Category Archives: Politics & Economics

Can we afford to keep raising the cost of doing business?

Those who don’t understand the free-market model or even care to because they hold a redistributive world view, will not care why businesses require profits. The divisive “evil-rich” or “greedy-profiteer” smears are lies told to the gullible masses who do not know what businesses require to keep going or even more importantly, how it must grow to be viable. So it’s easy to fall for the class-envy rhetoric which is sadly destroying the American Dream.

Government is a consumer of tax revenue paid by big and small private sector businesses and individuals who work for a living. In fact government produces nothing. It spends our money ostensibly to provide us services. Which in today’s bloated Monster Government, we’re actually working for our “slave-master,” because much of our working life is devoted to paying taxes. When the White House and those in Congress engage in class-warfare, and use government to pit Americans against Americans in order to extract more taxes. We as tax payers, are quite literally funding the assault on our own liberties.

When government mandates businesses to pay more in wages regardless of the actual fair-market values of “minimum-wage” labor, it artificially forces businesses to increase operating overhead. Anyone who’s ever run an enterprise knows increasing overhead costs adversely effects products and services they provide their customers. When costs go up, one of four things must happen: 1) cost of your goods or services to your customer goes up; or 2) the quality of your goods or services goes down; or 3) cut workers’ hours or impose a hiring freeze; or 4) cut profits or operate at a loss.

The big government pushers believe businesses are greedy and can always afford wage increases. ‘Look at the rich owner’s Mercedes; he needs to spread the wealth around.’ They would say. The reality is when you increase the wages of minimum-wage workers (or entry-level jobs that should be determined by the free-market) that means, for example, the low cost food services, who’s customers are those who can’t afford fancy restaurants, will have to buy food at higher prices or lower quality. So those who can’t afford caviar will now be penalized by the government mandate.

If the owner keeps the price the same and lowers quality to try and survive, they’ll lose customers because of bad burgers. Eventually they will lose their business anyway from a lack of patronage. Alternatively, he can freeze hiring or cut workers’ hours, but that of course hurts his employees. Then there’s the option of operating at zero profit or at a loss. Now, try to keep up with inflation – another government caused disaster. The landlord certainly won’t stop raising the rent and eat his tax hike and his suppliers are also subject to inflation as well.

By imposing more mandates like raising the minimum wage, the government makes burgers unaffordable, and puts shops out of business. But wait, aren’t the people who want to raise the minimum wage the same ones who blame businesses for sending jobs overseas? So, you’re not allowed to make a profit, that’s greedy, but you’re supposed to sustain your business because you must have some hidden profits you’re not telling the government. So government forces you to operate at a loss so entry-level workers gets a higher wage because that’s what’s “fair?” And we haven’t even touched on the deleterious effects on business of the unaffordable Affordable Care Act best known as Obamacare.

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Real Solutions for America Require New Leadership

Some suggest that America cannot compete with China or India unless we reduce our standards to combat cheaper labor off shore. Indeed that has become the basis of a political talking point for those attacking US corporations conducting business overseas. Those aligned with labor unions use this as a rhetorical weapon against the private sector and perpetuate a narrative that is both inaccurate and void of realistic solutions. They accuse pro-business legislators of supporting corporations and therefore they support killing American jobs.

Clearly, no one wants to see America lose manufacturing jobs, but the presumption that the only way we can compete with China is to lower our own standards is a false premise entirely. This unfortunate conventional wisdom is a result of much propaganda designed to undermine US business and its ability to succeed against global competitors and those who support the free market.

The idea we need to lower labor cost so we can level the playing field with China is both unrealistic and fool hearty. It assumes that cheaper labor will make us more competitive and presumably solves our problems. That, however, is absolutely the wrong way to look at this complex and multi facetted problem. Politicians are for the most part either ignorant of real solutions or they simply pander to an uninformed populous voting block.

The fact is America has always led in just about every category in commerce and there are very good reasons why that is so. We drive global lifestyles trends. We lead in invention and technological advancements. We lead the world in the development of new markets creating paradigms that alter consumer behaviors in way that improve peoples’ lives.

