Sunday, July 11, 2010

Bob, Dave, Budget, Taxes, Duck, and a look into the Future

This is Bob.  I wonder what is in his lunch box.
Meet Bob.  Bob is a builder, a contractor and he is the CEO of his own business, Contractor Bob.
  • Commercial & Residential
  • Licensed and Insured
  • Over 25 years of experience
  • Home improvements, remodels and repairs
  • Decks, patios, tile, wood floors, drywall, electric and plumbing
  • Free Estimates
So Bob here has been working construction for quite some time.  He started right out high school working for another company that sold and built garage packages and did that for 5 years before getting into business for himself.

Bob has a new client, Martha. Martha is having a new home built.  This is good business for Bob as now he can have good steady work for at least a few months.  This also gives his employees some good solid work hours.  Bob has been in the business for a while, so he can build anything.  However you want it.  Just tell him and he can make it happen.  Martha especially likes this because she likes to be involved with what goes on.
Bob works and does whatever the client wants.  Once the basic stick frame is built Martha gets more involved and wants to make some changes, add some fixtures, spruce things up a bit as she has been pondering the layout of her new home for some time.

Instead of a classic single vanity in her bathroom she wants two sinks.  Instead of a 3-piece walk-in shower she wants a glass door and a high rate tile.  Instead of the regular plastic fixtures she wants the higher end brushed platinum.  All this is fine for Bob.  Installing one is just as easy as installing the other and he is happy to keep Martha happy.  Bob, being the good contractor that he is tells her, "That will look real nice." 

Bob and his crew install what the client wants.  But the materials, the vanity, the tile, the fixtures, all have to get purchased.  The higher end fixtures, the higher end living amenities, they will cost more.  Does Bob have to cover that cost?  No, Martha does.  Bob will actually make the purchase, and incur the initial cost, but that cost for extra product just gets transferred to the customer.  In this case, Martha.  Of course, Martha's costs are going up.  Does this mean Bob makes more money because the house costs more?  No.  Bob makes money on building the house, not selling products.  He provides the service.  When the costs of providing that service go up, the cost to the customer goes up.

Bob's lunch doesn't get any more lucrative than his last job.  Bob doesn't make more money because the house fixtures cost more, Martha pays more.

Point here being, when the cost of operating a business goes up, that cost gets transferred to the customer.  When the cost of operating a business goes up, the customer pays more so that the business can maintain a profit.  No business would survive by not transferring the cost, that would be working for free, a loss, and would be financial suicide.

Bob has been in business for 25 years and his business is legit.  He keeps track of expenses, he writes checks, he runs a payroll, he files his taxes.  Bob, having employees, also has to pay for some insurance, and taxes.  These are operating costs.  And these are costs that get transferred to the customer.  When Bob has more jobs and can make more money, he can hire on new employees or simply just make more money.  But if taking on more employees means raising the operating cost of his business, that means he would have to raise the cost to the customer in order to still make a profit.  But customers don't like having costs go up.  They then tend to just do it themselves, like currently in parts of the mid-west where there has been significant jobs lost, no one has a lot of money to hire builders yet Building Supply stores like Home Depot and Lowes are doing quite well.  This is because no one wants to pay the cost of hiring and they are all becoming weekend warriors.

Also in Bob's town there is a place he likes to eat.  Noodle Garden, an Italian restaurant on the outskirts of town famous for their meatballs and friendly service they have been in business for 25 years as well.  Bob's high school class was full of entrepreneurs.  Dave is the owner and once the head chef of Noodle Garden.  Dave likes people, he likes people coming together, and he likes to keep people happy.  In fact, part of his long time advertising campaign slogan is "leave happy."
When the Noodle Garden has a large staff they have the ability to better to serve their customers.  And when customers are happy, they spend.  When customers are happy spenders, businesses and their employees are happy.
Missing one meatball.
When operating costs for the Noodle Garden have to go up, say if they have more than 20 employees they are required by law to provide insurance, then that operating costs comes from one of two places...  A) Noodle Garden takes the hit and brings everyone's profit share down, employees are less happy but customers are happy or B) raise the costs to the customers so that profit margins can stay at a level that keeps employees happy ... or option C) Noodle Garden doesn't have the financial ability to take a gamble with spreading costs right now because they are already tight on the budget so in order to avoid making a costly decision they have to fire, let go of employees so that each restaurant only employs 19 people, staying away from the mandated mark of 20.  This might hurt Dave's business some because now he has less staff to work with, more work for less people, and less time focusing on the needs of the customer.  Business won't be booming for Dave, but he will have a business.  Loyal customers will still come to the Noodle Garden, but the amount of customers will be less. 

