists and soldiers. You didn’t build it, Mitt Romney — we all built it.

A Good Question ...

WHEN Mitt Romney was governor of liberal Massachusetts, he supported abortion, gun control, tackling climate change and a requirement that everyone should buy health insurance, backed up with generous subsidies for those who could not afford it. Now, as he prepares to fly to Tampa to accept the Republican Party’s nomination for president on August 30th, he opposes all those things. A year ago he favoured keeping income taxes at their current levels; now he wants to slash them for everybody, with the rate falling from 35% to 28% for the richest Americans.

Read more ... http://www.economist.com/node/21560864

One Reason Our Economic Recovery Isn't

Executives Say Obama Better for World Economy: Reuters Poll

From my Twitter post @rgwilliams824 ---
"Executives Say Obama Better for World Economy: Poll Reuters | August 17, 2012 | 05:44 AM EDT"
See article at http://www.reuters.com/article/idUSBRE87G07D20120817
And if it's good for the world economy, what's the downside for the US economy?

Infrastructure Redux

Even if Republicans don't want to revive stimulus spending, they could take a smaller step, one that implies no direct fiscal stimulus but could unlock some $20 billion in infrastructure funds for states.
So says Peter Orszag:
     "The unemployment rate remains stuck at more than 8 percent. More investment in roads, water systems, airports and other public infrastructure would bring both short- and long-term benefits. And state and local governments face ongoing deficits. So wouldn’t it be great if we could design an efficient way to channel tax subsidies to state and local governments to invest in infrastructure?
     "Turns out we already have: the Build America Bonds program, which was a huge success in 2009 and 2010, but then expired. If you want an example of how political polarization is impeding sound economic policy, BABs would be hard to beat. Despite no credible argument against it, a divided Congress refuses to reinstate the program."

Unfortunate, But Perhaps True

Maybe it would be different if Congress hadn't continued
sitting on their partisan hands and passed some
meaningful jobs legislation --- like a bill to renew our Country's
aging infrastructure.

Tax Cuts and Job Creation

Wish It Were True ...

As you consider the following article from he Business Insider, don't forget to read the "on the other hand" point of view from Goldman Sachs...

BofA: Our Contrarian Indicator Is Flashing The Biggest Stock Market Buy Signal We've Ever Seen
(The Business Insider, August 1, 2012)
BofA just updated one of their favorite market indicators, and it's looking very bullish for stocks.

Savita Subramanian, who heads the bank's quant and equity strategy, says the indicator is flashing the biggest contrarian buy signal they've seen in 27 years of data:

After triggering a Buy signal in May, our measure of Wall Street bullishness on stocks has continued to decline, marking the tenth time in the past year that the indicator has fallen. This month’s 5.5ppt decline pushed the indicator down to 43.9, the lowest level in the history of our data going back to 1985, suggesting that sell side strategists are now more bearish on equities than they were at any point in the last 27 years. Given the contrarian nature of this indicator, we are encouraged by Wall Street’s lack of optimism and the fact that strategists are recommending that investors significantly underweight equities vs. a traditional long-term average benchmark weighting of 60-65%.

Here's a look at the indicator, which according to Subramanian is "based on the average recommended equity allocation of Wall Street strategists as of the last business day of each month," has plunged in 2012:


Subramanian writes that although it's not their official target for the S&P 500, the indicator implies a 12-month price target of 1808 on the index.

On the other hand, Goldman thinks … http://www.businessinsider.com/goldmans-presentation-economy-2012-7#-20.

Read more: http://www.businessinsider.com/bofa-our-contrarian-indicator-is-flashing-the-biggest-buy-signal-weve-ever-seen-2012-8#ixzz22J4HEsde

The Fed Should Stop Paying The Too-Big-To-Fail Banks Not to Lend

Commercial banks have significant excess reserves, but aren't very interested in lending those reserves.  Why should they when the Fed is paying them for those excess funds?  Why incur any risk (except when they want to stupidly act like hedge funds instead of commercial banks) when they can just make money by letting those excess deposits sit in their Fed accounts and get paid interest with taxpayer $?

This is but one more example of how the Fed is more interested in "protecting" the too-big-to-fail-banks than it is in stimulating the economy.

In the commentary reprinted below, Alan Blinder makes an interesting suggestion as to how the Fed could move the banks away from their risk-adverse position with these excess funds and move them toward stimulating the economy through commercial lending activities.

Commentary by ALAN S. BLINDER (July 22, 2012)
(Mr. Blinder, a professor of economics and public affairs at Princeton University, is a former vice chairman of the Federal Reserve.)

