Stop The Spending!

http://www.foxbusiness.com/on-air/cavuto/index.html#/v/2071492689001/can-dc-still-tackle-spending-cuts/?playlist_id=87065

Screen shot 2013-01-06 at 10.31.34 AM

 

See Steve Odland’s appearance on Cavuto 1/3/13 arguing for fundamental tax and spending reform.

 

— Steve Odland

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Beware Of Regulations

The regulatory wave that has been hidden in Washington DC awaiting the finalization of the election finally will wash over small businesses.  These are not voluntary rules.  Small businesses will need to incur significant costs just to comply but non-compliance could be even more costly. Regulation is important to democratic capitalism to level the playing field and protect consumers.  But this wave goes well beyond the role of regulation.  

Posted below is an article from the Wall Street Journal published November 24, 2012 regarding the upcoming rules:

Here Comes the Regulatory Flood

Costly rules held up for the election are about to roll over the economy.

President Obama’s hyperactive regulators went on hiatus in 2011 to get through Election Day. Now with his second term secure, they’re about to make up for lost time and then some.

The government defines “economically significant” rules as those that impose annual costs of $100 million or more, and the Bush, Clinton and Bush Administrations each ended up finalizing about 45 major rules per year. The average over Mr. Obama’s first two years was 63 but then plunged to 44 for 2011 and 2012 so far. The bureaucracies didn’t slow down. They merely postponed and built up a backlog that is about to hit the Federal Register.

We’d report the costs of the major-rule pipeline if we had current data. But the White House budget office document known as the unified agenda that reveals the regulations under development hasn’t been published since fall 2011. The delay violates multiple federal laws and executive orders that require an agenda every six months, so we thought readers might like a rough guide to the regulatory flood that is about to roll through the economy.

image

Corbis

• Health care. It begins with the Affordable Care Act, which has been in hibernation because it was the largest campaign liability. Since Election Day, the Health and Human Services Department has submitted a raft of key health rules for White House review that it has been sitting on for months.

Hiding the details paid off politically but also undermined ObamaCare’s already slim prospects for success. Ahead of the law’s go-live date of October 2013, states and industries will have less than a year to prepare to meet the new mandates.

Three of the rules were released right before Thanksgiving, so insurers are only now about to learn how they’ll design and price coverage, since one new rule defines “essential benefits” they must include. Another deals with limits on how premiums can vary from person to person based on risk.

The most important void is ObamaCare’s “exchanges,” the clearinghouses where millions of individuals and small business will receive subsidized coverage. HHS hasn’t said how they must be set up and function in practice, with the exception of “guidance” documents that make vague suggestions but don’t have the force of law and are likely to be revoked. HHS is all but begging states to run the exchanges but hasn’t clarified what they’d be signing up for.

Amid opposition from most of the 30 Republican Governors, many of whom are telling the feds to run an exchange on their behalf, HHS also hasn’t laid out how this federal fallback will work. Other complex rule-makings will decide who is eligible for the exchanges, how Medicaid rules will change after the Supreme Court’s ObamaCare ruling, and the future of Medicare Advantage’s private coverage options.

• Financial services. According to a Davis-Polk analysis, only 133 or 33.4% of the 398 rule-makings the law firm estimates Dodd-Frank requires have been finalized. The law is ambiguous and other reviews suggest the figure could be closer to 500. As of November 1, some 132 rules haven’t even been proposed, while the government has failed to meet 61% (or 144) of Dodd-Frank’s legal deadlines.

Regulators are now finalizing rules on bank stress testing and capital and margin rules for the swaps markets, but there are still many costly items on the to-do list. Major uncertainty comes from the rolling exercise to determine which businesses are “systemically important,” aside from the largest banks that have already been designated as too big to fail. This review never ends.

Also on the docket is an effort to define “qualified mortgages,” which will change lending and capital standards. Elizabeth Warren’s Consumer Financial Protection Bureau, having been invested with unaccountable powers, will now decide what financial products and services are “abusive,” a political term of art with no legal meaning. Then there is the pending Volcker Rule to limit proprietary trading at big banks, whose draft ran to 298 pages and asked 1,347 questions.

• Energy. In the lead-up to November, the Environmental Protection Agency stood down under White House pressure, delaying rules for ozone air quality and industrial boilers, and deferring carbon standards. Now EPA chief Lisa Jackson has the run of the place.

She will resume the Administration’s anti-carbon agenda through “new source performance standards,” which will set greenhouse gas emissions for new power plants so low as to prevent their construction. Look for this early in 2013.

She’ll follow with standards for “existing” sources that make coal-fired plants uneconomic to run. Inside of a decade, Ms. Jackson may wipe out what used to make up more than half of U.S. power generation. Environmentalists will write books about it, even if her agenda has received almost no public scrutiny or debate.

The oil and gas industry is also targeted, hydraulic fracturing (fracking) in particular. The EPA has already issued a rule on shale production emissions and has one coming on diesel fuel in fracking. The Interior Department is promulgating rules on fracking on federal lands, and other rules can’t be far behind, probably using the pretext of drinking water under the Clean Water Act.

The EPA’s sleeper issue is the National Enforcement Initiatives agenda, which is designed to use the agency’s existing legal powers for inspections, requests for information, penalties and so forth to make new de facto rules. The EPA now blackmails businesses into “super compliance,” or settlements far more stringent than the law requires, or else risk years of expensive litigation.

• Economic potpourri. The National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration and the Office of Federal Contract Compliance Programs are teaming up to rewrite employment, labor and workplace law. The FCC and the FTC are doing the same for the tech industry and Silicon Valley via investigations, audits and “oversight.” The Agriculture Department is going after “illegally harvested plants.” The Consumer Product Safety Commission has its eyes on . . . table saws.

***

Having come close to losing re-election because of a weak economy, Mr. Obama now keeps saying “our top priority has to be jobs and growth.” This new regulatory flood will increase costs and uncertainty and make that priority that much harder to achieve.

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We Need Economic Reform

http://www.foxbusiness.com/on-air/cavuto/index.html#/v/1954628590001/former-office-depot-ceo-americans-need-reform-to-happen/?playlist_id=87065

11/7/12 appearance on Neil Cavuto.

Small businesses need certainty.  They also need lower taxes, not higher taxes.  So the Fiscal Cliff is coming and it needs immediate attention.  But if we allow the rates to rise and if we raise them further thinking we are just taxing the rich, we will be raising rates on small businesses.  This in turn will kill jobs.  Because 75% of the top 1% of tax payers actually are small businesses, it is wrong to think that raising taxes on the rich will not impact the economy. We need to lower corporate taxes and small business taxes to drive growth.  This will actually create more revenue that, along with spending cuts, will lower the deficits.  Raising rates will hurt businesses, destroy jobs, and increase the deficit.