The press and some politicians, however, have deliberately mischaracterized and vilified US corporations for years. They say corporations are greedy and want cheap labor for bigger profit so they send jobs to China. But why do they not tout our accomplishments, nurture our strengths and inspire honest dialog to drive towards real solutions? Alas, it is political “silly season” so perhaps that’s why, but if we don’t replace our current failed political leadership we will continue to lose ground at an even more alarming pace.

The truth is many US companies simply cannot afford to manufacture domestically anymore because their own government has declared war on them. We’re all aware of these barriers: EPA kills affordable US energy so domestic production costs are artificially high. Companies are burdened with the highest corporate tax rate. They are saddled with draconian job killing regulations and red tape. Their own government imposes prohibitive legal costs for basic operational and compliance requirements. And our failed public educational system produces a poor quality workforce rendering companies non-competitive, etc. etc.

Yet corporations are labeled greedy uncaring villains that deceive, steal and pillage while destroying careers in America. That grossly unfair characterization is not exactly incentive to those who have the means to invest here. Having had a career of 30 years in various consumer product industries, I can assure you that it is virtually impossible for many industries to manufacture in America, sustain company growth and compete in the global marketplace under the current anti-business political climate.

The misinformation from the press and dishonest politicians don’t stop there. They also perpetuate an entirely false characterization of American branded products manufactured overseas. When US companies cannot afford to set up a plant in the US they go off shore to hire manufacturing vendors. These companies are simply buying a service. US based corporations that compete globally necessarily shop for the optimum suppliers to allow their businesses to succeed. Clearly, other nations are doing a better job supporting these businesses.

Good vendor support ensures a company’s sustained growth and its ability to compete world wide. Even though US companies may use overseas production services this greatly benefits America and US consumers. Here’s why: typically with popular consumer goods only 10-15% of the price of the product is paid to the Chinese factory while the US company keeps 85-90%. So even though the label may say Made in China (a Fed requirement which is not entirely accurate) the product is an America brand in most cases.

The sale of these products around the world contribute to the US GDP, the US tax base, the corporation’s customers (domestic retail stores), their share holders (US pension and retirement plans), the enhancement of the purchasing power of US consumers, as well as to the creation of domestic jobs in various commercial and retail sectors.

If America can be more competitive in providing these corporations with the necessary supply chain and infrastruture support that allows them to succeed, the entire nation would be much better off and America will once again be a powerful pro-growth economic engine. This can only happen if our government gets out of the way and allow the private sector to innovate and do its thing.

Why are these facts not more widely told? Instead, all we hear from the main stream press is the “evil” corporations are killing US jobs! We need to set the record straight because America cannot afford not to have an honest discussion and to solve real problems. This rhetorical poison is simply the most damaging part of our corrupt public discourse that continually stops real solutions dead in their tracks. Politicians with an agenda that is antithetical to American free enterprise need to be defeated or else we will face purpetual economic decline or worse.

In order for America to develop the right solutions, we must first change the current leadership that continues to drive us down this perilous path. America must remain at the forefront of innovation and lead the world as we have always done. That turn around will not happen under the current conventional thinking. Perpetuating class warfare and anti-business narrative is counter-productive and profoundly destrutive.

If private industry and government remain adversaries, this will subordinate America to follow and be reactive to our global competitors. This will not only weaken us further it will guarantee a trajectory of decline from which America may never recover. The right solutions for America have always manifested when we lead and the world is always a better place as a result. A people able to pursue its self interest free from government force is always the winning formula as America’s history attests. Those who dispute this deny the truth and will force us to repeat the same policies that caused the devastating consequences of the social and economic collapse we are witnessing in Europe. On November 6th, let’s turn this ship around and hire a new captain to help us steer clear of the iceberg infested waters we are currently navigating.

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Is China to Blame?

