SECOND STIMULUS? ARE OUR POLITICIANS TOTALLY CRAZY OR JUST REALLY, REALLY STUPID? NOTHING WILL IMPROVE UNTIL BUSINESS GETS INCENTIVES

We all are very familiar with the term, "stupid is as stupid does." This adequately describes our congress as it seeks another stimulus to jump start the economy.

This thinking is the dumbest idea yet conceived by the geniuses in Washington.

Government does NOT produce anything, and whatever it does produce, usually means that it takes from somebody's wallet.

There is no possibility that the wild out of control spending of money that the government does not have, financed solely by over-borrowing and causing the largest deficits in the history of the world will cause any stimulation of the economy.

It is a fact that only the private business sector can create true economic growth and then those profits are channeled into consumer purchases. In the USA, our economy is 70% consumer driven, we are a consuming nation...we consume a lot of everything because we have the disposable income to do so.

However, it was the President himself who in the last 6 months has constantly used the words CRISIS, DEPRESSION, WORST RECESSION, WORST ECONOMY, WORST , WORST everything ....so he helped create the panic that ensued.

Like dominoes, the various sectors of the economy fell and impacted each of the other sectors as they fell on each other. For instance going out to restaurants causes them to order less meat or fish or poultry which in turn causes their distributor to order less and that goes all the way back to the producer who produces less cows, chickens or needs to catch less fish, or pays less for all the products.

The government does not have the slightest idea that it is private entrepreneurs and small business that employ people. Big businesses buy from small suppliers, and the small suppliers are important to them.

The stimulus funds will not be impacting in any meaningful way the small or medium employer. In fact the opposite is occurring as small business profits are being threatened by every means possible through planned and announced taxes, or onerous requirements for everything ranging from mandatory health care to electricity usage.

Dealing with private businesses and business owners for over 30 years, this is the first time that business owners feel that the future is uncertain. Nobody wants to make any large commitments to acquire new machinery or to make long term plans. There are no plans to hire any new employees, and those who quit are not being replaced.

This is not how business wants to think.

In high tax states like California, Illinois and New York (which are technically bankrupt as States), the combined taxes paid by a higher income businessman could reach or even exceed 65%-70%, thus leaving little to invest in continuing the business. The myriad of taxes beyond the federal and state and local income taxes range include onerous property taxes, additional employee taxes, unemployment taxes, inventory taxes, license taxes, permits, fuel taxes, and on and on.

Nobody wants to start a business if only 30% of its profits will be retained by the hard working owner, with the government which realistically provides nothing in return takes 70%.

The stimulus dollars are not going to help the small business. Building reads or making federal buildings energy efficient will not help employ more people, and even it that does have the desired effect, what happens when the money is spent-unemployment for those people?

In looking an an example of such government largess as the USA is now experiencing, it is best to compare the present policy to that of Japan in the last decade. This identical policy, but on a smaller scale caused a recession to linger for a decade.

This is no small recession. These current events are no small and passing events which will miraculously improve the economy and it will magically again pop up.

The government is to blame as it was for the start of the crisis. The government itself issued a report that said the housing bubble and crash was caused by the government. Their policies which allowed weak borrowers to buy homes that they could not afford precipitated the crisis. It was not caused by greedy businesses or brokers. The government was more than happy to provide the guarantees of shaky debt of FANNIE and FREDDIE.

More regulation will not be the cure for anything, we have plenty of regulators and commissions and investigative agencies. We have directors and assistant directors, and oversight boards of every type.

The president's popularity is plummeting since the quick fixes he had planned though the incredible deficit spending are not making any dents in the economy.

The stock market has no real reason to go up-why would it is its stock components are showing earnings weakness for the future. The stock market decline will cause a further loss of wealth, and thus put more pressure on consumers to spend less, since they have less wealth to spend.

Consumers are not spending, they are saving!

Bank deposits in the last 8 months have increased by $1 trillion dollars. Consumers did not spend...after all the president accused us of spending too much, but then HE spends too much on our behalf. Mixed signals at best, but then again we are dealing with the first president who never had a job in the private sector, as such.

