The small-business solution for the US economy

Note:

Having observed radio silence for a few weeks, Hard Truths is now back on the airwaves in time for the run-up to the US presidential election. Coverage continues as normal from here on in...

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Small business is a form of enterprise that Hard Truths views as critical to the functioning of a modern economy, and one that came into prominence during the last debate. Small business is broadly defined in the US as employing fewer than 500 employees and gaining less than $7 million in annual revenue. These small businesses, the motor shops, dry cleaners, photographers, corner shops etc. are the motors of an economy. Fully 52% of Americans are employed in small businesses, and these businesses are very often the most versatile and agile in the economy. Small businesses are often able to adapt to changing economic circumstances more effectively than large enterprises, reorienting themselves and re-strategizing quickly and efficiently. Economies fluctuate, and in situations where corporate priorities hinder an appropriate reaction, a small business can take decisive action and adapt to the new environment. 

Small businesses may posses considerable flexibility in their capacity to weather economic changes, but they are incredibly vulnerable to government policy. Small businesses are very tax-sensitive, possessing neither the capability nor the size to be able to manipulate their tax dealings. Small businesses is also affected by other government policies, including employment legislation, health-care legislation and corporate law. It is extremely important for small businesses to have as few obstacles placed in their path as possible, given that their need to gain and keep momentum is absolute. If a small business loses it's momentum in sales, production, operations and so on, it runs the serious risk of failure. If small businesses have a true weakness, it is that they largely cannot endure long periods of inactivity or uncertainty. The effect of stifling legislation and overbearing government is exactly that, and the danger to posed to small business cannot be underestimated  The US must never follow a European path down the road to small business lethargy, where employment legislation and high taxes in countries such as Italy and France make opening a business a risky and unpleasant proposition.

Creating the conditions where starting a small business is an exciting, challenging and rewarding experience, not a frustrating one, is key to the growth of a modern economy. Small business-people are the guardians of the future of this economy. They must be encouraged, and conditions must be put in place that allow for easy access to capital, knowledge and allow for painless start-ups. It is not enough to pay lip-service without providing better conditions, as the UK government has done. No, allow Hard Truths to provide a pointer. These conditions are a step in the right direction:

• Acceptably low personal and business taxes.
• A simple and easy to navigate tax code.
• Easy access to startup and expansion capital, possibly with government loan guarantees.
• Simple and nonrestrictive employment legislation, with minimal union activity. 
• Free trade conditions across state and federal borders. 
• Access to an educated and motivated workforce, achieved through education.
• Access to cutting-edge knowledge, research and expertise.

This is of course not all that is necessary, but a President who is wiling to put in place policies that allow for such conditions will go along way towards ensuring that no matter what economic challenges appear, the small businesses of the US are there to adapt to the new conditions, to stimulate the economy and to create jobs. Whichever candidate wins the election must make small business a top priority, in order to revive the flagging US economy. Mitt Romney, however, appears to be aware of this, and willing to bend his mind towards creating the necessary conditions; whereas Barack Obama appears to not really care a great deal.

Gentlemen, small business will provide the entrepreneurial spirit and drive that will keep America on top economically. Do not follow Europe towards a policy of slowest growth and stifled hope. Give small business the conditions it needs, and it will repay the favor with a booming economy. 

Obama's Euro-health tax delivers Romney a golden opportunity

The Supreme Court verdict upon Obamacare will prove a key point of conversation in the November election. The Obama administration has stated repeatedly that the penalty that accompanies non-purchase of Health Insurance is not a tax. They have stated that it is designed to even out the costs accruing from hospital  treatment of uninsured individuals. The issue at stake here is not what the penalty is, though that is an important constitutional point. What is in the viewfinder here is the political implication of the court's decision.

The exposure of the penalty as a tax has  given the GOP, and especially Mitt Romney, the strongest possible boost at exactly the right time ahead of the November election. Five months out, the GOP can combine the message on economic recovery with a characterization of Barack Obama as a profligate, tax-and-spend president with an agenda. The GOP must take the European health care model, with high taxes combined with inefficiency and average service, and ask the American people whether they want to go down that road.

