Stop subsidizing the super rich: alternatives to the Fed rate hike

Today is the day when the mystical magic of economics is played with by people in an echo chamber.

And while the actions of Dr. Janet Yellen and the Fed are being anxiously awaited by the Wall Street Wizards, the pawns of the economy are hoping that the price of gas doesn’t jump up 20 cents.

No matter what economists and financial wizards think- Wall Street is so disconnected from Main Street (and reality for that matter) that the amount of attention paid to their fortunes is as disproportionate as the media coverage between Donald Trump and Bernie Sanders in the presidential race- despite one having substantially more donors, followers and potential votes.

Part of today’s action is boosting the interest paid on deposits big banks hold with the fed. This is supposed to “tighten” money up a wee bit- making lending slow down. This is giving more money to the people who crashed our entire economy- does that sound like rewarding bad behavior to me? Sure does.

So here are some alternatives – some of which could be enacted by Congress- which would do the same thing, and actually impact Main Street more positively than Wall Street:

  • Cap credit card interest rates at 20%. Any interest rates approaching 25% have been proven to be loans that are inescapable. In Ohio we saw toothless laws against payday lenders try to reel in these sharks, while the big banks are back to their old tricks- with bundling and reselling this high yield debt.
  • The 2009 bailout is still sending shock waves through the real estate market. We allowed millions of people to lose their homes, and even when we stepped in to “help” homeowners- the only people who benefited were the banks who all were made whole- even if the valuations were all wonky to begin with. There are still many people who asked for assistance- or even received it- that are still paying interest rates on home loans several points over what a loan is now. Offering 100% tax credits on any interest paid  last year over 5% on homes owned before 2009- would put money back in the hands of the people who have managed to struggle through the storm- while making sure not to hurt the precious bankers bottom line.
  • Enact caps on pay for companies that subsist on the public dollar. There is no reason to keep feeding campaign coffers with federal money. Here’s what I mean: hospital revenues can be divided by federal funded and insurance company funded. With the new mandate that everyone has health insurance- this basically comes down to health care is funded 100% with money from tax dollars. Yet, while the President of the United States makes a mere $400,000 a year- the average hospital CEO makes at least 3 times that. Defense contractors- make even more. Either cap salaries- or have special tax rates approaching 90% on all revenue above $400,000 a year for federally funded work- and, btw, ban them from donating to political campaigns and hiring lobbyists. No need for that circular flow of money to be subsidized.
  • And last but not least- companies that have more than 100 employees that have people on the payroll who are getting public assistance- be it section 8 housing, medicare, food stamps- etc- that money needs to be charged back to the employer. Call this the WalMart rule, call it being fair to families, but there is no reason to continue this subsidy of the rich at the expense of the poor.

Changing the federal funds rate is easy. Making real substantive changes to the real economy outside the Wall Street bubble is hard.

And one last thing- if we really were talking about stabilizing the economy, there should be a 24 hour moratorium on Wall Street trading starting an hour before the announcement. Of course, if we really wanted to start making economic policy that made sense, we’d eliminate flash trading, require stock purchases to be held a reasonable amount of time to be considered a true investment other than a day at a casino… but, that’s really wishful thinking.

Your tax dollars at work as venture capital vs. small businesses at work

If you wonder why Dayton doesn’t have as many police officers as it used to, or firefighters, or recreation centers- it’s because we’ve been so busy doing “economic development” and “job creation” to the effect that fewer people want to live in neighborhoods considered unsafe, and plummeting property values as people move to where they feel safe.

Job creation tax credits and grants and tax breaks are nothing other than corporate welfare. The jobs that are being “wooed” like the ones at the GE Episcenter (which got a 15-year tax break from Dayton Public Schools) aren’t the ones that provide work for the under-educated types that used to be able to find good paying jobs at Generous Motors- they are high-skilled, requiring advanced educational achievement. Guess what- those people that GE is going to hire aren’t going to want to live in Dayton (although they’ll pay taxes in Dayton) – they’ll live in Oakwood with their highly trained safety forces, great schools and well paved streets.