— Steve Odland

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Income Tax Increases Will Hit Small Business

A July 2012 Ernst & Young study shows that income taxes scheduled to rise as part of the “fiscal cliff” at the start of next year will have a negative impact on small business.  You can view the entire report here:

http://www.nfib.com/LinkClick.aspx?fileticket=OMV7uZczVaM%3d&tabid=1083

Here are some highlights from the report:

“The confluence of fiscal policy changes scheduled to occur at the end of 2012 – sometimes referred to as the “fiscal cliff” – poses serious challenges for policy makers. One area of disagreement is the increase in tax rates for high-income taxpayers resulting in part due to the sunset of elements of the 2001 and 2003 tax cuts.  The increase in the Medicare tax and its expansion to unearned income for high-income earners under the Patient Protection and Affordable Care Act of 2010 (PPACA) further contributes to the increase in top tax rates.”

“The concern over the top individual tax rates has been a focus, in part, because of the prominent role played by flow-through businesses – S corporations, partnerships, limited liability companies, and sole proprietorships – in the US economy and the large fraction of flow-through income that is subject to the top two individual income tax rates. These businesses employ 54% of the private sector work force and pay 44% of federal business income taxes. The number of workers employed by large flow-through businesses is also significant: more than 20 million workers are employed by flow-through businesses with more than 100 employees.”

“[There are] four sets of provisions that will increase the top tax rates:

• The increase in the top two tax rates from 33% to 36% and 35% to 39.6%.

• The reinstatement of the limitation on itemized deductions for high-income taxpayers (the “Pease” provision).

• The taxation of dividends as ordinary income and at a top income tax rate of 39.6% and increase in the top tax rate applied to capital gains to 20%.

• The increase in the 2.9% Medicare tax to 3.8% for high-income taxpayers and the application of the new 3.8 percent tax on investment income including flow-through business income, interest, dividends and capital gains.”

“With the combination of these tax changes at the beginning of 2013 the top tax rate on ordinary income will rise from 35% in 2012 to 40.9%, the top tax rate on dividends will rise from 15% to 44.7% and the top tax rate on capital gains will rise from 15% to 24.7%. These higher tax rates result in a significant increase in the average marginal tax rates (AMTR) on business, wage, and investment income, as well as the marginal effective tax rate (METR) on new business investment. This report finds that the AMTR increases significantly for wages (5.0%), flow-through business income (6.4%), interest (16.5%), dividends (157.1%) and capital gains (39.3%). The METR on new business investment increases by 15.8% for the corporate sector and 15.6% for flow-through businesses. This report finds that these higher marginal tax rates result in a smaller economy, fewer jobs, less investment, and lower wages. Specifically, this report finds that the higher tax rates will have significant adverse economic effects in the long-run: lowering output, employment, investment, the capital stock, and real after-tax wages when the resulting revenue is used to finance additional government spending.”

“Through lower after-tax rewards to work, the higher tax rates on wages reduce work effort and labor force participation. The higher tax rates on capital gains and dividend increase the cost of equity capital, which discourages savings and reduces investment. Capital investment falls, which reduces labor productivity and means lower output and living standards in the long-run.

• Output in the long-run would fall by 1.3%, or $200 billion, in today’s economy.

• Employment in the long-run would fall by 0.5% or, roughly 710,000 fewer jobs, in today’s economy.

• Capital stock and investment in the long-run would fall by 1.4% and 2.4%, respectively.

• Real after-tax wages would fall by 1.8%, reflecting a decline in workers living standards relative to what would have occurred otherwise.

These results suggest real long-run economic consequences for allowing the top two ordinary tax rates and investment tax rates to rise in 2013. This policy path can be expected to reduce long-run output, investment and net worth.”

— Steve Odland

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What Is The Role Of Government In Business?

How Much of a Role Should Government Have in Business?

Steve Odland on government’s impact on businesses and Americans.  10/3/12

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Odland Appearance On Fox Business To Discuss Romney

http://www.foxbusiness.com/on-air/cavuto/index.html#/v/1809233108001/former-office-depot-ceo-on-romneys-business-background/?playlist_id=87065

 

I appeared August 28, 2012 on Neil Cavuto’s show on Fox Business to discuss Mitt Romney’s business experience.  Click on the link above to watch.

 

— Steve Odland

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Back To School?

It’s that time of year again–Back to School time.  Hundreds of small businesses hold their breaths each year as this make-or-break season kicks in.  Prior years have been tough.  Consumer confidence has been low and wallets have stayed relatively closed.  What about this year?

Well, the economy hasn’t improved.  Unemployment remains high, and confidence remains low.  While basic school needs remain, discretionary expenditures are bound to stay low.  Look for consumers to buy the basic consumables but shun the extras.  Basic clothing should sell but quantities will remain in check.  Also, new electronics that historically have generated excitement are non-existent this year.

So, look for a flat year-to-year performance.  Not what everyone was hoping for but better than being down!

— Steve Odland

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Businesses Are Built By People

http://professional.wsj.com/article/SB10000872396390443931404577551344018773450.html?mod=WSJ_hp_mostpop_read

Small Business owners are fuming over comments that the government is responsible for their business success rather than them.  Of course the government contributes to the overall good of the nation including defense, infrastructure, basic research, etc.  But it is incorrect to say that small businesses are not responsible for their own success.  Of course small businesses are formed when people have ideas, when they risk their own capital, when they innovate, when they demonstrate passion.  People who never have worked in the private sector don’t always understand what it takes to create jobs and to create new businesses.  We need to do a better job throughout our education system of teach economics and business so people have a better understanding.  Businesses are built by people, not government.

— Steve Odland

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Off the Tax Cliff He Goes

Below is an interesting article from the Wall Street Journal.  Once again, it highlights how unfriendly current policies are toward small business.
— Steve Odland
July 9, 2012, 7:38 p.m. ET

Off the Tax Cliff He Goes

President Obama wants lower rates for GE and J.P. Morgan than for small business.

So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn’t so big that he’s willing to curb his desire to raise taxes on tens of thousands of job-creating businesses.

That’s the essence of Mr. Obama’s announcement Monday that he wants Congress to extend current tax rates for a year, but only for those making less than $200,000 a year. This is a political gambit designed to protect Democrats who are starting to feel queasy about opposing GOP plans to extend all of the Bush rates as the economy weakens again. The ploy could help Democrats if Republicans fall for it, but it won’t reduce the economic damage to the country.

By Mr. Obama’s economic logic, tax increases matter on middle-income earners but are irrelevant to everyone else. “By the way, these tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth,” as he put it Monday.

