They're All Missing the Point

 | Dec 14, 2012 | 7:37 AM EST  | Comments
  • Comment
  • Print Print
  • Print

It hit me last night: Here's what I think is so annoying and niggling about the budget talks between House Speaker Boehner and President Obama. I think they don't understand, neither one, the consequences of what they do on the American business public.

That's because, in many ways, the business public is not represented by either person.

As I parse through the Republican and Democrat posturings, I hear two major skeins of thought. For the GOP it's the worries about the small-business person and how much their motivation is being hurt by government tax policies. For Obama it's "the folks who work at places who aren't helped enough by government programs and pay more than their fair share for them in taxes."

That's what makes the whole thing so unrealistic. First, small businesses revolve around bigger businesses. When you set up a small business, unless it is about a particular better mousetrap, what you typically need is traffic -- that which comes from the growth of big business in the area.

Also, you want to create a service or hospitality business? You need someone to cater to. You aren't worried about taxes. You are worried about customers. Who is worried about the customers in Washington? Who is worried that their psyche may be damaged by what Washington is doing? Who is worried about them transacting with the small-business people and those they employ?

How do I know this? As a serial entrepreneur, I recognize that customers are the lifeblood of why you are successful. If you are worried about tax rates, you are going to fail. If you even consider tax rates as a reason to start a business or not to do so, you shouldn't start it. Don't waste your time. Stick to your day job.

The president's focus is equally myopic. He should go spend time with Fed chief Bernanke, who has a really good idea of how people get employed. They get jobs when demand is stimulated, and you get demand when you have a much larger employer set up near you. Otherwise, no one comes by. You don't get any customers. So all you do is figure out how few people you can hire, particularly because now you know that you have extensive healthcare costs that weren't even in the equation before.

You can only not know these things if you haven't been hired, fired or created a job in the private sector.

Now, there's another side of all of this. If we are concerned that the U.S. government won't be able to pay its bills one day, then we know a time will come when we'll have to do what Spain did, and radically cut back all of our social programs. We will have to do what the rest of Europe will do over time, which is accepting a lower standard of living for all. That, in turn, is why the longer-term austerity plan is vital, because everyone knows we can't afford what the U.S. government provides to Americans.

That's why spending cuts are so important. They figure in the job creation of the next 25 to 30 years, and in the ability of people to stay out of poverty longer-term.

But, in the meantime, you can't get the growth for the government receipts to go higher, even in the near-term.

Take such companies as Honeywell (HON), Eaton (ETN) or Celgene (CELG) (the last of which is one of the principal employers in the town I live in). Put simply, if someone from one of these firms were in the room, explaining the impact of the delay in an agreement to avoid the fiscal cliff, the imperative would be to get this done before vacation -- or for there to be no vacation. That's because, the longer the delay, the fewer reasons there are to start a business and the more reasons there are to shrink, lay off, build fewer houses and cars -- and take your business off shore if you are big enough to do so.

Columnist Conversations

The semiconductor sector performed poorly today with the Market Vectors Semiconductor (SMH) fund down over 2% ...
Is this the biotech revolution or the biotech bust? View Small Cap Biotechs Like Never Before: Transparency is...
ive tried to sense how these new rules can possibly be good for the mkt--and struck out trying. the investmen...
Skip Raschke and I have been talking about THIS behind the scenes. Note the following excerpt: "The rules also...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.