Why is Small Business Not Hiring?

By: Bill Watson

I am in business for myself. My number one goal, besides making
a profit, is not having employees. I wonder how many other small
business owners feel the same way? It's no surprise that the
unemployment rate hangs above 10%. The government is smothering
small business. Too bad Obama only hires Ivy League academics
with big business buddies for advisers.

I used to have employees. My business was providing marketing
research, sales consulting, and sales services to small
technology companies. All my employees worked from home and were
located in several states. The work was all on computers and
phones. It seemed so simple.

Enter the IRS. They have rules. You can buy the 20 volume "US
Code of Federal Regulations" written by the IRS from the
Government Printing Office for $974. This does not include
around 100 volumes of the court tax cases nor individual state
tax laws. If a business has employees they are required to know
the latest tax rules and pay federal taxes, state taxes, social
security taxes, and employment security taxes for each employee.
If you happen to make a mistake you could face interest, fines,
and imprisonment.

I had one employee in Oklahoma who I had to let go due to tax
issues. Oklahoma could not agree on how to classify my business,
so they were going to charge a tax on my services. It is really
important to know which box to check on these government
applications!

Deductions are another wild ride on the IRS train. I guess it is
made complicated by all the big shots paying for legislators to
give them loopholes. I spend a lot of time looking for
loopholes. For example, take the vehicle deduction. Everyone I
know uses the per mile formula for getting their deduction. It
is certainly easy. Did you know there is another way to deduct
your car? It is called the Actual Method. You deduct all
expenses of the vehicle including depreciation. It is
complicated to do, but you will have a much larger deduction.
IRS = time and money. Good for lawyers and accountants, bad for
small business.

Enter the Obama administration. They were elected on the
promises of higher taxes, nationalized healthcare, and Cap and
Trade. All the stimulus money given to Wall Street and state
governments are just late additions to the power game. All of
this spells death to the small business. Thank goodness we are
still a capitalist economy with the hope of large profits to
cover massive government intrusions.

Now that the banks have been saved, everyone wonders why people
are not lining up to borrow money. I can answer that - small
business owners are scared to death! Why would they take a risk
and borrow money knowing they will have to adjust their business
to every whim of this gigantic government?

If I need help now, I pay independent contractors. A 1099 form
for each contractor at the end of the year and it's done. It's
not the best way to do business, but it's safe. Nationwide, this
is not good for the economy.

Small business is not looking for a government handout or
bailout. We just need the government to get out. If the
government really wants people working and the economy to grow,
look to small business. Reduce the tax burden, relax the rules
on employment, and stop protecting big business.

About the author:
Bill does online marketing for small business. Check out his
political blog at questionsbybill.com

Lloyd Blankfein In The News

Lloyd Blankfein, CEO of vampire squid Goldman Sachs, is being grilled about how he's been doing God's work by a congressional committee today:

From Bloomberg: Blankfein Says He Wasn’t Asked to Take AIG Haircut

Reuters: Goldman's Blankfein defends business practices

Huffington Post: I didn't see Blankfein honestly answer one question

Here's some snippets of the questioning from New York Times:

"Mr. Angelides pressed Mr. Blankfein about selling securities tied to subprime mortgages while at the same time betting against them. Mr. Blankfein said he “really needs to explain this because the press swirling around this. Because the firm was accumulating positions, “we have to go out ourselves and source the other side of the transaction,” he said. He said there was no simultaneous selling of securities and then betting against them."

"Mr. Angelides asked Mr. Blankfein what the two most significant instances of negligent behavior by Goldman Sachs. In response, Mr. Blankfein said his firm got caught up in extending more and more leverage to private equity firms and other and, thus contributed to the froth in the market. Mr. Blankfein stops short of saying the firm was negligent."

"Mr. Blankfein said that his firm noticed that lending standards and covenants on large corporate loans were much lower than usual, but that like the rest of the industry, the firm rationalized those looser standards by arguing that the world was getting wealthier and other excuses. “We talked ourselves into a place of complacency,” he said."

"“When was Goldman first alerted to the fact there were serious problems with subprime mortgages?” Mr. Wallison asked. Mr. Blankfein didn’t know exactly when the firm became aware of the the crisis, but he said the firm had turned bearish on housing prices in late 2006 and thought problems in the mortgage market would grow out of declining home prices."