Editorial page editor Paul Gigot on why President Obama is ignoring Senate Democrats who want to forge a tax compromise with Republicans. Photo: Getty Images

But Mr. Obama is demanding taxincreases, not tax cuts, and large increases at that. If the Bush tax rates expire as scheduled on December 31, rates on the top two income brackets will jump to 39.6% from 35%, and 36% from 33%. Add the scheduled return of income phaseouts for exemptions and deductions, and the rates go up another two-percentage points—to at least 41% and 35%.

Mr. Obama claims this will merely return rates to what “we were paying under Bill Clinton,” but that’s not true either. It ignores his ObamaCare tax increase of 0.9% on top of the current 2.9% Medicare tax, plus a new 2.9% surcharge on investment income, including interest income.

That’s an additional 3.8% surcharge on investment income, and added to the Bush expirations would take the capital gains rate to 23.8% from 15% today, and the dividend tax rate to about 45% from 15%. In Mr. Obama’s economic world, tax cuts for middle-class “consumption” are good, but low rates to spur saving and investment are bad. This makes no sense because consumption is ultimately the product of saving and investment.

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Ron Sachs/Pool/CNP/Corbis

The President dismissed all of this as merely affecting 3% of small business owners. But that includes tens of thousands of the most productive, fastest-growing small businesses—those most likely to hire workers amid a national jobless rate of 8.2%.

Congress’s Joint Tax Committee—not a conservative outfit—estimates that in 2013 about 940,000 taxpayers will have enough business income to meet Mr. Obama’s tax increase threshold. And of the roughly $1.3 trillion in net business income, about 53% will get hit with the higher tax rates.

This is because millions of businesses report their income as sole proprietors and subchapter S corporations that file under the individual tax code. So Mr. Obama wants these businesses to pay higher tax rates than the giant likes of General Electric or J.P. Morgan. Does that qualify as “tax fairness”?

As for the impact on growth, even Keynesian theory holds that raising taxes should be avoided in a weak economy. That’s the argument that Mr. Obama used in late 2010 when he agreed with Republicans to extend the Bush rates through the end of 2012.

His assumption then was that the economy would be stronger now, but today we are in the third slow-growth patch in three years. Businesses are sitting on their wallets as they wait out the tax, regulatory and election uncertainty. Mr. Obama’s tax gambit will only increase that uncertainty and further retard investment and job creation.

We also know from experience that high earners are most able to move their money to avoid high tax rates. If they don’t have tax shelters at home, they can find opportunities abroad. Mr. Obama is running ads accusing Mitt Romney of sending jobs offshore, but the best way to send capital and jobs overseas is to raise U.S. tax rates to levels that aren’t competitive with the rest of the world.

Mr. Obama tacitly admits this when he talks about corporate tax reform, but raising tax rates merely increases the incentive for Congress to create more tax shelters. Mr. Obama promised Monday that if Republicans accept his proposal now, they can all come together on tax reform next year. But he knows that if tax rates rise, the Beltway’s revenue “scoring” conventions will make it that much harder to cut rates again as part of tax reform. In any event, he showed the value of his promises during his 2011 backroom budget charade with Speaker John Boehner.

The good news Monday is that Republicans in Congress and Mr. Romney seemed disinclined to take this class-war bait. Perhaps they realize that if they agree to raise some taxes but not others, they’ll dispirit their own base and hurt the economy. They can also put Senate Democrats on the spot by forcing them to choose between extending rates for everyone and accepting Mr. Obama’s tax increase. Republicans can win this debate by stressing growth over fairness and jobs over income redistribution.

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Small Businesses Lead Recoveries

http://video.cnbc.com/gallery/?video=1154541423

This clip from June 2009 discusses the importance of small businesses in job creation and driving economic recovery.  To do so, these small businesses need confidence in tax policy, in healthcare policy, and in less regulation.  They also need access to liquidity.  Unfortunately, none of this has happened yet and so jobs are not being created by small businesses and recovery is still fleeting.

— Steve Odland

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When Forming A New Business Consider Tax Impact

Many people are forming new businesses at the bottom of this economic downturn.  This is common at this point in an economic cycle.  But it’s critical to think about the structure of your new business from a legal perspective and a tax perspective.

Businesses can be formed as C-corporations, S-Corporations, LPs,  LLCs, etc.  Currently, LLCs or Limited Liability Companies are the most popular.  This is due to what the name implies: an LLC provides shelter to individuals for legal liability.  LLCs are owned by “members,” not partners or shareholders.  Net income from an LLC is passed through directly to Member’s personal income taxes and are not taxed at the entity level.  But if there is only a single Member to the LLC, the company can elect to be taxed as a different form of company, like an S-corp.  So the company can be registered as an LLC and elect to be taxed in some other form.

Another issue is that single Member LLCs may require social security and Medicare withholding on the entire amount of income depending on structure and the amount of time the Member dedicates to the business.  This is tricky and requires some study.

Net, consult your attorney and tax accountant before establishing the structure of your new company with all these issues in mind.

— Steve Odland

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Small Business Drives The Economy

http://video.cnbc.com/gallery/?video=1154541423

This video clip from the summer of 2009 highlighted the role of small businesses in driving economic recovery.  All the principles outlined in this appearance are applicable to the economic situation today.  The economy is not recovering quickly.  This is driven by little job creation in the small business sector.  The issue still is confidence and liquidity.  The financial crisis was caused by the burst of the housing bubble.  Home loans and lines of credit were the primary sources of liquidity for small businesses.  This crash removed an important source of capital and therefore job creation.  There has been no replacement either by the private sector or public sector for this source of cash.  Net, housing needs to recover for small businesses to have access to this source of liquidity again and start to create jobs.