This side of Obama, that he is a European-style president with a European-style agenda, has been under-emphasized. Obama obviously views continental Europe with a high degree of admiration, highlighted by his close friendship with the French Socialist President, Francois Hollande. The European model contains big government, restricted freedoms, high welfare, high taxes, high bureaucracy, restrictive business conditions, multiculturalism, and very low economic growth. These conditions are the antithesis of the American model, which emphasizes individual responsibility, minimal government interference and freedom of choice and expression. Europe consists of post-liberal democracies, where the freedom of the individual is suppressed to benefit the collective. To be viewed as in favor of such a doomed and destructive model could do massive damage to Obama, if the idea can be articulated clearly.


In his opinion for the majority, Chief Justice Roberts stated that:
     "Members of this court are invested with the authority to interpret the law; we posses neither the expertize nor the prerogative to make policy judgements. Those decisions are entrusted to our nations elected leaders, who can be thrown out of office if the people disagree with them"

Mitt Romney has to encourage the US electorate to hold president Obama to account for his policies. It is not the task of the Supreme Court to rule against Obamacare if it is constitutionally valid, no matter what conservatives say. It is the task of the American people to vote against a Euro-Socialist model, and that message must be articulated clearly. Permit, if you would, an example:

"President Obama has shown, by his actions and his ideology, that he supports the kind of policies that have brought Europe to the point of economic disaster. The American spirit has always emphasized free choice and free action over living government-dictated lives. If we wanted to be told what to do by the government, we could move to Europe. President Obama would like to bring that system here, and for that reason it's time to elect a president who will take a stand for freedom!"

A cold wind blows in Cairo

The victory of Mohamed Morsi, the Muslim Brotherhood backed candidate in the Egyptian election, ushered in scenes of awesome jubilation in Tahrir Square. Many thousands of people, mostly men, jubilant and ecstatic, formed a heaving crowd in the square. Pictures of Morsi abounded, held overhead and clutched to chests like icons. The religious symbolism did not stop there. The faces of some of the celebrants displayed a glowing fervor that would normally be associated with the crowd on the road to Jerusalem. This was a crowd welcoming so much more than the election of a new president. This was a crowd welcoming a religious revival. Herein lies the problem.

The Muslim Brotherhood is one of the oldest Islamist Organizations. Founded by Hassan al-Banna in Ismailia in 1928, the Brotherhood holds to the belief that the Sharia is the ultimate constitution, and to the overarching goal of establishment of a Sharia-compliant society in the Arab World. They claim to entertain democracy and reform, but exactly how far the Brotherhood will deviate from the teachings of it's founders, and exactly how much freedom it will allow women, and Coptic Christians in Egypt, remains to be seen. We in the West view Morsi's victory with trepidation, as we have now become uncertain as to the politics that will be played out in Cairo in the near future. Morsi will be largely kept in check by the army, but how long that discredited and sotted organization can resist millions of people calling for it's exit can probably be counted in months, not years. People in the Muslim world have a tendency to welcome the replacement of autocratic, secular dictatorships with Islamist theocracies, for some reason. It happened in Iran, and it is happening all across the Arab world. The old guard is being replaced by the older, yet newer-seeming ideologues. The people are running, enthusiastically, towards their own possible enslavement.

People have the right to, as Bret Stephens ironically put it, "choose unfreedom freely". The Egyptians have made their bed, and we will not disturb their rest, no matter how uncomfortable it is. We in the West also have one overarching goal in the Middle East: We will protect our source of oil while we still need it, we will protect Israel and we will contain Islamism so that is does not poison our lands. We have no place for Sharia, and Muslims who live here are expected to follow our laws and norms. Islamists, such as the Brotherhood, may freely do whatever they wish in their countries, but they are unwelcome in ours. Given the chasm between our Western culture and Islamic theology, this is a perfectly normal and decent state of affairs; running along the lines of "Leave me to my business, and I will leave you to yours".