FORGET THE SECOND STIMULUS, TRY A TAX BREAK. Realistically, this administration has no idea of such a cure, it will continue to try and cover its deficits by greater taxes. Do not expect any economic recovery, just more misery, and more unemployment with a prediction now easily going to 11%-12% by year end and worse yet in 2010 as the domino effect takes hold.

MOVING OUT OF AMERICA AND STAYING OUT-TAX PROPOSAL WILL KILL USA GROWTH AND SINK ECONOMY; MICROSOFT PLANS TO MOVE EMPLOYEES OUT OF THE USA

I’ve finally figured out the Obama economic strategy. President Barack Obama and his team have been having so much fun wielding dictatorial power while rescuing “failed” firms, that they have developed a scheme to gain the same power over every business. The plan is to enact policies that are so anticompetitive that every firm needs a bailout.

Once that happens, their new pay czar Kenneth Feinberg can set the wage for everybody and Rahm Emanuel can stack the boards of all of our companies with his political cronies.

I know, it sounds like an exaggeration. But look at it this way. If there were a power ranking of U.S. companies, like the ones compiled by football writers for National Football League teams, Microsoft would surely be first or second to Google. But last week, Microsoft Chief Executive Officer Steve Ballmer came to Washington to announce what Microsoft would do if Obama’s multinational tax policy is enacted.

“It makes U.S. jobs more expensive,” Ballmer said, “We’re better off taking lots of people and moving them out of the U.S.” If Microsoft, perhaps our most competitive company, has to abandon the U.S. in order to continue to thrive, who exactly is going to stay?

At issue is Obama’s policy to end the deferral of multinational taxation.

The U.S. now has about the highest combined corporate tax rate, second only to Japan among industrialized countries. That rate is so high that U.S. firms have an enormous disadvantage versus competitors. The average corporate tax rate for the major developed countries in the Organization for Economic Cooperation and Development in 2008 was about 27 percent, more than 10 percentage points lower than the U.S. rate.

Tax Burden

U.S. firms have nonetheless prospered because our tax code allows a business to set up a subsidiary in a low-tax country. When that subsidiary earns profits, they are taxed at the rate of that country, and don’t face U.S. tax until the money is mailed home.

The economically illiterate partisan Democratic view is that this practice is unpatriotic and bleeds jobs from the U.S. The economic reality is that American companies use this approach to acquire market share overseas. The alternative is losing the business to foreign competitors.

Don’t just take my word for it. A recent paper by Harvard economists Mihir Desai and C. Fritz Foley and Berkeley economist James Hines and published in the distinguished American Economic Review, gathered data on American multinationals to explore the impact of foreign investments on domestic U.S. activity.

Encourage Overseas Sales

Their conclusion was striking. The authors found that “10 percent greater foreign capital investment is associated with 2.2 percent greater domestic investment, and that 10 percent greater foreign employee compensation is associated with 4 percent greater domestic employee compensation. Changes in foreign and domestic sales, assets, and numbers of employees are likewise positively associated; the evidence also indicates that greater foreign investment is associated with additional domestic exports and R&D spending.”

So when firms expand their operations abroad, taking advantage of the lower foreign tax rates, it helps their workers in the U.S. Higher sales abroad (surprise, surprise) are good for domestic workers.

It is worth noting that this study, which is confirmed by a boatload of evidence elsewhere, was coauthored by the same James Hines who recently wrote a sweeping review of international tax policy with Obama’s top economist, Larry Summers. Summers has to know what the literature says.

Inexplicable Stance

So the question is, why does Obama advocate a policy that so flies in the face of everything that economists have learned? How could Obama possibly say, as he did last month, that he wants “to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens?” Further, how could Treasury Secretary Tim Geithner call a practice that top scholarship has shown increases wages and employment in the U.S. “indefensible?”

I have to admit I am at a loss. Maybe it is good politics to bash American corporations, and Obama isn’t really serious about making this change happen. But if the change is enacted, and domestic corporate taxes aren’t reduced to offset the big tax hike, the result will be a flight from the U.S. that rivals in scale the greatest avian arctic migrations.

If that occurs, the firms that stay in the U.S. will be at such a huge tax disadvantage that they will absolutely need a “rescue.”

Kevin Hassett, director of economic-policy studies at the American Enterprise Institute