In today’s Dayton Daily News we read about millions of our tax dollars being handed off to big corporations who promise jobs in the future:

The Ohio Tax Credit Authority approved Monday a 75 percent, 15-year Job Creation Tax Credit for Abbott worth an estimated more than $8 million, said Stephanie Mennecke, a spokeswoman for Ohio Department of Development. That’s the largest value tax credit approved Monday, she said.

The second largest was for approximately $4.5 million for a Republic Steel and Republic N&T Railroad Inc. expansion in Lorain, she said. The authority approved 11 total incentive packages Monday.

The Ohio Development Financing Advisory Council also approved Monday a $1.5 million, 10-year, 0 percent interest loan for Abbott’s project.

“There were many factors that lead us to the decision to build a new plant in Tipp City including direct access to a major interstate, quality of available work force, and state and local incentives,” said Abbott spokesman Pete Paradossi in an email Monday. “Other locations were being considered. In the end, Tipp City was the best choice for this plant.”…

The Tipp City plant will create about 240 jobs, according to Abbott.

Tipp City Council members will vote April 2 on a local incentive package for the Illinois-based company, said Brad Vath, Tipp City Assistant City Manager. Vath did not say Monday what the city plans to offer. He said the city is optimistic everything will fall in place and the project will move forward “very, very quickly.”

Pilot Chemical Co., which operates a Butler County facility in Middletown, also received a tax incentive Monday. Pilot received a 50 percent, six-year tax credit worth an estimated $182,006, according to Gov. John Kasich’s office. The Sharonville-based company is planning an expansion at its headquarters, as well as a $42 million expansion project at either its Middletown or Houston, Texas, facilities.

Kasich’s office said Pilot’s project would create an estimated 38 full-time jobs.

via Abbott to begin building $270M plant.

On the flip side of these public fundings of private companies, I’m watching a small start-up try to get out of the blocks. A house painting company that specializes in making new paint stick to old houses- by doing maniacal surface preparation and using high quality paint. He could hire an employee tomorrow to start work, but, he has to pay for licenses, bonding, insurance and purchase capital goods like a scaffold, all out of cash.

Also the minute he hires someone, he has to start paying worker’s comp (which is high for a painting company out of the blocks) payroll taxes- all the things we’re willing to subsidize for the going concern.  And, the person he’s likely to hire- is someone who is also under-employed, needing every dollar earned just to survive.

He has no credit, no tax breaks and zero support. I helped by creating his new identity, printing business cards, door hangers and signs. I set him up with a website and suggested marketing strategies, he’s finishing his first project and about to start his second tomorrow. I also hired him to do some interior painting as he was getting started. He’s having to bid low to prove the value of his product, despite having a few “freelance projects” to show from last year.

When we know that the major engine for job creation is small businesses, why are our tax dollars subsidizing large ones?

When we know that the small business can have an immediate impact- why are the deals being done for jobs that are a year away?

Why do we subsidize any business with our tax dollars? With every subsidy we tilt the playing field to give an unfair advantage to one company over another- not the role for government or a fair use of our tax dollars. Plus, if the big business paid the same taxes as our smaller ones- maybe the burden of starting up wouldn’t be so insurmountable?

Would you like to help a small business get started? Hire one. The Brush and Bucket. (updae 2015, I can no longer vouch for this business)

You want your tax dollars to help a big company by costing you more for security systems, slower emergency crew response, new school tax levies to make up for the giveaway- continue to sit on your thumbs while politicians sell you the BS that tax supported “job creation” is a good investment of your tax dollars.

Because when our tax dollars are used as venture capital- the only ones who win are the private companies who get the tax breaks.

 

Corporate welfare: 100% wrong, 52% effective

100% Against Corporate Welfare Sticker

Sticker available from www.stickittothe1percent.com click on image to bu

From the very first time I ran for office, I believed that government should stick to doing things that only government should do: provide universal services and amenities to the community it serves. Police, fire, roads, parks, water and sewer are great starting points. Some things aren’t so black and white: trash collection, golf courses and convention centers and concert halls are things that could go public or private, but in general, there is nothing wrong with some publi-private competition.

However, when we start down the road to “economic development” by government, where we pick winners and losers in private enterprise I’m 100% against it. Why one business should get preferential tax breaks or lower interest financing, grants or other tax support, while its competition doesn’t creates havoc in the marketplace.