Fritz Henderson Resigns GM Post

GM CEO Fritz Henderson abruptly resigned this afternoon. No explanation was given.

From Reuters:

"General Motors needs to explain why chief executive Fritz Henderson is resigning. Replacing the group's driver could well be a good thing. After all, Henderson belongs to the old guard who drove the carmaker into bankruptcy. And as Fiat and Ford have shown, new blood from outside the industry helps power a turnaround. But the lack of an explanation from GM sends some worrying signals.

Granted, it should come as no surprise that there were growing tensions between the chief and his board - Henderson, for example, was more publicly optimistic about an initial public offering next year than chairman Ed Whitacre Jr."

Huffington Post reports that Henderson's daughter made an obscenity laced post on Facebook claiming that Henderson was fired.

Ed Whitacre , the current chairman, takes over for the interim. Whitacre(friend of Rahm Emanuel) was appointed by the government as Chairman of the Board earlier this year.

Unemployment Rises to 10.2%

Just in this morning from BLS:

"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm
payroll employment continued to decline (-190,000), the U.S. Bureau of Labor
Statistics reported today. The largest job losses over the month were in con-
struction, manufacturing, and retail trade."

"In October, the number of unemployed persons increased by 558,000 to 15.7
million. The unemployment rate rose by 0.4 percentage point to 10.2 percent,
the highest rate since April 1983. Since the start of the recession in
December 2007, the number of unemployed persons has risen by 8.2 million,
and the unemployment rate has grown by 5.3 percentage points."

AND....THE MANCESSION CONTINUES:

"the unemployment rates for adult men (10.7 per-
cent)"

We were assured that the stimulus bill that was passed earlier this year would keep unemployment at 8% and save 3 million jobs. There's been a loss of 3 million jobs since then. You sure have to love keynesian solutions....

Goldman Sachs Under Fire

There's been a spate of articles within the last week investigating Goldman Sachs role in the financial crisis.

From McClatchy:

"In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk. "

THERE ARE PENDING LAWSUITS FROM PENSION FUNDS,AMONG OTHERS

More from Matt Taibbi on the AIG fiasco:

"The important thing to remember about all of this is that just because Goldman was buying “insurance” from Cassano, that doesn’t mean they were being responsible. On the contrary: Goldman was creating well over ten billion dollars worth of exposure to a guy that they must have known was an absolute idiot. Now, in a world where actual capitalism existed, Goldman should then have been highly invested in making sure that AIG did not go under. A dead and bankrupt AIG should not have been good news to a company like Goldman Sachs, which had billions of dollars riding on AIG’s financial health.

But if anything Goldman behaved throughout the runup to AIG’s collapse like it couldn’t care less if the company died. In fact Goldman accelerated AIG’s demise by making margin calls against AIG, for both the CDS deals and for deals it had done with Win Neuger, who was running AIG’s securities lending business. What really sank AIG was the fact that the downgrade of its credit rating permitted companies like Goldman to demand large sums of money from AIG in the form of these margin calls, and AIG could not get its hands on enough cash to meet its demands, resulting in the death spiral situation we all witnessed last September. Of all the firms making such demands against AIG, Goldman was the most aggressive (I have more on this coming out in a forthcoming book) and my sources who were involved in the AIG bailout bunker scene of a year ago almost to a man report that Goldman and its chief Lloyd Blankfein took an extremely hard line with AIG.

Why would it act like that? Well, in a normal capitalistic situation, it wouldn’t. But Goldman, it turned out, had an ace in the hole. It seems that when the state stepped in and decided to bail AIG out, its former director, Stephen Friedman, was among those making the decision that AIG’s counterparties should be paid 100 cents on the dollar for its CDS debts. It never made sense that AIG/AIGFP would decide on its own to pay its creditors 100 cents on the dollar for its debts, but now we know, thanks to reporting from Bloomberg, that it wasn’t AIGFP and its CFO Elias Habayeb who was making that decision."