Let the Brotherhood understand this: We will allow you to forge whatever model of theocratic state you wish in Egypt, and in the rest of the Arab world as and when you can. We will not interfere. However, threaten us or Israel directly, interfere with our commerce or economic activity, or sponsor terrorism in our domain, and we will not stand idle. Our eye is on you, Mr. Morsi. We congratulate you, we welcome engagement and dialogue with you, but cross us and we will end you.

Taxation and the politics of covetousness, or why the British hate Jimmy Carr

The case of Jimmy Carr, the British comedian, has proved instructive in the mindset of modern Britain. As the story of Carr's tax minimization scheme broke, a storm of indignation erupted, from No. 10 all the way to the UK Twittersphere. The PM called the scheme "morally wrong", concluding that UK Citizens would be "appalled" at having to pay the UK's exorbitant taxes while rich people like Carr & Co. have their lawyers invent methods to minimize their tax exposure. 

This could well be true, but there are two deeper issues at stake here. The first, and most apparent, is that there is far too high a tax burden in the UK for the UK to remain competitive. This, of course, is not restricted to the UK, but is common throughout Europe. The truth is that in most jobs in the Talent Economy we live in, there are truly talented individuals, and those individuals will require very high salaries to attract them to UK companies. In order to stimulate economic growth in the UK, a concerted effort needs to be made to attract Foreign Direct Investment and to position the UK as an international business center again, in the model of Hong Kong or Singapore. One of the many conditions that need to be changed to achieve this end is the lowering of taxes across the board. Taxes in the UK are far too high, as is illustrated by the fact that a person earning a median wage of 30,000 Euros or GBP ends up with exactly the same amount after tax in Germany after pension contributions are taken from the salary (before pension contribution in the UK). This does not include the UK Council Tax, on average around £1000 per annum. As you earn more, the tax burden rises consistently. Earn over £150,000 and you pay 50% income tax in the UK, whereas you have to earn over €250,000 to pay 45% in Germany. Corporate tax is lower in the UK than in Germany (24% maximum versus 29% maximum actually), but still not low enough to compare with the 12.5% across the Irish sea.... These are not attractive numbers, especially when compared to the 15% personal and 16.5% corporate rates in Hong Kong!

The darker and less apparent issue is the tax "addiction" that is so prevalent in the UK. Why does the UK need so much tax income? Quite apart from the social welfare and NHS black holes, that drain the British state revenue like nothing else, there is also a societal psychology issue here. The British have become a nation driven by covetousness and hatred of success. To be successful in business (not in football), and therefore rich, is to be hated and despised in the UK. "Tax him" sounds the cry when a rich man is seen, with the "because he has dared and won, and I hate him for it" remaining strongly felt but unspoken. The silent hatred of the rich is a poison to British society, which will drive the talented and excellent away from the white cliffs faster than any economic downturn. To exacerbate the situation, the government foolishly panders to the popular hatreds, without giving thought to the economic consequences. Until the British learn to celebrate success, the outlook is grimmer than Shetland weather. 

Pray for day that the sentiment in the UK sounds as follows: "Ho, a rich man. Look what he has done, I would emulate him. Let me be about building the foundations to my success, as he did". Only when this becomes the national mood, the UK will begin the long climb to success again. You cannot be successful without first learning to celebrate and nurture success. Learn to admire the wealthy, for they are successful. Look to them, analyse how they succeeded, and plan how you will join them. 

The calm after the Greek storm

Now that it seems that the Greek election has been decided, the world's financial institutions and corridors of power overflow with jubilation. Hard Truths wishes to ask, at this very appropriate juncture, an uncomfortable question:

"Would it have been better had Greece withdrawn from the Euro?"

It is understood that if Greece had withdrawn from the Euro, the consequences for the single currency would have been severe, with a run on the Greek banks, plummeting Euro valuations and Eurozone bond rates exploding. The situation in the Eurozone would have worsened, and Greece itself would have landed in a mild depression for a decent period of time. The existence of the Euro itself would have been put in jeopardy by the market reaction. These outcomes have been prevented by the the victory of the New Democracy party. 