— Steve Odland

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Take Cover Before The Storm

Small businesses are very vulnerable to the weather.  Storms like tornadoes, hurricanes, straight-line wind, etc. can knock out the workplace for a home-based businesses.  In turn, this could have serious financial ramifications.  Here are some practical steps to prepare:

  1. Locate a safe room.  Plan to find the lowest place in the house, without windows.  Usually this is the basement or an interior closet or storeroom.  Meet as a family and agree to the plan to meet there in case of emergency.  Be sure that each family member has a plan for shelter away from home in case of a storm that doesn’t allow everyone to get home.  Be sure it is operational for your small business.
  2. Supplies.  Be sure to keep supplies on hand in or near the safe room.  These should include:  water, a water purification kit, non-perishable snacks/food, blankets and pillows, clothing, first aid, medical equipment for special-needs family members, pre-moistened towelettes, hand sanitizer, zip-lock plastic bags, disposable eating ware, duct tape, necessary toiletries, flashlights with fresh batteries, radio, cell phone with charged batteries, entertainment items such as books, or games, pet care items.  If you have a baby or toddler you will need appropriate supplies:  diapers, baby food, formula, toys, etc.  You may want a battery-operated laptop with a cellular modem to be able to connect with email and Internet.
  3. Evacuation plan.  Have a plan if you will be required to evacuate due to incoming weather.  Hurricanes and floods approach more slowly giving people time to escape.  Don’t risk it–get out if an evacuation order comes.  Know the escape routes, plan for pets, know where you will go, have the car full of gas, etc.  Much of the loss of life suffered in past storms could have been prevented had people heeded evacuation warnings.  Be sure you have identification, medication, medical paperwork, insurance information, food, eyeglasses, money, credit cards, etc. with you if you evacuate.
  4. Plan for pets.  Make sure you know where the family pets are at all times and who is responsible for their care before and during the storm.  Develop a plan for their care in case of evacuation.
  5. Generator.  A stand-by generator rapidly is becoming a necessary home appliance.  Maintenance of electricity supply is becoming a necessity vs. a luxury and can qualify for insurance discounts.  Heating/cooling, cooking, communication, medical gear, etc. all are dependent on electric supply.  A permanent stand-by generator fueled by natural or propane gas with automatic transfer switch is best.  Make sure the propane company tops off the tank before the storm.  Portable gas or diesel-powered generators are ok for short-term uses but less reliable and more dangerous.  Be sure to follow proper venting procedures to avoid carbon monoxide poisoning.
  6. Check insurance.  Make sure your home, auto, and small business insurance is up to date and that you’re covered in case of storm damage.  Especially important is wind and water damage for homes (flood insurance in some areas), and water damage to vehicles.
  7. Trim the trees.  Broken tree limbs hitting power lines or houses can cause a lot of damage.  Many times trees themselves are toppled onto cars and houses.  The best defense is pruning.  Taking the weight off the top of trees allows the roots to withstand higher winds, survive the storms, and prevent the damage.
  8. Install the shutters.  New building codes in hurricane-prone areas require shutters or ballistic glass to be installed in homes.  But increasingly homeowners around the country are installing shutters that can be deployed electronically or manually in case of storms.  You also can use pre-cut plywood to cover windows.
  9. Collect all potential projectiles.  Clear the yard and patio of everything not attached:  lawn furniture, bird feeders, wind chimes, patio equipment, toys, etc. so they don’t become airborne projectiles that can do damage in a storm.
  10. Secure valuables.  Move valuables to a safe deposit box to prevent loss.  Videotape the contents of your home, garage, and landscaping, and store the video in the box.  A good practice is to store irreplaceable photos and negatives off site in a safe deposit box.  Back up your computer systems to an off-site location for business continuity.

Preparedness and planning are the keys to minimizing damage and preventing injuries or loss of life in storms.  But it’s also key to small business planning.  Just because your area hasn’t been hit recently doesn’t mean it won’t be hit.  You can’t change or prevent the weather, only the potential outcome.  Often the worst disasters occur in areas where people have let down their guard.  So get ahead of the season, and be prepared.

— Steve Odland

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Save Money on Your Home Insurance

A lot of small businesses work from home.  Insuring your home, and place of work, is important to reduce risk.  You want to cut costs in your business, but how can you do it for your home insurance? Of course, you could competitively shop the policy every year but that is onerous as it takes a lot of study to understand the difference between policies.  Often it’s easier to stay with the policy that has the appropriate coverage.  And longer-term policyholders can earn discounts for longevity.  Here are 10 ways that you can control your home insurance costs:

  1.  Increase deductibles.  Insurance isn’t meant to cover the small stuff.  Set deductibles as high as you can afford.  For example, a $150,000 house could have a $1500 or 1% deductible.
  2. Make improvements.  Install a backup generator, a whole house surge protector, and smoke/CO2 detectors. Refit roof trusses with strapping.
  3. Opt for hip roofs.  Hip roofs offer the most slippery shape in high wind settings or storms.  You don’t want areas that can catch the wind and are prone to damage.
  4. Locate intelligently.  Stay away from flood prone areas.  Look for brick or stone houses in high wind areas and wooden frame houses in earthquake-prone areas.  Locate in communities with professional fire departments.  Have your home inspected before purchase.  Also check the Comprehensive Loss Underwriting Exchange report of your home before purchase to see insurance claim history.
  5. Don’t make small claims.  Frequent claims can drive up rates.  Don’t sweat the small stuff.  Insurance is meant to protect from catastrophic loss.
  6. Reinforce your home.  Install storm shutters, reinforce the roof, retrofit older homes for earthquake resistance, and modernize heating, plumbing, electrical to reduce risk of fire and water damage.
  7. Improve home security.  Add smoke detectors, burglar alarms, and deadbolts.
  8. Exclude land value.  It’s unlikely the land beneath your home will be stolen or burnt in a fire.  Insure the value of the home only.
  9. Combine policies with one insurer.  Most insurance companies offer discounts for multiple policy households.  Combine home and auto insurance.  Then buy an umbrella liability policy over both to optimize cost.
  10. Eliminate unnecessary coverage.  Don’t buy coverage you don’t need: earthquake coverage is unnecessary in most zones; don’t schedule jewelry if it’s inexpensive, etc.

Talk to your agent about other discounts.  Sometimes there is a discount for good drivers, or retirees, or people with good credit ratings.

Be sure also to discuss your home business needs with your agent.  Often simple riders can be added to cover increased liability. Be sure you have enough insurance.  Don’t be penny-wise and pound-foolish.  Saving a few dollars a year will seem silly if you find out you’ve skimped on coverage that later costs you thousands.  Be sure to read the policy and ask your agent a lot of questions so you understand what coverage you do and don’t have.

— Steve Odland

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Government Spending Must Stop

http://www.forbes.com/sites/steveodland/2012/04/09/the-spending-must-stop/

Our government spending is out of control.  Debt has increased from about $9 trillion a few years ago to nearly $16 trillion today.  Our debt per taxpayer is $138,000.  And yet, Washington seems to be oblivious to what is happening.  They call for more spending, er, “investment.”  They want to raise taxes on the 52% of us who are currently contributing to give more to the 48% who are not.  They say it’s only fair.

It’s out of control.  The House budget attempts to reign in the spending a little and is criticized as “radical” by the administration.  In fact, the House budget only dials back spending increases so that the deficit still increases by $4 trillion over the next decade but allows the economy to grow faster so that debt to GDP returns to a more normal level.

The current path is unsustainable and the only course to prevent the U.S. from following down the well-worn path of the PIIGS debacles is to cut spending, dial back the social guarantee escalations, reduce the tax burden on businesses, flatten the burden on individuals, and live within our means.