The U.S. economy could use another boost, and it won't come from fiscal policy. Can the Federal Reserve provide it?

Chairman Ben Bernanke keeps insisting that the central bank is not out of ammunition, and in a literal sense he is right. After all, the Fed has not yet exhausted its bag of tricks. It is still twisting the yield curve. It can purchase more assets. It can tell us that its federal funds target interest rate will remain 0-25 basis points beyond late 2014. It can even nudge the funds rate down within that range. The operational question is: How powerful are any of these weapons?

Let's start with Operation Twist, which was recently extended through the end of this year. The Fed seeks to flatten the yield curve by buying longer-term Treasurys and selling shorter-term ones. And it's probably succeeding—a bit. But Federal Reserve activity in the Treasury markets is modest compared with the vast volume of trading. Realistically, the U.S. yield curve is probably influenced far more by daily developments in Europe. In any case, the Fed will be out of short-term Treasurys to sell by December.

The logical next step would be more quantitative easing—QE3—or, as the Fed likes to call it, more large-scale asset purchases. Purchases of what? There are two main choices. One is Treasurys. But does anyone really think that lower U.S. Treasury rates are what this country needs?

Mortgage-backed securities (MBS) are a better choice, the idea being to reduce mortgage rates by shrinking the spread between MBS and Treasurys. But mortgage rates are already falling toward 3.5%. With 10-year expected inflation around 2.1%, can a 1.4% real interest rate be deterring many prospective home buyers? No, they are shut out of the market by the unavailability of credit. Posted rates are low, but try getting a mortgage. The third available weapon is what the Fed calls "forward guidance"—that is, indicating (please don't say promising!) that the 0-25 basis points funds rate will be maintained for years to come. The Fed's current guidance (please don't call it a pledge!) extends "at least through late 2014." While that's pretty far into the future, the Fed could stretch it to 2015, 2016 or 2025 for that matter.

In rational models, the yield curve should flatten a bit every time the Fed pushes that date out further. But the key words here are "rational" and "a bit." To most bond traders, two and a half years is already an eternity. Would they really respond much if 2015 replaced 2014?

This brief analysis paints a pretty grim picture: The Fed has three weak weapons, one of which will be exhausted by year's end.

Fortunately, there is more the Fed can do. I have two out-of-the-box suggestions to make, one in today's column and another in a companion piece soon.

The simpler option is one I've been urging on the Fed for more than two years: Lower the interest rate paid on excess reserves. The basic idea is simple. If the Fed reduces the reward for holding excess reserves, banks will hold less of them—which means they will have to find something else to do with the money, such as lending it out or putting it in the capital markets.

The Fed sees this as a radical change. But remember that it paid no interest on reserves before the 2008 crisis and, not surprisingly, banks held practically no excess reserves then. In early October of that year, Congress gave the Fed authority to pay interest on reserves, which it promptly started doing. When the Fed trimmed the federal funds rate to its current 0-25 basis-point range in December 2008, it also lowered the interest rate on reserves to 25 basis points, where it has been ever since.

My suggestion is to push it lower in two stages. First, test the waters by cutting the interest on excess reserves (in Fedspeak, the "IOER") to zero. Then, if nothing goes wrong, drop it to, say, minus-25 basis points—that is, charge banks a fee for holding their money at the Fed. Doing so would provide a powerful incentive for banks to disgorge some of their idle reserves. True, most of the money would probably find its way into short-term money-market instruments such as fed funds, T-bills and commercial paper. But some would probably flow into increased lending, which is just what the economy needs.

The Fed has steadfastly opposed this idea for years. Why? One objection is true but silly: Lowering the IOER might not be a very powerful instrument. No kidding. Are there a lot of powerful instruments sitting around unused?

The other objection is that making the IOER zero or negative would push other money-market rates even closer to zero than they are now, thereby hurting money-market funds and otherwise impeding the functioning of money markets. My answer two years ago was that we have more important things to worry about. My answer today is that it has mostly happened anyway: U.S. money-market rates are negligible.

It is noteworthy that the European Central Bank just jumped ahead of the Fed by cutting the rate it pays on bank deposits to zero—and European money markets did not die. Denmark's National Bank went even further, dropping its deposit rate to minus 20 basis points. Yet the Little Mermaid still sits in Copenhagen harbor.

The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?

But suppose it doesn't work. Suppose the Fed cuts the IOER from 25 basis points to minus 25 basis points, and banks don't lend one penny more. In that case, the Fed stops paying banks almost $4 billion a year in interest and, instead, starts collecting roughly equal fees from banks. That would be almost an $8 billion swing from banks to taxpayers. There are worse things.