Jan 18, 2012, 9:48 am EDT
Despite the seemingly endless number of Republican debates we have digested during the primary season, it seems that small business owners and entrepreneurs are not satisfied with what they have heard from the GOP field. Do they have reason to feel slighted? And what does the GOP have to offer small business? What has the Obama administration done to help or hurt small business?
The lack of policy clarity for small businesses stems from a variety of factors. The term “small business” itself is ambiguous–the small business “label” applies to a widely diverse group of firms. The political gridlock and polarization across the country and on Capitol Hill is exacerbating existing problems for small business and arresting the policy process that should be working for them. As small-business owners struggle to make decisions about the future, they are hampered by endless political infighting, vows of repeal and lawsuits over the constitutionality of existing law. It’s hard to imagine any politician right now has a good claim on the small-business vote.
The politics of “small business” are clear and easy. Americans in general love the idea of small business, love the small business owner and any attempt to support such a noble cause is met with resounding approval. James Surowiecki notes that small businesses have a hold on the public imagination. “We may spend our dollars at Walmart and IKEA, but in our hearts we have a soft spot for the corner store.” According to Gallup, almost 80% of the public has confidence in small business owners to create jobs and we are three times as confident in small business generally as we are in big business. It makes perfect sense for the President and his challengers to angle for the support of small businesses. Read
Jan 18, 2012, 8:55 am EDT
Government backed mortgage firms Fannie Mae and Freddie Mac — formally known as Federal National Mortgage Association (OTC:FNMA) and Federal Home Loan Mortgage Corp (OTC:FMCC) , respectively — are apparently catching on to the cost-cutting crazy that seems to be fashionable in Washington right now. The companies will not offer new CEOs the lush compensation deals previously available.
Fannie Mae and Freddie Mac regulators said Tuesday that new executive teams are unlikely to receive the controversial, multi-million dollar pay packages given to predecessors.
“[We] anticipate a substantial decrease in CEO compensation when the new CEO’s are hired,”a spokeswoman told CNNMoney. Read
Jan 17, 2012, 3:22 pm EDT
I have long advised against direct investment in China. Among the many reasons I am bearish on the country is its vastly distorted economy.
China’s is a command-style economy run by an unelected political party — the Communist Party of China (CPC). The CPC’s policies have resulted in a grand misallocation of capital. A mercantilist currency policy, perverse incentives for provincial-government officials and crude monetary-policy tools have helped inflate a fixed-asset and real estate bubble that makes the U.S. real estate bubble seem trifling.
Economic Growth: China’s Quality Problem
It should be obvious to most observers that things are not as they seem in China. The country has reported GDP growth of 9% or more in every quarter over the last two years, yet the Shanghai Composite Stock Index has plunged more than 30% during that time. If China’s economy were truly booming, Chinese shares would most likely be trending up. When it comes to economic growth, China doesn’t have a quantity problem — it has a quality problem. Read
Jan 17, 2012, 3:06 pm EDT
Congress has a lot on its agenda when it reconvenes next week. One of the most closely watched items will be the extension of the payroll tax holiday for all of 2012. Recall the pre-Christmas drama surrounding this issue: while there was bipartisan agreement to extend the stimulative tax break on payrolls through the end of 2012, there was caustic disagreement over how to pay for it. Senate Democrats pushed for a surtax on incomes in excess of $1 million, while Republicans refused to consider tax increases of any kind and wanted to realize the savings through spending cuts.
The tiniest of compromises was agreed upon in the form of a two month extension and a promise to continue the conversation this year. That debate has begun again in earnest. Politico reports that Republicans are proposing to find $24 billion in savings by changing a law that allows undocumented workers to claim the Additional Child Tax Credit. Under current tax law, workers that have an Individual Taxpayer Identification Number, but not a social security number, are allowed by the IRS to claim a tax credit for their children, who are often American citizens. This refundable tax credit is claimed by the poorest of working families: those that make about $21,000 a year.
Cutting the credit for undocumented workers may be great politics in the very short term for some in an election year, as it will allow them to look both tough on immigration and frugal, but this is terrible policy and will ultimately prove to be bad politics as well. Read
Jan 17, 2012, 2:44 pm EDT
Voters often respond with loud approval when the government decides to tighten its own belt, but a recent analysis suggests such cuts might be doing more harm than good.
According to the Sunlight Foundation – an organization with a stated goal to “catalyze greater government openness and transparency” – recent and future House cuts threaten the quality of work being done in Congress, and risk higher dependence by politicians on lobbyists.
In early 2011, the House of Representatives voted to cut its operating budget by 5%. That has resulted in a 7.4% cut in salaried staff (948 positions), a 62.5% cut in computer spending and a 30.7% drop in office supply spending. And the 2012 Legislative Branch Appropriations Act will cut into House pockets even deeper, with the branch set to hack off another 6.4% in spending. Read
Jan 17, 2012, 2:06 pm EDT
A quick look at last night’s South Carolina debate by politico.com yields a few essential points:
1. Mitt Romney is in for a hard week.
He hemmed and hawed about releasing his tax returns in April, and even though the question was expected, Romney still seemed uncertain in his response. Read