— Steve Odland

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U.S.: Highest Tax Rates In The World

It’s official as of April 1, 2012: the U.S. now has the highest corporate tax rates in the world.  It seems appropriate that this happened on April Fools Day.  On that day Japan lowered its corporate rates so that the U.S. stands alone with the most uncompetitive rates.  We also double tax multinationals—they are taxed in the country where they generate revenue, and then again when that cash is brought back to the U.S.  This causes most foreign earnings to be reinvested outside the U.S. rather than being brought back for domestic investment.  IPOs are going overseas rather than face the strangling regulations applied here.

Additionally, tax rates on individuals are quite high comparatively and there is a drumbeat to raise them even higher.  What is not acknowledged in this is that most of the  so-called 1% are small businesses filing as S-corps, LLCs, LPs, etc.  Small businesses make up 75% of individual filers and higher individual tax rates diminish their ability to create jobs. 

These rates and the spending binge in Washington are damaging our economy.  The dollar is weakening versus other currencies, and inflation is a looming concern.  Small businesses need to wake up and demand change before it’s too late.

— Steve Odland

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Small Businesses Face Higher Borrowing Costs

http://online.wsj.com/article/SB10001424052702303816504577308010791373308.html?mod=WSJ_SmallBusiness_LEFTTopStories

Small businesses face rising borrowing costs.  From credit cards to bank loans, the businesses that usually provide the job growth following recessions are under undue pressure with the lack of affordable capital.  This is unfortunate. Small businesses need capital to fund expansion, to underwrite innovation, and to hire people.

One traditional source of capital has been the housing market.  Home equity lines of credit, re-fis, etc. traditionally have provided capital to these businesses, many of which are home-based.  But this source has dried up after the housing crisis.

Small businesses likely will need to turn to private equity and venture capital sources for future capital.  These private sources likely will grow in coming years as even larger PE firms begin funds to invest in smaller businesses with potentially higher growth rates and returns.

— Steve Odland

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States Need To Lower Taxes, Cut Spending

http://youtu.be/VCN2j1NLkfE

Here is an appearance by Steve Odland on Neil Cavuto 3/23/12 discussing the Illinois State Lottery’s decision to sell lottery tickets online.  While this may help raise some revenue, the larger issue is that spending is too high and business taxes are pushing companies out of state.  Like many states, they need to cut spending and lower taxes to be more competitive.

— Steve Odland

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The State Of Spending

http://www.bing.com/videos/watch/video/office-depot-ceo-on-state-of-spending/3xtk9saa

CNBC Fast Money from 6/24/10.  The subject of this video is the state of consumer and small business spending.  Small businesses had yet to come back and start spending.  They had not begun to create jobs.  Things were not getting better.  Unfortunately, a year and a half later, there still hasn’t been improvement.  Small businesses continue to be under duress.

— Steve Odland

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Small Business Outlook Uncertain Still

http://www.bing.com/videos/watch/video/small-business-outlook/3xm97n22?cpkey=55cbeae7-0506-443f-b5cd-59208c3f38c2

Here is commentary from an appearance I made on The Kudlow Report in September 2010.  Unfortunately, very little has changed from the situation a year and a half ago.  Small businesses face economic uncertainty, tax increases, lack of liquidity, rising costs, uncertainty, or maybe certainty of higher costs.

— Steve Odland

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Honda Civic Still A Winner

http://www.torquenews.com/1082/2012-honda-civic-still-winner

Honda introduced the new 2012 Civic last year just as Japan was reeling from the dual impacts of the earthquake/tsunami natural disasters.  As a result of the events, supply was severely limited and sales suffered.  In 2012 sales have roared back and the Civic now is the third most popular car in America, and the most popular if you include sister SUV CR-V sales.

— Steve Odland

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Geneva Motor Show

http://www.torquenews.com/1082/four-european-cars-you-cant-ignore-geneva-auto-show

The International Geneva Motor Show is running now through March 18.  Here are some important new designs and models.

— Steve Odland

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Silly Interview Questions

http://www.forbes.com/sites/steveodland/2012/03/05/silly-interview-questions/

It’s the silly season again.  No, not the political races—the interviewing season.  For thousands of people this is a time of year when they are subjected to the stress and strain of interviews.  College seniors are interviewing for permanent positions.  College juniors are interviewing for increasingly important summer internships.  High school students are interviewing for college placement.  And then there are the rest of the millions of Americans out of work who are interviewing for whatever job they can find.  Each of these groups finds themselves in a room with a recruiter asking mind-numbingly silly interview questions.

— Steve Odland

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JOBS Act Has Bi-Partisan Support

The Jumpstart Our Business Startups, or JOBS Act, is six bills offered by different GOP lawmakers that have earned bipartisan support. 

Among the measures in the JOBS Act are items to ease regulations on raising capital and organizing before the money is in hand; to enable business start-ups to pool investments from smaller contributors; to change rules on registering small bank holding companies and to allow small firms breaks on certain Securities and Exchange regulations that prevent them from going public.  The bills would take such steps as removing a Securities and Exchange Commission ban preventing small businesses from using advertisements to solicit investors; eliminating SEC restrictions that prevent “crowd-funding” so entrepreneurs can raise equity capital from a large pool of small investors; making it easier for small businesses to go public by increasing the threshold under which companies are exempt from SEC registration; and raising the shareholder registration requirement threshold from 500 shareholders to 1,000 shareholders.

The House is set to vote on the legislation as early as next week.

— Steve Odland

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NASCAR’s Back!

http://www.forbes.com/sites/steveodland/2012/02/27/nascars-back/

NASCAR may be big business but small businesses all over work to supply the sport.  So here’s to every small business that make NASCAR what it is.  “Gentlemen, start your engines.”

— Steve Odland

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Mercedes-Benz Introduces the SL63 AMG

http://www.torquenews.com/1082/mercedes-benz-introduces-sl63-amg-rumor-says-it-may-ante-sl65

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5 Ways For Small Businesses To Control Costs

http://blogs.forbes.com/steveodland/

Here are five ways for small businesses to control costs:

1) Renegotiate all contracts annually.

2) Discuss with customers how to take steps out of the mutual supply chain.

3) Match payment terms with inventory turns.

4) Ask vendors to own their inventory up to the point of your sale.

5) Hold headcount constant.

Click on the link above to see the full article.

— Steve Odland

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Small Business Outlook

http://www.bing.com/videos/watch/video/small-business-outlook/3xm97n22?cpkey=55cbeae7-0506-443f-b5cd-59208c3f38c2%7C%7C%7C

This clip from 9/16/10 is still appropriate today.  Temporary tax cuts rarely create long term benefit.  Small businesses need tax certainty.