We’ve gone hog-wild down the “economic development” path in Montgomery County. How do the Wamplers (owners of Hara Arena) feel as Hara Arena has had its business cannibalized  by the Dayton Convention Center, the Nutter Center, and other-tax supported venues?

Despite the fact that Montgomery County hasn’t gained any population in the last 25 years, we’ve been building new housing, new retail space and new office space like crazy- granting tax breaks and creating private taxation districts (TIFS) where the money paid in taxes comes back to the taxpayer (you’d like that deal wouldn’t you?). We now are grossly overbuilt- and facing much larger overhead costs of maintaining all the infrastructure (more roads to plow, pave and sweep). Yet, we scratch our heads about why downtown buildings are empty and being sold for pennies on the hundreds of dollars while we’re pouring tax dollars into Austin Road Interchange and new office buildings.

Finally, the Ohio Attorney general does a study on what we got for all the “investment” in “economic development” read what the Cleveland Plain Dealer reports:

A new Ohio Attorney General’s report showed that only 52 percent of companies that received Ohio taxpayer-funded economic development awards that ran out in 2010 kept their promises to boost the economy.

The report, released Thursday, identified 200 companies that received grants, tax credits and other awards from the Ohio Department of Development that did not meet their goals for job creation, job retention or other measures.

The awards to non-compliant companies totaled more than $82 million.

via Nearly half of companies that received Ohio economic development awards didn’t keep promises to boost economy, study shows | cleveland.com.

The main excuse for continuing playing this game which pits one community against another to give away your hard-earned tax dollars to these corporate charlatans is that “if we don’t do it- the jobs will go somewhere else.” Hence, NCR moved to Georgia, Mead moved to Delaware, Kettering and Miamisburg (depending on which division). The reality is, if your community isn’t a good fit for a company to make money – no amount of sales incentive should make a difference.

This is one of the key pieces of legislation I’d work to introduce in Congress when I’m the Honorable Gentleman from Ohio representing the hard-working people of the tenth district: No tax breaks or incentives can be made for business relocation, or for “job creation” except on a national level- and only for broad industries for companies that have less than 10% of the total market. We don’t need to support the Exxons or Banks of  America anymore, nor do we want our politicians rewarding their paymasters in our auction system of election.

If we really cared about creating jobs in America- we’d make our tax system work to reward those who employ the most U.S. citizens be able to make the most money. You get what you pay for after all- and what we’ve seen over the last 40 years is that the rich 1% have bought our Congress to help them gain even more wealth at a ridiculous rate.

Ending corporate welfare is my number two priority after taking the money out of politics. I hope you’ll consider supporting my campaign.

Another reason to end local “economic development” efforts by government

In the continuing saga of incompetence in crony capitalism in Dayton, we now can thank the Dayton Daily News for finally uncovering a failure by the powers that be in handing out cash to private businesses.

Note, that this was money that was put aside as payola for allowing Waste Management and the Danis Corporation to build a mountain of trash on the West Side- not actual tax dollars:

A $100,000 West Dayton Development Fund grant the city awarded to Loritts-Neilson Funeral Home Inc. could be pulled back after the Dayton Daily News discovered the state had canceled the funeral home’s articles of incorporation in 2007 for delinquent taxes.

Ernest Neilson III, president and owner, owes an undisclosed amount of taxes to the state and more than $36,000 in property taxes on the business, 3924 W. Third St., to Montgomery County, records show.

“If the tax issues are true, then the funding would be in jeopardy,” said Timothy Downs, deputy director of the city’s economic development office, the division that distributes the grant.

Downs said he was unaware of the canceled articles of incorporation until the Dayton Daily News informed him of it.

The background reporting system the city uses did not reveal the cancellation, said Veronica Morris, senior development specialist for the city’s economic development office.

No decision had been made Thursday about the grant, which is funded through landfill fees paid to the city by Waste Management Inc. The grant money is used as reimbursement money for projects recipients of the West Dayton Development Fund have spent money on.

City commissioners approved the grant to the funeral home Oct. 12.