The question is, should they have been? The Euro is a flawed concept. It brings together economies in a single currency that in any normal, non-political circumstance would never have even considered a currency union. Germany, with its export-dependent, manufacturing-based beast of an economy, makes an extremely poor bed mate with economically anaemic, corrupt and inflexible Southern Europe. The dissolution of the Euro would be in the interests of both parties. The Germans and Eastern Europeans, with dynamic and vibrant economies, could continue in a currency union that would benefit all concerned. The Southern Europeans, at the same time, would be able to revert to their respective currencies and devalue them enough to jump-start their economies. They still would need to reform their ridiculous socialist socio-economic systems, but at least if they failed to do so they would not damage the functional economies in Europe. 

European leaders must begin to realize that blindly following an ideological position is a very dangerous strategy, and before Europe goes down an economically disastrous path, the leaders must consider if the Euro is a viable currency, and if such close union is desirable. Politicians should be calculating, focused and willing to do what is necessary. This does not describe the approach to the Euro taken by Eurozone leaders.

It is time for a moment of clarity, and the recognition of a hard truth!

Is waterboarding acceptable in order to extract information from terrorists?

In a International Relations module at a prestigious university, a professor asked a hypothetical question to the class: "If a terrorist had planted a nuclear weapon in London, and you caught them, what would you do in order to find out where it was?" Hard Truths has always considered this morality play trite, because of the circumstance involved. One student's answer, to the horror of the left-wing students surrounding them, was "whatever it takes to get the information".

Hard Truths has little sympathy for a man who successfully planned the murder of 3000 civilians, was subsequently captured, and then waterboarded, in order to extract information that led to the aversion of the infamous "liquid bomb plot". It is incomprehensible that the BBC can condemn the CIA for waterboarding the terrorist, when hundreds of British lives hung in the balance. The BBC makes a mockery of rationality by suggesting that any rational person would have done other than what the CIA did. The interrogators should be proud to have served the West so well, and so faithfully. The BBC, and other left -wingers, should take a moment to consider what is more important to them, the moral high ground or their own survival...

Politicians are never "fit and proper" people to determine the ownership of a corporation!

News Corp. has been in the news a lot recently, with inquiries being held to determine how far the criminal phone hacking extended from the company's newspapers into the police and general press. Now, Hard Truths does not have the intention of commenting upon the legalities of News Corp's activities. If anybody at News Corp. broke the law, they should be subjected to due legal process. This is beyond doubt, and not the point at issue.

There was a worrying aside to the general conclusions of the U.K. House of Commons Culture Committee report. The Labour and Liberal Democrat members of the committee, led by The Rt. Hon. Tom "The Witchfinder General" Watson, voted to label News Corp. Chairman Rupert Murdoch "not a fit person" to lead a major international company. This is a flagrant abuse of power, and must receive the strongest condemnation. It is not the place of politicians to determine who is a "fit and proper person" to lead a company, but that of the shareholders in the company. This type of statement by elected officials is completely unacceptable, given its awful implications. Once politicians are permitted to intrude into businesses and dictate issues of company ownership, it is only a small matter of time until they begin to take control of the direction and actions of the companies, creating a coercive and poisonous business environment. Corporations will feel pressured to undertake or not to undertake projects, to create or not to create products; and the consumer will invariably suffer as their choice is reduced.

Let us remember what elected officials are elected to do. Politicians are elected by the people to the stewardship of certain, very clearly delineated, areas of the public domain. In a democracy, their remit does not include determining the leadership of private organizations that already have an ownership structure. Politicians are elected by the people as glorified managers, who manage the common property and assets of the people. In a market state, politicians manage in the name of the people only that which is held in common by the people, as such management of the common market in order to provide an environment in which the people can conduct their market activity with minimal disruption. It is an affront to democracy when politicians intrude into the private sphere of private organizations.

Tom Watson and co. should remember that, in their position, they have no right to infringe upon the already fragile nature of UK democracy. Given the tendency towards overreach common on the Left, it is sadly unsurprising. Consider this a warning, then: let the people beware those who would like to see British politicians intimidate media and business organizations into compliance in a manner more commonly found in Russia.