— Steve Odland

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Porsche Macan: The Baby Cayenne

http://www.torquenews.com/1082/porsche-macan-baby-cayenne

 

Most of my articles deal with small business on this blog.  But I wrote this artice for TorqueNews regarding the newly announced Porsche Macan.  Hope you enjoy.

— Steve Odland

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To Do List For Small Businesses

http://www.huliq.com/13309/do-list-small-businesses-after-tough-2011

Here’s a simple To Do List for Small Businesses in 2012.

— Steve Odland

 

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Take Care Of Small Businesses

Steve Odland on Fox News Sunday

This clip from a 2009 Fox News Sunday with Chris Wallace show outlines the issues facing small businesses still today.  Small businesses were hurt disproportionately in this economic crisis.  Housing has hurt not only homeowners but small business people too as those businesses relied on their homes for cash from home equity lines of credit and re-fi’s.  Due to the credit crunch, small businesses have few sources of liquidity.  Almost every recession has ended when small businesses begin hiring.  Net job creation happens in the small business sector.  For this to happen, these businesses need the liquidity to grow and the confidence to implement.

— Steve Odland

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How to Go Green

http://www.youtube.com/watch?v=r-nX4dn-zs4

Here’s a short clip from a video produced discussing Office Depot’s green marketing efforts.  Enjoy.

— Steve Odland

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5 Policies To Aid Housing

The housing market still is a drag on economic recovery.  As inventory continues to exceed demand, prices are still under pressure, and asset values must continually be revalued lower. As these assets are reduced in value, banks and other lending institutions must reign in lending to maintain capital ratios.  Natural recovery still is projected to be a couple years away unless government and lending policies can be changed to aid the situation.  Here are five policies that could be implemented or changed to aid housing:

  1. Fast track the foreclosure process.  There is a huge backlog of homes in various stages of foreclosure.  As these homes stay out there in limbo, prices on normal sales cannot recover.  Policies vary by state but Florida’s process is especially onerous.  These processes need to be streamlined to process the backlog.
  2. Aid financing for investor purchases.  We can let the housing market heal one unit at a time, or we can encourage bulk purchases by investors to clear the backlog.  Local private and public incentives can be deployed to encourage local investors to buy up excess inventory for redeployment in the rental market.
  3. Add tax incentives.  Federal tax breaks could be offered to encourage investment by professionals in homes.  The short term and capital gains rate could be adjusted to 5% or 0% for gains on bulk purchases of homes.
  4. Borrowing rates could be restructured.  Underwater mortgages are holding back consumer spending and threaten even more defaults.  Lenders should get more aggressive with restructuring these loans and rewarding borrowers who stay current.  One idea is to alter loan terms so that payments go to pay down principal with interest deferred until later in the loan term.
  5. Temporarily suspend payments.  Homeowners with underwater mortgages could be given a two-year hiatus on paying down their mortgages.  Of course this would mean some restructuring essentially to extend the term of the mortgage.  But with a two-year easing, owners could stay in the homes and maintain them.  Meanwhile they could benefit from some housing recovery so that perhaps they would be no longer under water after the end of the period.

For sure, homeowners who borrowed more than they could afford and lenders who loaned too aggressively are all accountable for the current situation.  But we need some intelligent policy changes to get the housing market out of decline and therefore move the economic recovery out of neutral.

— Steve Odland

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We Must Know Our Customers

Businesses of all sizes have customers.  If we didn’t, we wouldn’t be in business!  But having customers and knowing our customers are two different things.  Regardless of our business, we must know our customers.

When small towns emerged in this country and the usual main street of shops were created, merchants really knew their customers.  After all, towns were small and customers were neighbors and residents of the town.  It was easy to understand the needs and concerns of customers since all were part of the same community.  As growth exploded after WW II and national chain stores emerged, literally “knowing” customers became more challenging as a company’s headquarters were located away from the ultimate point of sale.  But still, people who worked in the shops were neighbors of the customers who lived in the community.  Not perfect but it still worked if they fed information back to decision makers.  With the advent of online shopping, the global market place, and merging of different kinds of businesses into one, knowing the customer has become ever more challenging.

Most small businesses today believe they understand their customers.  But do they?  To be successful, we need to act more like those main street merchants a hundred years ago and really walk a mile in their shoes.  We must talk to our customers.  This can take the form of formal research like focus groups or surveys, or just plainly interacting with them during the regular course of business.  Ask them what they like about our products and services, what they would like we to do differently, and what we do that drives them nuts.  By the way, I’ll bet they’ll say something about the ordering and billing process but this is all part of the product, isn’t it?

Sometimes our customers don’t know what they want us to do differently.  Apple is famous for not doing customer research but instead inventing what they think their customers want and presenting it to the world.  Behold the iPod, iPhone, and iPad.  Customers in a focus group or quantitative survey never described these devices.  But Apple uniquely knows their customers well enough to create something new and fit a need.  Likewise, we need to understand our customers’ business or personal needs well enough that even if they can’t articulate what they want new from us or what they want us to do differently, we can figure it out and create something.

We need to “live in the skin” of our customers to really understand their needs.  The best business people are those that uniquely can translate this understanding into goods and services that meet these stated or unstated needs.  Despite the evolution of business over time, one constant remains: to be successful, we must know our customers.

— Steve Odland

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Small Businesses Should Fight Regulatory Costs

Regulation by government bodies imposes a huge cost on U.S. businesses, but it is especially onerous for small businesses.  The costs include changes needed in the business to comply, legal advice to understand rules, penalties and fines, etc.  Prices from your suppliers have built in costs for their compliance.  And seemingly daily another regulatory agency or body pops up to add more rules to your lives.

Well, Congress finally is taking steps to try to manage regulation.  Their effort has been named the Regulations from the Executive in Need of Scrutiny or REINS Act. The REINS Act would require an up-or-down vote on all new proposed rules with an economic impact of over $100 million by both the House and the Senate and the signature of the President before they can be enforced on the American public.   This act has been written to try to rein in the regulatory authority of all the agencies in the executive branch.  For some time, Congress has delegated its constitutional authority to these agencies allowing rules to be written by unelected, unsupervised, unaccountable bodies.  The REINS Act would require any “major rule,” or rule imposing an annual economic impact of $100 million or more on the economy, to be approved by Congress and the President before becoming law.  It would require a simple up or down vote by Congress before going to the President for approval or veto.  If the resolution is not passed by both the House and Senate and signed by the President within 70 legislative days, the rule would not take effect.