Neilson applied for the grant in August. The grant application he used included a question as to whether he owed any delinquent taxes to the state or any political subdivision of the state.

He responded “no.”

“I said ‘no’ simply because those were already in arrangements and I felt that was no one’s business,” Neilson said Tuesday….

If the grant award stands, Neilson will use it toward a $450,000 renovation and expansion of the funeral home, according to his application.

“He cannot use (the grant money) to help pay his taxes,” Morris said.

via City fails to investigate grant requests.

The list of grants handed out to questionable companies is long and the return on investment reports totally lacking. No other business would survive based on the practices and policies of “economic development” employees of government organizations. The only people who seem to make as many wrong calls and keep their jobs are meteorologists on local TV news. To list a few favorite “economic development” flops- where economic development gurus blew it: the funding of a new HQ for the ponzi scheme called MCSi, money thrown hand-over -ist to Ultracell which never had a production ready product and the tons of money thrown away on the “Wayne Avenue Kroger” which has decimated a neighborhood and given us an empty lot.

Crony capitalism is the correct term for when government gets to pick winners and losers in the private sector. Read this excellent essay from the NYT on crony capitalism in the US by Nicholas Kristof: Crony Capitalism comes home.

Imagine if the West Dayton Development fund went to funding parks and rec programs for kids, or for consolidating good neighbors into solid savable neighborhoods? That may have been real economic development, instead of crony capitalism at its finest.

How to get small business moving, Mr. Immelt?

When did Dayton become the first stop on the bullshit express?

We had John McCain go rogue and introduce Sarah Palin as his secret weapon at the Nutter Center- and now, we get a junta of overpaid CEOs from big business trying to figure out how to create jobs via small business:

The President’s Council on Jobs and Competitiveness will hold the first in what the White House said would be a series of “listening and action sessions” Tuesday at labels manufacturer Hooven-Dayton Corp.’s Vandalia plant, 7468 Webster St….

The council’s sessions will take place around the country and are geared toward bringing “new voices to the table” in helping the council arrive at recommendations for the president, the White House said. What’s said at these meetings will help inform the “future policy work” of the council, the Obama administration said Friday.

In Vandalia, administration officials and council members will tour the Hooven-Dayton facility before holding discussions and question-and-answer sessions with local business owners.

“Small businesses need to be the engine of the U.S. jobs recovery,” said Jeff Immelt, General Electric Co. chief executive and head of the new council. “Creating new opportunities and lowering barriers to small business growth is at the core of our mission on the president’s council.”….

The administration said the council’s core mission is to encourage hiring, education and training of workers to compete in the global economy.

Participants in Tuesday’s event will include Immelt; Darlene Miller, president and CEO of Permac; Dick Parsons, Citigroup chairman; Karen Mills, of the Small Business Administration; John Fernandez, of the U.S. Department of Commerce’s Economic Development Administration, and others.

via Obama’s Jobs-Competitiveness Council to hold first session in Dayton.

I’d like to go and introduce a few strategic ideas- but, doubt I’ll get a chance to talk to people like Immelt who think they are worth $10.5 K per hour- no, that’s not $10.50 but, $10,500 per hour- or $175 per minute:

Compensation for 2010
Salary $3,300,000.00
Bonus $4,000,000.00
Restricted stock awards $0.00
All other compensation $389,809.00
Option awards $7,400,000.00
Non-equity incentive plan compensation $0.00
Change in pension value and nonqualified deferred compensation earnings $6,338,956.00
Total Compensation $21,428,765.00
via Jeffrey R. Immelt Profile – Forbes.com.

So, Mr. Immelt, are my ideas, worth five minutes of your esteemed time ($875)?

