Thursday, September 8, 2011

Politics and Economics

I guess tonight is the night that Barack Obama makes his big speech about jobs!  Pretty much more of the same, tax credits, extended unemployment benefits, infrastructure investments, and funds for states and local governments so that they do not have to lay off teachers and first responders.

No need for me to tune into the speech, because the reality is none of these prescriptions will deal with the economic issues we are currently facing.

In a recent column Jeremy Siegel notes that the S&P 500, which "...represents nearly 80% of the market listed value of U.S. stocks, and U.S. economy..." derive almost 50% of their profits from overseas.

So, simply put 80% of our economy is focused internationally because that is where the growth is and where their futures lie; the days of these business entities creating jobs in the U.S. is over.  Since we do not tax foreign profits until the money is brought to the United States and as they are expanding overseas and have no need to repatriate these profits we will continue to see a reduction in corporate tax collections.

The other day I participated in a debate at a tech venture capital blog, A VC, and of course the sentiment was that technology could solve all of our problems and that government just needs to get out of their way.

The reality is that technology does not create as many jobs as the technology that it creates replaces.  

Then I came across this article this afternoon, What 10 small business owners would tell the President, and one comment in particular stuck out;
"I used to do a lot of the baking and now my partner and I have moved to other aspects of the business. We have stepped out of the kitchen. It is nice to see the business is growing. We started in 2005. We have 20 employees, pretty much full time at this point.

We have a cobranded line of mixes with Williams-Sonoma: brownie mixes, a Bundt cake coming out, and a whole line of breakfast treats. We had this urge to move on and away from the cupcake to prove that American baking is more than just about the cupcake.

We have been hiring more people. It has been a slow, steady climb. We will hire when the need arises. So far, we have never had to let anyone go ever since we opened, actually.

I would like to hear that President Obama is going to continue to back small business owners. There are ways to encourage growth. The number one thing is making credit easy to get. At the moment it is so difficult. It is almost comical. They need to figure out how to extend credit to small business without it being such a hassle.

We actually did go through the process in the very, very beginning of trying to secure startup money. The paperwork required a lawyer and an accountant. The SBA loans are beyond complicated: It is so much paperwork -- so much of a hassle that I could see a lot of people not applying because it is so labor intensive. It is not worth it in the end. It is almost worth it to go outside the SBA."
 I have worked in the world of small businesses, companies with 15 to over a 1,000 employees all my life, and never in my life have I seen a time when financing was as hard to get as it is today.  Its not hard to get, its impossible.

I see all the opportunity being created by technology and the internet for small businesses, for old economy start ups, and niche products, and I wonder how long we can continue to invest in technology when the natural consumer, the creators of advertising for social communities and such on the internet, of all that is being created, are disappearing.  Small businesses are the income stream for most of what today is called social media and without funding they cannot maximize the potential of what our cutting edge technology can create.

Our government cannot see past the lobbyists and special interests that represent the major firms to even notice that we could have a very vibrant job creating environment, if they could find the small innovative companies within the old economy.

I have all but given up on seeking funding, sometimes you just have to accept that you are trying to fit a square peg in a round hole; not enough tech for the folks looking for the next big thing and too much of a niche product to be of interest to old economy investors.

We are in a period of transformation and without small business we have no way to bridge the gap between today and our future economy.  So we will build roads and borrow money hoping that something changes while our major corporations continue to focus on the global economy and our innovation will be squandered with the burden of rising taxes and more entitlements.  

1 comment:

Carl said...