From Janet Tavakoli:

"The government’s 100% payout to AIG’s counterparties was a gift, and the negotiations were done in secret. The monoline insurers were in a similar situation with a variety of deals from a variety of counterparties. (Structured Finance Pp. 405‐427) For example, in 2008, Citigroup Inc. accepted about 60 cents on the dollar from New York‐based bond insurer Ambac Financial Group Inc. to retire protection on a $1.4 billion CDO. Ambac said the underlying “super senior” was worth about zero, and the protection payment would otherwise have been near the full $1.4 billion. Citigroup got a relatively huge payout, since other “high grade” deals have been settled for as low as ten cents on the dollar.

The irony is that Goldman Sachs may not have been involved in the worst of the deals, but its officers had unusually high profile in AIG’s damage control. Goldman’s deals with AIG may have all been completely proper, but deals like GSAMP Trust 2006‐3 indicate that Goldman should not be exempt from the general fraud audit of mortgage securitizations that all of the former investment banks [Lehman, Bear Stearns, Morgan Stanley, Goldman Sachs, Merrill Lynch, and some foreign banks doing business in the U.S. (DMB Pp. 97‐107.)] should undergo."

The fact that there's been a revolving door between government and Goldman employees doesn't seem to get enough major media attention. Couple that with a list of politicians who have been on the receiving end of GS campaign contributions and connect the dots with legislative activity and appointments. A scandal of huge proportion looms, if anybody bothered to look into it. Of course, all the t's crossed and i's dotted may be perfectly legal but ethics and morality are noticeably absent.

GDP Posts 3.5% Gain In Third Quarter

The US GDP(gross domestic product) rose 3.5% for Q3 according to the Bureau of Economic Analysis.

" The increase in real GDP in the third quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), exports, private inventory investment, federal government
spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP,
increased.

The upturn in real GDP in the third quarter primarily reflected upturns in PCE, in private
inventory investment, in exports, and in residential fixed investment and a smaller decrease in
nonresidential fixed investment that were partly offset by an upturn in imports, a downturn in state and
local government spending, and a deceleration in federal government spending.

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after
adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.11
percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from
the second-quarter change."

However, at least half the gain was due to temporary government stimulus schemes. The market is reacting well to the news and the pundits are claiming this marks the end of the recession.

It's too quick to claim this is the end. As Barry Ritholtz points out his Big Picture
blog:

"The 1st question to ask about GDP is the degree of inorganic/artificial gains. As the above paras suggest, much of the improvement is where the government is spending, incentivizing, or bailing out various sectors: Autos, Residential RE, and Fed spending. As expected, Inventory reduction helped, and unexpectedly, increasing imports hurt.

A large chunk of the gains — 1.66 percentage points — came from Car sales in the form of cash for clunkers; this will not be in the Q4 data.

Home building soared 23.5% — reflecting a combination of zero percent interest ratyes (ZIRP) and 1st time homebuyers tax credit. That was good for another 0.5 percentage points of GDP.

Well over half of the gains are therefore government related.

Also of note: Nominal GDP was below forecasts, thanks to a surprise 0.8% gain in the deflator (That also added to the REAL GDP figure). Hence, a chunk of the gains are pure inflation."

Claims that the recession is over are premature, at best. The Q4 Christmas shopping season will be a huge test. Credit card companies have jacked up interest rates and decreased credit limits on millions of people. It's extremely likely that it will have a negative effect on sales.

Chris Dodd: Bankster's Best Friend

Senator Chris Dodd says he will introduce legislation to freeze interest rates on credit cards. That's nice. This, after the major credit card companies have already screwed everybody. Does anyone remember the term "loan sharking"?

I hope Peter Schiff slams this duplicitous moron to the high hills.

Here's Dodd's top 20 campaign contributors over the last five years:

1 Citigroup Inc $265,694
2 SAC Capital Partners $262,800
3 United Technologies $255,800
4 Royal Bank of Scotland $223,700
5 Bear Stearns $190,500 $190,500 $0
6 American International Group $183,700
7 ActBlue $144,800
8 Merrill Lynch $129,950
9 Goldman Sachs $127,950
10 Credit Suisse Group $114,800
11 Morgan Stanley $110,600
12 Travelers Companies $104,700
13 JPMorgan Chase & Co $103,550
14 The Hartford $94,550
15 Hartford Financial Services $90,300
16 St Paul Travelers Companies $88,750
17 General Electric $81,700
18 Bank of America $80,350
19 Ernst & Young $80,250
20 FMR Corp $78,950