  1. Since the Federal Government is the largest purchaser of goods and services in the U.S.- how about a simplified GSA-EZ schedule for small business– those under $6 million in annual revenue (571 hours of Jeff time). The current GSA schedule requires about 80 hours (or $840,000 in Jeff time) to fill out. By creating a GSA EZ schedule the federal government could widen their vendor base and help many small businesses get a chance to operate in this market.
  2. End “corporate welfare” in the name of “economic development” creating a competition between cities and states for “jobs” where decisions are no longer based on solid business models, but purely on short-term extortion by big businesses- including yours (GE’s new  “Episcenter” on UD property). A level playing field is absolutely essential for small business having an opportunity to compete. The taxpayers subsidized about half your annual salary to this facility. Why?
  3. Instead of protecting the people from online poker, let’s protect the integrity of our financial system by restoring sanity to the Wall Street Casino. The average share of stock is now held for less than 12 seconds- ($35 in Jeff time). The reality is that no business would ask for investment for 12 seconds- we need to return sanity to what the word “investment” means- and force stock holdings to last for more than a New York minute.
  4. Small business needs healthy workers, yet including the health insurance companies in the delivery of health care is like guaranteeing a vig to the mob to stay in business. As a small business I used to provide 100% of my employees’ health insurance. Now, I can barely afford my own. When the CEOs of Anthem and United Health Care both made around $140,000,000 each in annual compensation (making Jeff time look like minor league money) it was clear that the insurance industry wasn’t interested in taking care of anyone but themselves. A single-payer system would cut a ton of overhead out of the health insurance industry, giving us money for actual health care delivery. We’d have to build an effective retraining program to teach former paper pushers how to become pill pushers instead.
  5. There are two major addictions in this country that we need to deal with- cheap oil and high fructose corn syrup. Presidents as far back as Nixon have set goals of “energy independence” yet nothing has happened. We could make major changes by electrifying rail, offering a walk to work tax credit, and by investing in high-speed rail. The addiction of our processed food manufacturers to high fructose corn syrup has created a nation of unhealthy fatties. If we work at getting America to eat better- and to lose weight, our costs of health care will drop as well. This may be too esoteric for the scotch and caviar set- but when you can get more crap calories off the $1 menu than you need in a day, we’re in trouble. When small businesses get hit with price increases in both energy costs and health insurance costs- they don’t have the flexibility that large companies do to pass the costs along, making factors beyond their control a major stumbling block.

This list is getting longer than Mr. Immelt would ever afford me to speak- but, the last two items are absolutely critical to seeing real change in our country and creating opportunity- political reform.

  1. We need to simplify our tax code and payment and collection systems. For small businesses to have to go to a multitude of different government websites- from local to federal, to file paperwork and make payments on a schedule that only tax professionals can keep track of is criminal. We need a single site login with our federal employer ID- where we report our simplified payroll and tax info– so that we don’t spend more time trying to decipher what we owe, to whom and when. The amount of fines levied on small business because of complexity is criminal- the amount that GE doesn’t pay because they can afford tax-avoidance departments is also criminal- it’s time to simplify.
  2. Last but not least, we need to take the auction atmosphere out of politics and reform campaign finance once and for all by making it something the taxpayers pay for- not selling our political offices out to the highest bidder. The cost of campaigns and the bad policy we’ve made to satisfy campaign debts is killing us. In a country that prides itself on having tons of choice in everything from education to hot sauce, the fact that our system asks us to choose between two political parties is a bad joke. It’s time to get down to real politics and honest government.

If Jeff Immelt really wanted to give small business a chance- it would have to start with a new definition of what the American dream is these days. While he may be living it- there is a cost associated with it, that he’s been tasked to offer solutions. The reality is, he’s being incredibly well paid to manage a company he didn’t create, didn’t take any risk to run, or has any personal risk if it fails- the total opposite of what we as small business people have to deal with. When our big businesses have to operate with the same challenges that small business have to operate with- we may see the change we are supposedly talking about with this Jobs Competitive Council.

This took me about 93 minutes to write. If I was paid like Jeff Immelt, I’d be $16,275 richer. Considering $15,810 is what the minimum wage pays in a year, you should quickly see the problem with creating minimum wage jobs the way we are shifting our work force in America. If Immelt was paid based on a formula for how many people he pays- and how much the total payroll is – instead of some whim of the unregulated market, we’d probably see more focus on the kind of jobs we create in this country. But, that’s asking way too much of a man with nothing to lose.

Dayton was the first place we figured out the secrets of powered flight, it’s where we solved the Bosnian war, now, let’s end the bullshit and get serious about rebuilding the American Dream.