Small businesses should contact your senators and congressmen via their websites and urge approval of this Act.  Congress needs to rein in authority for law making and take control of the regulatory burden that is being placed on our economy.

http://www.nationalreview.com/articles/285074/reins-regulators-jonathan-h-adler

http://www.law.upenn.edu/blogs/regblog/2011/07/the-reins-act-a-constitutional-means-to-control-delegation.html

http://geoffdavis.house.gov/REINS/faqs.htm

— Steve Odland

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Demanding Demand

This was written in 2010 for Huffington Post. It was written to urge business and government to work together to encourage productive economic growth. As I said then and is true now: “It will be the private sector that leads our nation back to a path of long-term prosperity. Businesses across America will continue to hire and invest each and every day — it’s our bread and butter. Working together in partnership with the government, we know we can boost these investments at greater speed and provide more better-paying jobs for American workers. Businesses and policymakers ultimately have the same goals: to build a robust economy and to ensure long-term job creation for the American people.”

http://www.huffingtonpost.com/steve-odland/demanding-demand_b_670411.html

— Steve Odland

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10 Things to Do At Year End

Small businesses generally had a tough year in 2011.  Once again, the economy was difficult, customers were not in buying moods, and growth was tough.  But still, small businesses faired well if they managed their businesses conservatively.  ‘Tis the season to reflect on the year and prepare for a (hopefully) much brighter 2012.  Here are ten things to do at year end:

1)   Call or visit your top customers personally and say thanks.  The personal touch is missing in much business communication these days.  We rely overly on email and texting and true communication suffers.  A personal visit demonstrates how much you care about their business.  And a call, while not as good as a visit, still can be very effective.

2)   Call your top suppliers and say thanks.  Yes, they should visit or call you if you’re a top customer.  But if they haven’t done so, a call from you with thanks (and no complaints!) probably will make you a favorite customer.  The best customers get the most favorable treatment.

3)   Gather your associates together and say thanks.  Maybe holiday gifts, parties, and bonuses have become largely extinct but it doesn’t cost anything to host a holiday or new year gathering with a simple thanks.

4)   Reflect on what went well and what didn’t in 2011.  How will you know what to do differently in the future if you haven’t done an honest assessment of the past?  Remember the definition of insanity: “Doing the same thing over and over and expecting different results.”

5)   Do inventory.  Of course, you didn’t need to read this to know that.  But let me say this about that: inventory isn’t just about the counting.  It’s about assessing strategy.  What is moving, what isn’t? What sold last year but maybe won’t next year?  Who is paying for all the inventory now and who should be in the future?

6)   Ask yourself why your customers buy your product/service?  Better yet, ask them when you visit them.  They may have a different reason than you think.  If you don’t know exactly what drives the need for your business, you may not be able to drive future growth.

7)   Look at your competition.  What differentiated your business in the past from what they do?  Not what is different, but what drove true competitive advantage.  Has it eroded? Have they moved?  Is the gap between you and them increasing or decreasing? Again, what do you need to do differently to stand apart?

8)   Check your costs.  Are you truly running the lowest cost operation?  If not, you leave a gap for others to fill.  Look at how you’re buying, how much inventory you have vs. need, how much cash is tied up in the business that could be redeployed.  How many people do you have? If you cut the bottom 10% of performers how much would you save and would the business do better? Every new dollar of sales is five or ten cents in profit.  Every dollar of cost saved is a dollar in profit.

9)   What percent of your sales are over the internet?  If they’re low, your company may be a dinosaur.  If they haven’t grown double digit in 2011, chances are you’ve left a lot of room out there for others to enter and compete with you.

10)  Thank your family.  Without them, you wouldn’t be able to do what you do.

The list is a starting point of course.  The point is that calendar transitions should trigger time to step back and reflect and give thanks.  Hopefully, you’ll get a chance to do so to really proactively ensure a Happy New Year.

— Steve Odland

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Small Business Needs Tax Certainty

There has been a huge debate recently about the job situation in the private sector.  The solution embraced over the last couple years has been temporary tax incentives and temporary Federal Reserve actions.  The extension of the “Bush Tax Cuts,” the temporary lowering of Fed Funds Rate to virtually zero, the payroll tax holiday, etc. all have been deployed to stimulate the economy to produce jobs.  There is great surprise and hand wringing that these tactics have not been more stimulative.  And the logical question is “why?”

Why?  Because businesses need certainty.  Despite popular notions that all companies are short-term focused, businesses of all sizes plan for the long run.  Company leaders do not have an end date for operations and hence plan and run their businesses as if they will operate in perpetuity.  Therefore, no short-term actions to stimulate behavior will produce long-term actions on the part of business leaders.  A temporary payroll tax cut is nice, but no business will add jobs when the incentive is scheduled to disappear in a matter of months.  Business leaders instead pocket the savings and add the cash to their balance sheets as an insurance policy against the possible negative impact of the expiration of the cuts.  So the short-term nature of the tactic creates exactly the opposite impact on business thinking.

This thinking also applies to the “Bush Tax Cuts.”  The cuts went into place in 2003, and included a provision to expire at the end of 2010.  From the beginning, businesses knew that this was a seven-year incentive and so all decisions related to the 4.5% marginal tax rate benefit were modeled for that period.  The economy did well after the tax cuts and up until the mortgage/banking crisis of 2008.  But even without the crisis businesses would have begun around 2008 to take actions as if the tax rate was going to increase.  The “Bush Tax Cut” was extended for two years in December of 2010.  So, just as businesses had taken every action, short-term and long-term, to model the higher tax rates into their decisions, the rates were extended for two years.  The result?  Businesses ignored them and took all actions assuming the rate was going to be higher.  Net, no stimulative result was achieved for 2011.

Why would businesses make decisions as if they are impacted by personal income tax rates?  Because many large businesses depend on consumer spending for their revenue and consumer spending is directly related to the cash that is left over after taxes.  Small businesses that are organized as S corporations, LLC’s, or LLP’s actually have flow through income to their personal tax return and so their tax rates are the personal tax rates.  Hence, the “raise taxes on rich people” argument is risky since a huge percentage of “rich people” actually are small businesses.

Net, businesses logically plan and act consistent with long-term macro environment assumptions.  Tax rates are an essential part of that environment and directly impact that planning and therefore investment and job creation.  Temporary incentives or any incentive with an expiration date will have limited to no impact on long-term business planning.  Therefore, the only way to stimulate job creation is with permanent tax structures.

— Steve Odland

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Corporations Are Holding Cash—Why?

American corporations have a record $2.1 trillion in cash on their balance sheets this fall.  One point of view is that this is terrible:  these companies deliberately must be extending the economic issues by not spending cash on creating jobs.  But this point of view makes no sense when you compare it to corporate behavior over time.

