Category Archives: News

August 12, 2017

Fiscal Cliff – Why many lawmakers don’t want to stop it

It appears that certain lawmakers don’t want to stop the fiscal cliff.   Those reasons seem clear to be politically motivated rather than for the good of the country.

Many lawmakers state that they will not sign on to the fiscal cliff offers that have been presented thus far because those offers would involve raising taxes on those earning more than $250,000 per year and they simply cannot vote for that under any circumstances.   Some democrats have insisted that they cannot vote for any spending cuts that would cut Medicare and some other programs.

The part that is incomprehensible to close observers is that while this belief may be respected, if lawmakers do not come to an agreement, taxes will increase far more on everyone rather than modestly on the affluent.   Spending cuts will be significant across the board for many programs rather than just for some programs.

If lawmakers do vote any agreement, in future elections, Republican incumbents fear they will be accused of raising taxes as well as agreeing with, and promoting Obama’s agenda by challengers from the right in Republican primaries in their district.  Democratic incumbents are concerned they will be attacked for cutting beloved social programs such as Medicare and social services in democratic primaries in their district.

As a result, it appears that many politicians would rather allow large tax increases, large spending cuts, a possible additional U.S. Credit downgrade, major decreases to the stock market, and another recession actually occur, rather than risk accusations by political challengers in future elections.   Stay tuned, the ride is just beginning.

Update 01/13/2013   –   The fiscal cliff was partially avoided and delayed.   The revenue increase aspect was agreed upon, while the spending part of the deal, which is really half the equation, was simply delayed for 2 months, as an agreement could not be reached.  Political heads of Government came to this agreement at the last minute, while rank and file politicians in the house, especially Republicans, voted against a deal.   It would have been interesting to see if the politicians that voted against it, over the course of the two to three weeks afterwards would have still insisted on their district receiving the same level of Government spending.   After all, they certainly give the impression that they want to cut spending, only not in their districts.

The fiscal cliff – why a deal will happen

The fiscal cliff deadline of January 1st 2013 is fast approaching.   It appears that no deal will be made, we will all go over the cliff, and the Mayan apocalypse will be proven correct a few days too late.   But a deal will be made, that is 100% assured, even if it is a few days late, and here is why.

The tax increases will take affect, and the public will be seriously displeased, but they will not protest in mass.    Polls have shown that while the public does not want tax increases, much of the public has come to understand that in order to solve the country’s budget deficit and national debit, tax increases combined with spending cuts must take place, even if they do not like it at all.

What will set the public into a far greater fit of anger and rage will be the automatic spending cuts.   When the sequester was put into place, it was done as a last ditch threat as part of the fiscal cliff talks of 2011.    During those talks, it was agreed that a bipartisan commission would be set up in 2012 to come up with a solution to the problem.   As an incentive to push both sides to come to an agreement, a sequester of large tax increases and spending cuts would take place.   This was only supposed to be a motivator.   It was never expected that the sequester would happen because every sensible person knew the the reality of the sequester is far worse than the items both sides objected to while trying to come to an agreement.

Once the spending cuts hit, they will be very large.   Many citizens receiving government checks will get a substantial reduction or delay, or both, in their checks.   Not much motivates people to take action as when they don’t receive money they feel they should receive.     Ultimately, the leaders of the political parties know this and will come to an agreement.

2.7% increase in Gross Domestic Product based on BEA

A 2.7% increase in Gross Domestic product occurred in the 3rd Quarter of 2012, according to the 8:30 A.M. November 29th reporting by the BEA, bureau of economic analysis.

The bureau further reported that in the 2nd Quarter, real GDP increased only 1.3%.  In the advance estimate, the forecast was 2.0% growth, so the actual figures surpassed the estimate.   The increase in real GDP in the 3rd Quarter reflected real increases in Personal Consumption expenditures, private inventory investment, federal government spending, residential fixed investment, and state and local government spending.  Imports increased slightly.   The bureau also further reported that the increase in real GDP in the third quarter reflected upturns in private inventory investment and in government spending.

Real Domestic Gross Product up 2% in third Quarter

According to the 8:30 A.M. November 23 rd release by the Bureau of Economic Analysis (BEA), real gross domestic product was up 2% in the third quarter of 2012, for that 3 month period.

The bureau further reported that increase in real GDP in the third Quarter primarily reflected contributions from (PCE), Personal Consumption Expenditures, federal government spending, as well as residential fixed investment that were partly offset by negative contributions from exports, non residential fixed investment, and private inventory investment.

Real federal government expenditure(s) as well as gross investment increased 9.6 percent 3rd Quarter, in comparison to a decrease of 0.2 percent in the second.  National defense increased 13.0 percent, in contrast to a decrease of 0.2 percent.  Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent.  Real state and local government consumption expenditures and gross investment decreased 0.1%, compared with a decrease of 1.0%

Real nonresidential fixed investment went down1.3% in the third quarter, in contrast to an increase of 3.6 percent in the second.  Nonresidential structures decreased 4.4 percent, in contrast to an increase of 0.6 percent.  Equipment and software decreased less than 0.1 percent, in contrast to an increase of 4.8 percent.  Real residential fixed investment increased 14.4 percent, compared with an increase of 8.5 percent.