As America’s economy continue to sputter, politicians blame China for taking American jobs. But is that fair or is it just provocative rhetoric that redirects the ‘pitchforks?’ I find it ironic the same politicians tout globalism when it fits their agenda, yet they refuse to acknowledge the dynamics and nature of the global supply chain when it comes to domestic economic policies. This is especially true when US companies seek affordable resources abroad. Then it’s: “those greedy corporations are shipping our jobs to China!” The truth is it’s most convenient to make China the boogieman because this populous narrative works like a charm to deflect attention. Clearly, the vast number of imported consumer products is proof we’re loosing traditional manufacturing jobs in America, but China isn’t the problem, Washington is. Capitol Hill has a spending addiction and our gargantuan debt is evidence they will do just about anything to feed it. Therefore politicians make us watch the other hand to cover for the white elephant. The fact is, businesses move production to China because most have little choice.

Let’s first, set the record straight: “profit” isn’t “evil”. It’s not only necessary, the inability to profit prevents growth and doom businesses to failure. Just as a great work force is important, profit is likewise crucial. Profit provides resources for expansion creating more jobs. It enables rewarding excellence further driving performance. Profit builds sustainability which guarantees tax revenue. It also funds corporate charity to benefit the needy, and profit adds vibrancy and prosperity to the community. Yet many politicians routinely vilify corporations and use class warfare shamelessly to pit workers against management. They strangle businesses at the behest of their special interest partners like the unions, the green lobby and others. Who in America does not want better wages and security for their family? What American does not want clear air, clean water and a healthy environment? The ruling elites manipulate public opinion by exploiting populist fears to enrich their political capital. Their crime is the systematic degradation of American free enterprise. In other words, they’re killing the golden goose.

Demagogues suggest “greed” is the motivator, but the truth is many companies can no longer afford to make products at home. To do so means their high prices will put them out of business. It’s not “greed,” it’s about survival. In fact, for many industries domestic production hasn’t been a viable option for years due to: high taxes, draconian regulations, exploding healthcare costs, higher labor costs, restrictive work rules, unaffordable pension obligations, strangling environmental compliance, more permit fees, more license fees, bloated legal costs, prohibitive raw materials and energy costs. By contrast, China promotes free market activity even as they restrict political freedoms. Imagine, these days China lectures us about our lack of fiscal discipline! The irony is not lost on this humble patriot living with restrictions on our own economic liberties.

Jobs have disappeared because our traditional manufacturing is unaffordable. Progressive politicians, their union partners and radical environmentalists put America in this untenable position. Their inability to deliver real solutions to prevent the job exodus is not China’s fault. For our politicians to vilify American Business, the engine of our economy, is like putting sugar in our own gas tank. Protectionists say buying Chinese only makes China richer while we become even more indebted to them. Poppycock! That we owe China has nothing to do with our consumption but everything to do with our out of control government deficit spending, so they vilify China to defect blame from the reckless political class.

The government requires the “Made in China” label displayed on products manufactured in China, but most consumers don’t know the untold story beneath that label. Take toys for example, Mattel manufactures in China, but did you know Mattel also exports billions of Dollars of toys internationally? Even though you see a “Made in China” label, it does not mean all Mattel revenues go to China. Quite the contrary, on average only 15 to 20% of every Dollar paid for a Mattel toy goes to the factory, the rest Mattel and its customers keep to create jobs, buy services and invest right here at home. If we add a 25% tariff on Chinese imports as some suggest, what happens to Mattel’s business and the economic prosperity Mattel generates in America? The “Made in China” label is misleading. It implies the products are Chinese owned. They are not. Like Mattel’s Barbie, these are US brands. The Chinese factory or original equipment manufacturer (O.E.M.) is merely a vendor in Mattel’s supply chain.

Politicians say China manipulates its currency to artificially keep their exports cheap so we should impose tariffs. But their US customers benefit from the low prices as do US consumers. By imposing a tariff we will hurt our own companies and consumers, especially the poor. Waging a trade war isn’t the answer. If America returns to common sense free market principles, we will be better able to compete. We should increase production of domestic energy, raw materials and rebuild our own manufacturing services. A competitive America will give us greater leverage with China to level the playing field.