Companies normally have deployed cash in the manner they see as the most logical way to create value.  Cash can be used to invest in capital equipment to expand output, new stores to drive sales and market share, acquisitions to expand market share or diversify, share buybacks, etc.  But companies only will take these actions if they can generate an acceptable return.  If companies are not investing their cash, they must not believe they can generate the return.  So then why not just pay the cash to owners as dividends?  Evidently, they believe they may need the cash for something in the future and hence are not distributing it to shareholders.  Two possibilities come to mind.  First, perhaps they believe that the economy is going to get worse and they may need to cash to operate and hence they’re holding onto it.  The second possibility is that they believe other sources of funding including bank loans may not be available whether or not the economy improves.

Either of these alternatives or both together explain the accumulation of cash on the balance sheet of U.S. companies.  Weighing on their views are the debt and currency crises in Europe, inflation in emerging markets, increased investment in gold and other hard currencies, banks reserves, underlying asset valuations, current and future potential government policy, and economic malaise here at home.  It’s hard to justify investing cash in jobs when you’re worried about that many things impacting your business and the economy, and you need to ensure you’ll have enough cash to survive.

What does this mean for small businesses?  Conserve cash.  Cut costs, be conservative about investment payout assumptions, and wait for signs of economic rebound before deploying scarce resources.

http://www.foxnews.com/politics/2011/12/09/household-wealth-suffers-biggest-loss-since-2008/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews%2Fpolitics+%28Internal+-+Politics+-+Text%29&utm_content=My+Yahoo

http://www.taxfoundation.org/blog/show/27796.html

— Steve Odland

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Unemployment Rate Drops–Then Where Are the Jobs?

Yesterday the Labor Department reported that the unemployment rate dropped from 9.0% in October to 8.6% in November. So, does this means nirvana is just around the corner?  Are our problems are over?  With .4% drop per month, will we be below 5% unemployment in under a year?  Wow.  If only this were true.

The unemployment rate is determined by the Labor Department’s household survey.  The government takes a survey and asks how many are unemployed and that becomes the reported rate.  Unfortunately the hard numbers tell a different story.  About 102,000 jobs were created last month according to the Department.  But just to keep up with the population increases, over 200,000 jobs need to be created every month.  So, basic math says that the unemployment rate hasn’t decreased.

According to Neil Dutta, US Economist at Bank of America Merrill Lynch, “When the unemployment rate declines, we want to see both employment and participation increase as discouraged workers return to the labor force. Today, we got the former, but not the latter, making the 0.4 percent drop look a bit suspect.  We would not be surprised to see the unemployment rate give back some of its decline in the coming month(s).” (http://www.cnbc.com/id/45521793)  According to CNBC, “Claims for unemployment insurance unexpectedly rose last week, climbing past the psychologically important 400,000 mark as the jobs market showed signs of more weakness.” (http://www.cnbc.com/id/45506837/)  This obviously doesn’t support a falling unemployment rate.

Over 310,000 people left the labor force last month thereby dropping out of the number counted as unemployed. (http://finance.yahoo.com/news/jobless-rate-drops-8-6-133402269.html?l=1/)  These include women who previously worked as well as early seniors who have simply given up hope of working and slipped into unintended early retirement. Further, a large percentage of the 102,000 jobs gained last month were seasonal retail jobs that likely are temporary

Let’s look at it another way.  The unemployment rate in 2006 and 2007 was 4.6%. (http://www.bls.gov/cps/prev_yrs.htm/)  According to Edward Glaeser (Glimp Professor of Economics, Harvard University), “Since 2007, the number of employed Americans has fallen by 7 million.” (http://www.hks.harvard.edu/centers/rappaport/events-and-news/op-eds/more-americans-need-to-work-and-to-marry/)  Clearly this is not good.  Regardless of year-over-year or month-over-month changes, 7 million fewer people are working than just a few years ago.  Reports suggest that people have grown discouraged and taken themselves out of the workforce and so are no longer reporting themselves unemployed.  At 102,000 new jobs per month, it will take until 2017 to get back to the employment level of 2007!

As an aside, there are about 140M people employed in this country (http://www.bls.gov/news.release/pdf/empsit.pdf).  That’s only about 45% of our 312M population.  63% of the population or 197M people are between the ages of 18 and 65.  So only 71% of the working aged population is employed.  That’s a lot of unproductive people and a huge waste of human resources.

So what conclusion should small businesses derive from these new data?  The economy remains sluggish, unemployment remains very high, 7 million fewer people are employed versus a few years ago, and there is no short-term catalyst for economic growth.  Small companies should be cautious, pay attention to cash flow, and continue to wait for sunnier days to take investment risk.

— Steve Odland

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Small Businesses Should Support Cash Repatriation

America’s small businesses usually create most of the jobs in an economic recovery.  But they don’t do this in a vacuum.  Much is made about “big business” versus “small business.”  But it’s not one or the other.  Small businesses exist and thrive in an ecosystem with large businesses.  Of course, small businesses are mom and pop retailers who service the consumer market.  But they also are the suppliers to large businesses.  Hence, large business success feeds small business success and allows them to create jobs.

That brings me to a “big business” issue that is inhibiting small business job growth.  Currently, about $1.5T of corporate cash is “trapped” overseas in subsidiaries of U.S. multinationals.  This is because these companies have earned this money and paid taxes on it in other countries.  Repatriation to the U.S. would incur another taxable event and hence it is more profitable for these companies to use this cash to invest in job creation outside the U.S. than to bring it back and lose a third of it.  U.S. corporate tax law needs to be reformed to lower the second highest rates in the world and make us more competitive.  But meanwhile, a tax holiday on repatriation would create an opportunity to bring this cash back now. If the average cost of a created job is $50k and if all of the cash came back and was invested to support U.S. job creation, a repatriation tax holiday could theoretically create upwards to 30M jobs.  According to the Bureau of Labor Statistics (http://www.bls.gov/web/empsit/cpseea03.htm) there are about 14M unemployed people in the U.S.  If only part of the repatriated cash went to investment, job creation by companies large and small easily could significantly diminish the level of unemployment in this country.

Opponents argue that rather than hiring people companies may use the cash for other things like improving liquidity, payouts to shareholders, or reducing debt.  Even if some cash is used for these very sound strategies it should put the economy on a stronger footing and allow more confidence for job creation. I would rather see guidelines created around use of the repatriated cash rather than continuing to incentivize companies to create jobs elsewhere.

Small businesses need to support their large business customers and argue for a cash repatriation holiday.

— Steve Odland

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Fox Business 2010 Back To School

http://video.foxbusiness.com/v/4294915/office-depot-ceo-on-back-to-school-sales

Commentary on the 2010 Back to School season on Fox Business.

— Steve Odland

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