Sunday, May 3, 2009

Small Business Fandango


I do so enjoy your panache. But I think some body's been spiking your hot cocoa with a few fingers of Four Roses.

First of all, your argument is internally inconsistent. You assert that small business made cutbacks starting last June in anticipation of an anti-business administration and congress - and this seems to be your explanation of why we are in the truly devastating recession we find ourselves. To be specific, you name Nancy Pelosi, Harry Reid and Barak Obama - and the policies they would pursue, as the reason why small business "hit the life boats".

This makes absolutely no sense because it assumes that if Republicans had been leading in the majority of congressional races - and the race for the White House - small business would not have bailed out, tax revenues would have continued to increase and we would not be having this recession. Now that's a little hard to swallow. I think we need to go back to the drawing board on this one. And for good measure, let's use one of the best credentialed conservatives in the business - a man who served in both the Nixon and Reagan White Houses - and who incidentally doesn't like Pelosi any better than you do. Ready Pat?

Here's Pat Buchannan from September, 2006:

"...China's trade surplus with us was $19.6 billion for July alone, moving toward an all-time record of $235 billion for 2006 -- the largest trade deficit one country has ever run with another. Our deficit with Mexico is running at an annual rate of $60 billion. With Canada, it is $70 billion. So much for NAFTA. With the European Union, it is running at $160 billion.
America as the most self-sufficient republic in history is history. For decades, U.S. factories have been closing. Three million manufacturing jobs have disappeared since Bush arrived. Ford and GM are fighting for their lives.

Bushites boast of all the new jobs created, but Business Week tells the inconvenient truth: "Since 2001, 1.7 million new jobs have been created in the health care sector. ... Meanwhile, the number of private sector jobs outside of health care is no higher than it was five years ago..."

Now from November, 2007:

"...The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar...

The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.

The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.

In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are unsustainable and must lead to a decline of the dollar..."

And finally, from March, 2008:

"...When Europe imposes a 15 percent value-added tax on U.S. imports and rebates the VAT on exports to the United States, that is not free trade. When China devalues its currency 45 percent, as it did in 1994, and bolts it down to suck jobs and factories out of the United States, that is not free trade. When Japan manipulates its currency, preaches economic nationalism to its people, and shelters its market for TVs, autos and steel, while dumping into and capturing ours, that is not free trade.

McCain admits to knowing almost nothing about economics and is now being advised by my old friend Jack Kemp. In a Wall Street Journal essay bemoaning my views, Kemp concedes, "I'm on the advisory board of Toyota North America and now drive a hybrid Lexus."

Now I don't have any problem agreeing with you that small businesses are virtually the life-blood of the American economy. But your connecting the decline of small business and this recession to an anticipation of poor government by Barak Obama is just not tenable. For three starkly obvious reasons:

One: This recession has been building up for years. We've been running epic trade deficits for years and financing the shortfall with borrowing, both public and private. That's where the housing bubble came from in the first place. This recession was inevitable.

Two: Small businesses didn't cut back or decline overnight because of government policy - they've been losing out for years. Want proof? Just go over to Wal-Mart and check out the labels. Here in the U.S. we don't make TV's, radios, blue jeans, china or toys anymore - but I could go on with that list all night.

Three: Even if I am wrong about the preceding two reasons (I'm not), how on Earth can you possibly reason that small business was afraid of Obama and not McCain: who frankly admitted during the campaign that he knew "very little about economics".

Now if we're going to have a debate on whether or not the current administration is doing the right thing insofar as spending is concerned, let's have it. But first, in case you've been on another planet for the last 20 years or so, take a drive sometime and see if you can find the small manufacturers and local retailers who just aren't there anymore. Last point:

Foreign competition has been cleaning our clock big time for three decades and the pigeons have come home to roost. All those small businesses you are talking about - as manufactures couldn't compete with Asia and as retailers couldn't compete with Wal-Mart. We need a way out of this trap. The Obama administration is taking some initiatives aimed at just that very outcome. Are they going about it the right way? Maybe, maybe not. But at least they are trying to identify the problem and do something about it, rather than stick their heads in the ground and leave what's left of American small businesses to fend for themselves.



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