Progressive law makers have deliberately banned domestic drilling, blocking access to our own petroleum. Obama blocking the Keystone Pipeline is a prime example of an unreasonable liberal-progressive bias against supporting domestic energy. We may debate the motives of the anti-oil crowd another time, but let’s expose its consequence to business. Oil is a vital global commodity critical to all industries. Plastics its byproduct, is also essential to produce consumer and industrial products. Plastic raw materials are derived from petroleum but because our radical environmental policies have restricted drilling and our refinery capacity, businesses are forced to go overseas. When US companies contract Chinese factories they also gain access to affordable international raw materials. Therefore, unless our domestic policies change to permit drilling, companies will continue to go overseas and American jobs will continue to do likewise.
US companies with customers world-wide contribute to our GDP. To service international customers they must operate globally and manage a global supply chain network accordingly. China has positioned itself extremely successfully as a reliable manufacturing vendor of choice. Their success was not built on the backs of Americans. Our misguided economic, labor, educational, environmental and energy policies are to blame for our malaise. Washington is the problem. It’s an outrage our leaders are not focused on solutions to enable American businesses to compete. Their stunning lack of leadership has been the steady undoing of what was once the greatest growth economy on Earth. Therefore, whether you’re an American entrepreneur, union worker, corporate professional, environmentalist, educator, student, home maker, immigrant or public official, we all share a common interest in an economically vibrant America. We must work together to solve real problems not for short term gain but for America’s long term success. Politicians need to be held to account to not pit Americans who need jobs against Americans who provide them.

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Home Values Decline Under Hope & Change

Home ownership has always been synonymous with participating in the American Dream. Hard working tax payers strive to earn enough money to afford owning their homes and when they do, ownership is a momentous milestone by which success is measured in achieving that dream.

To most Americans to own one’s home isn’t merely a symbol of achievement, it is quite literally a means to build wealth. In fact, most of us depend on the sustained value of our home as a retirement nest egg. When working Americans pay their mortgage, most view the monthly payment as a saving program, an investment for the future. To the vast majority of Americans the home is simply their single largest asset.

Barack Obama came into office on a promise of hope & change. Not only has the housing market not recovered in nearly four years, the negative trend continues unabated putting an unprecedented number of home owners under water. To these Americans hope has turned to despair and the change a nightmare.

In Rhode Island, our governor’s anti business agenda continues to bleed jobs with a predictably deleterious effect on our home values. Rhode Island real-estate values have likewise been hit hard losing an average of 25-30% since the highs of 2006. (see RI housing chart by Zillow.com)

Under President Obama more government debt has been accumulate while more personal wealth has been destroyed in the United States than at anytime in modern American history. Perhaps it shouldn’t come as a shock that under an administration committed to socialistic-progressive policies that our homes would become necessary collateral damage as this administration advances its collective fairness agenda.

We now know that hope & change actually means building bigger government, waging class warfare and imposing even greater redistribution of wealth all paid for by accelerated deficit spending. Government doesn’t build wealth, free people in the private sector do. What this president has created is anathema to the very soul of America, a most hostile environment for free enterprise, the continual loss of personal wealth and the diminished values of personal property. His recent comment, “you didn’t build that…” reveals a troubling hidden belief he had not openly shared. Translation, “You don’t own that…”

A critical basis to American liberty is our private property rights. Obama’s quip exposes how he justifies taking what you might believe is rightfully yours to redistribute to others. It is most alarming that this president clearly does not share our fundamental beliefs in America liberty of which private property rights is a major part. Regardless, facts are stubborn things, no amount of political spin can change the fact that American assets continue to bleed values under the destructive policies of this administration.

President Obama and his progressive partners, including Rhode Island’s own Gov. Chafee, have put our nation and our state on the edge of a fiscal cliff. The bigger they grow government the more destruction they wrought on the private sector. As your assets shrink so too your economic liberty. Unless we reverse course, America will almost certainly continue her economic free fall, even greater debt, more diminished world standing, more suffering and along with that the destruction of our republic. This November, vote for American liberty & prosperity. Let’s fire the big government progressives, reverse course, restore the America of productivity through self reliance. Let’s restore America to a nation where freedom and prosperity will be once again be our children’s future for generations to come.

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How Do We Rebuild Manufacturing in America?

First of all the class warfare and political demagoguery must stop. We all need to work together to support American free enterprise. Private sector success is what made this country great. Free men and women with ideas, dreams and ambition built this great country. The resulting prosperity is what transformed the world.