So again, when operating costs go up, the cost gets pushed onto the customer.  And this is the end of my analogous short stories.
----- begin real life scenarios -----

Obama and his regime utilize crisis.  That is easy to see if you are paying attention.
Before Obama even took office he was bracing the nation for the impact of having the duty to take over what he was about to inherit.  He has referred to his inheritance as a "mess" and critiscized the amount of spending Bush did because that is what people were upset with.
"the national debt? It increased from $5 trillion to $10 trillion in the Bush years" - MORE
But since Obama has taken office his own spending 'makes Bush look like a coupon clipping house wife.'
In February of 2009, "In the span of four days, we saw the signing of the $787 billion stimulus bill, the rollout of a $275 billion housing proposal, discussion of Congress’s remaining appropriations bills (about $400 billion) and word of a vaguely-defined financial stabilization plan that could ultimately cost $2 trillion. When representatives of GM and Chrysler said they might need $21 billion more to survive" - MORE

More recently, here in 2010, the Obama administration has done so much spending that the democrats have avoided even coming up with a budget in fear that the truth might add fuel to the fire the public angst is holding them to.  CANCELLED: No Budget This Year
On the side of Obama we have democrats blindly following the agedna, like Pete Stark, congressman from California, saying "the larger the National Debt, the wealthier we are."
Ron Blackwell, the Chief Economist at AFL-CIO, (a Union 'mob' that staunchly glorifies Obama and his agedna) justifies spending more because spending more saves more.  ???
Yet 49 of 50 States Have Lost Jobs Since Democrats’ Stimulus

Health Care Reform, from a business perspective only ADDS to the cost of operating a business.  Financially, and with time - monotonous and taxing paperwork.
Dr. Scherzer from Arizona explains why he would close up shop...

-----

Obama has had ample time to develop the idea that Bush is at fault for much of the country's crisis/ economic recession.  But since Obama has taken the reigns in the White House government has expanded its role into the private sector, and expanded its financial 'necessity' by taking over Chevrolet, Fannie and Freddie, Banks, Health Care, Student Loans, and he only wants to take over more...  increasing the costs to us all.  The 1/2 who pay taxes that is.

Costs for everything will go up.  Does Obama see this massive bill coming?  Yes.  Does he need the money to pay for it?  Yes.  Does he have plans to force that taxation and then be able to make it look like he has saved money, by actaully increasing spending and increasing the tax burden on Americans?  Yes.  America is being held hostage with these massive increases in government spending, and we all know it.  The increase in spending is going to be the justification, the 'necessity' to increase taxes to fund these democratic labeled 'necessities.'  Obama will twist it around on republicans by telling them that conservative policies, like national defense (which makes us less than 4% of US spending) will have to be cut.  after all, 'don't you want to reign in spending?  I thought you want to get out of debt?'
----- Obama Eyeing Tax Hikes to Pay Down the Debt -----

-----
America has just 6 months until the largest tax hikes in history.  The Bush tax cuts (that evil Bush giving Obama so much economic crisis) of 2001 and 2003 are sert to expire at the end of this year and that will unleash another massive wave of COSTS BURDEN onto the backs of the working American.

*PREDICTION* ... A Look Into the Future of America

The elections this fall are likely to swing states back into the red, likely crushing the morale and ability of the now democratic power house that Obama may have exhuasted with the mob style passing of ObamaCare.  This will leave Democrats, and Obama full of political favors, with nothing to lose.  The Lame Duck session between November and January when new seats get sworn in is when Obama will mount his attack on America.  Politicians plan ahead, and for this they are most suredly planning...

The Obama-Pelosi Lame Duck Strategy
Union 'card-check,' cap and trade, and so much more.
party leaders are planning an ambitious, lame-duck session to muscle through bills in December they don't want to defend before November. Retiring or defeated members of Congress would then be able to vote for sweeping legislation without any fear of voter retaliation.
Even if Democrats do nothing in the Duck session, allowing the Bush tax relief to expire will trigger a massive impact onto the private sector.  Small percentages yield high returns for the Government, and that is all money that could in stead be spent by you and me, on our local businessess, for ourselves.

That rate of tax I think will surge unrest in America, motivating some to perhaps move like they did in New Jersey, N.J. loses $70B in wealth during five years as residents depart.  Why?  Tax hikes.

Costs to businesses will go up, costs to public funded jobs (education, fire, police, land management, city officials, civil engineers...) will go up (only bleeding the gov. expenses, growing them further) ... and all those costs will be transfered to the people.  Consumers.  Draining their pocket books faster with more spending and more taxation.

*Unemployment rates will rise.  Prepare for the new norm of 10-15% unemployment.
*Average Yearly Income will drop.
*People who pay taxes in 2011 will be yet again, less than the year previous.
*Government revenue will be less.
*Census workers will be back out on the streets, there will be negative growth in the private sector and Obama, Biden and whatever democrat is left will continue to tell the American people that what they are doing is working... "saved those jobs" ... "It could have been a lot worse"
and that is all I expect, with Liberalism dominating the ideas of how this country should be, things will always get worse.

We have got to let go over the idea that government does good.
The ideas of liberty, personal responsibility, dignity and virtue should be the values we hail - not the demise and destruction of capitalism, religion, and the power of the free and prosperous individual.
Do business with Cash and experience real liberty.
Get the Government out of lives and out of business, let Bob and Dave create relationships with their customers and continue to hire and make people happy.
Elect people to local government office who want to decrease the size of government and open opportunity for the private sector.
It has been done before, America can do it again.
But we have got to wake up out of our deep sleep off in dreamy land, the house is burning down.

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