Thank your for visiting our Real Gross Domestic Gross Product up 2% in third Quarter resource page!

 

 

$187 Billion in September Exports

The Bureau of Economic Analysis reported on $187 Billion in September exports per press release dated Thursday, November 8th 2012, 8:30 A.M. release.

The bureau also reported total imports of $228.5 Billion resulting in a total goods and services deficit of $41.5 Billion down from $43.8 Billion in August.  In September, Exports were $5.6 Billion more than August Exports of $181.4 Billion.   September imports were $3.4 Billion more than August imports of $225.2 Billion.

In September, the goods deficit decreased $1.4 Billion from August to $57.5 Billion, and the services surplus increased $.8 billion from August to $15.9 billion.

The monthly trade deficit has been significant for many years with many politicians in Congress wanted to fix the trade deficit, without success.

Should the Government make small business loans directly?

Currently the Government does not make loans directly to businesses.   The SBA, a well known government institution, does not make loans directly.  The SBA only guarantees loans that banks make.   As long as the banks follow certain specific guidelines that are set by the SBA, then the SBA guarantees 80% of the loan in case of default, which allows the banks to feel comfortable and secure in making the loans.

However, should the Government begin making loans directly to small businesses?   There are some reasons to consider doing this.    During the time the Government was bailing out the banks and trying to get the economy going, they wanted small businesses to start getting loans.   So the Government gave billions to banks with the instructions that the banks would begin lending the funds out.     By many accounts, much of the money was not lent to small businesses, but rather hoarded by the banks.

The Government should consider starting it’s own direct lending department.    Fully credible loan officers could be hired and the department could be staffed.   Critics might well say that the last thing the economy needs is more Government intervention in the economy and more Government control.

However,  if the Government identifies certain industries they want to lend to, then currently they have to ask the banks to focus on those industries and there are no assurances the banks will do so.   Direct lending would eliminate the middle man.  Even though the Government would be lending themselves, simply eliminating large corporations in the middle of the process should speed things up dramatically.

Do deficits matter to the U.S. Economy?

Do deficits matter to the U.S. Economy?    Will having large, annual deficits harm the U.S. Economy in the long term?

It was widely reported that former Vice President Dick Cheney said that deficits do not matter.    The amount of the deficits and the length of time of the deficits will dictate whether they matter and will be a burden on the U.S. Economy.     To simply say that deficits do not matter is not incorrect if the deficits are small and for only one or two years.

If the issue is large deficits for many years, then deficits do matter great deal.   Currently, the government is using approximately 10% of revenues to simply pay interest on the current national debt.     This means that the Government only has approximately 90% of the funds it takes in to actually spend.   Every year the Government runs a large deficit, that percentage goes down.

So deficits do matter.  They need to be cut and eliminated, plain and simple.

Do Deficits matter resource page

SBA Community Blog and Forum –  Blog and Forums by the SBA, Small business administration.   Questions can be asked and answers provided.

More do deficits matter resources:

 

Thank your for visiting our do deficits matter resource page!

 

Gas prices spike $.31 in August

Gas prices have spiked $.31 in August to an average of $3.83 per gallon.   This price beats the previous Labor Day high of $3.68 set in 2008.

Some of the increase has been attributed to Hurricane Isaac.    AAA estimates that approximately 33 million Americans will travel 50 miles or more, including 28.2 million by car.

SBA Community Blog and Forum –  Blog and Forums by the SBA, Small business administration.   Questions can be asked and answers provided.

U.S. Department of Commerce – Helps american businesses become more innovative at home and competitive abroad.

U.S. Bureau of Economic Analysis – Provides statistics on consumer spending, corporate profits, travel and tourism and much more.

Entrepreneurworld – Resource for Entrepreneurs, including starting your own business, growing your business.

Bureau of Labor Statistics – Provides companies with up to date information on employment, demand, hiring, productivity and other information that may be useful to companies.

International Trade Administration – Creates jobs and economic growth by promotingU.S. companies abroad to governments in other countries.

More Small Business Loan resources:

Department of Labor – Provides information on many labor issues that can be useful to companies, such as insurance, regulation, wages, wage hours, compensation, safety and health

U.S. Patent and Trademark Office –U.S. office to file patents to protect a companies new or existing proprietary products.

U.S. Trade and Development Agency – Promotes U.S. Exports to Foreign Countries, please review if your company is interested in exporting goods to foreign countries.

CEO Refresher – A monthly newsletter on creative leadership ideas. Short articles, brief book reviews, models, management tools, quotations and commentary.

E-Network for CEOs – Online articles and much more for CEO’s

Public Radio Planet Money – All issues money related to the public.