If we want to reinvigorate domestic manufacturing we must take meaningful steps to rebuild a pro-business climate in America once again. We need to do the following:

1) Develop domestic energy: The idea we can’t access our own petroleum and fossil fuel resources is utterly insane. The environmental concerns are entirely political and unwarranted because we can extract and produce energy responsibly. Besides energy, it’s about producing raw materials as well. Plastics are derived from oil and are in just about every common consumer product as well as having countless industrial uses. Plastics help raise and sustain our high living standards and it saves lives.

2) Restore balance between labor and industry: It’s utterly absurd that a line worker should earn a comparable wage to someone who has greater strategic value to a business. Those who have much higher qualifications technical or otherwise which they acquired through hard work and personal sacrifice should be compensated commensurate with their value to the organization. All professions have a fair market value on a global level. When we ignore those values because we want everyone to be paid like Donald Trump, we render our industries noncompetitive. Aspiring to excel, to be competitive and to be best qualified in one’s profession of choice should mean something again in America. If you’re willing to go the extra mile you should be rewarded accordingly.

3) Educational reform: Our educational system is simply not producing qualified professionals for our workforce. That must change if we are to compete successfully. The anti-free market climate and the vilification of ‘profit’ must stop in our schools. Our children need to know that government is not the answer. As free individuals they are the solution. They need to be told it’s noble to pursue your own interest and not be a burden on society. They need to be told it’s Okay to succeed!

4) Get government out of our way: Self-evident!

Many will argue we’ll never bring back manufacturing because of the cheap labor overseas. I would argue that this is not the right way to look at the situation. Sure, cheap labor provides the ability to produce some merchandise at a competitive price, but labor cost is only one facet of a complex multi-facetted problem the solution for which requires innovation across all facets.

The media talks about manufacturing, as if all manufacturing are the same. Nothing is further from the truth. There are countless industries out there all with their own unique set of problems and needs. For example the manufacture of toys, cars, health care products, consumer electronics, apparel, consumables or the litany of industrial products all have different pricing, quality considerations, manufacturing requirements, regulatory issues and customer needs. To the casual observer there may be similarities, but the differences in the respective industries are stark and cannot be put into the same bucket.

Regarding domestic manufacturing jobs, the socialist policies of Europe and Japan have driven their labor needs to America. Today, BMW, VW, Mercedes Benz, Toyota, Honda, Mitsubishi, and Subaru all have production in America. On the other hand, the low prices Americans have enjoyed on countless consumer products have driven their production to China and elsewhere around the world. The point is we cannot paint with a broad brush. Today we function in a global economy and the supply chain for most industries are global and their receivables come from both domestic and international customers.

It’s crucial we support American companies that conduct business abroad because their revenues create jobs at home, their company profits enrich pension plans and these companies contribute to America’s GDP and our balance of trade. For example, Hasbro and Mattel have customers around the world. Their international operations need to be cost efficient for them to be profitable. That includes locating manufacturing, warehousing and distribution in strategic networks around the world to best service all their customers effeciently.

America is all about innovation and generating new solutions. Creativity remains the key to our success and ultimately our ability to invent and discover innovative solutions will be the answer to our economy. It’s no accident American industries hold more patents than any other country on Earth. We’re certainly no smarter yet we lead the world in technological innovation… why? The answer is remarkably simple: “America has been the freest society on Earth where anyone with a dream and ambition can succeed regardless of social status”. As an immigrant American who grew up in Asia, Africa and Europe, I know the American entrepreneurial spirit is truly remarkable and is at the core of America’s exception.

But we need to stop demonizing success. We must not allow the spirit of American entrepreneurialism to be stifled. Growth can only happen when enterprises are not shackled and burdened with over regulation and beaurocratic road blocks. And as for bringing manufacturing back to America? We are a CAN DO people, and if we change course and return to common sense free market principles, American entrepreneurs will continue to invent new ways to lead the world in business. New manufacturing paradigms will emerge to make America competitive once again. The only prerequisite, however, is government must step aside and let a free people be free.

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