Economics

A Looming Crisis — & a Call for Solutions

May 6th, 2013 // 3:51 pm @ Oliver DeMille

Most Americans have no ideas it is coming. But it is just around the corner.

It’s one of those technical changes that only wonks pay attention to, so few people realize how big this will be.

In fact, it’s a serious crisis in the making. And unlike the Y2K scare in 1999, this crisis is a sure thing.

What is it?

Well, put simply, this coming January, many companies will be required to extend Obamacare health care to their employees.

The costs of this are significant, and will force many small and larger businesses to make some very tough choices.

The result will be a lot of layoffs, downsizing, reduced pay, and outsourcing.

Service will suffer, and response times will plummet.

Most families and individuals plan on a yearly basis, running January 1 to December 31, so they may not know how that a lot of businesses run on a fiscal year—from April 1 to April 1, July 1 to July 1, or October 1 to October 1.

This is very important, because we just witnessed the first big round of businesses (whose fiscal year is April to April) factoring in the costs of the January 2014 Obamacare requirements.

The number of layoffs and cuts is a serious concern.

But those who run April to April have only had to factor in three months of Obamacare costs so far, so the damage has been minimal.

It’s going to get increasingly worse on July 1, and then by October 1 it will start having a major impact.

By the first of January, when everyone will have to pay the higher costs, the effect will be huge.

Again, because this is a numerical concern, most people aren’t paying attention. Here’s the crux of the problem:

• Our economy is already struggling with a weak recovery.
• The increasing tax and regulatory burden on business has dampened innovation.
• The schools seldom teach innovation or initiative—indeed they usually promote the opposite.
• International innovation is rising.
• Business is reticent to invest or spend, because the current environment in Washington is highly uncertain.
• Big business, which has a high surplus right now, is finding better political environments in other nations—so the money will naturally flow to where business is treated better.
• The Obamacare requirements are making business a lot more costly, and they mostly kick in this coming January.

A lot of businesses are scrambling.

For example, in the past few months I’ve received email from a number of friends who are business owners or who consult with small businesses—saying that their only choice is to either lay off a lot of employees or shut down their business.

One company, for example, is trying to prepare for next year, but has realized that the additional cost of Obamacare for their firm will be at least $18,000 a month.

This is a fairly small company, with close ties to its people.

The last thing it wants to do is lay off employees. But what to do? The costs are simply prohibitive.

Laying off is the obvious option; and after digging deeper, it may be the only option.

How would you counsel companies in this predicament? (Note that most companies are dealing with this right now.) What ideas do you have? I’m sincerely asking for input.

What can they do?

Thousands of companies are asking the same thing right now, and many others will do so before the end of 2013.

This is going to be a real shock to the economy.

A crisis is coming.

But back to the question. How can small companies that are already financially tight comply with the new regulations—without laying off or cutting salaries?

I’m hoping you see some real solutions.

The obvious one is to innovate—to expand sales into new markets and make a lot of extra cash.

The regulatory challenges of such a strategy are, alas, a serious problem. At least in the United States.

So, thinking like an owner, what would you do?

I know you don’t have financials or details in front of you for any one company facing this challenge, but take a stab at this problem anyway—because almost all businesses are doing the same thing right now. It’s the only realistic way to look at Obamacare, because it’s the way pretty much every business owner is looking at it.

Specifically: Costs are going up significantly, with no offsetting increases in income.

In fact, higher taxes and increased regulations make growth even more difficult.

In this environment, how can you absorb the Obamacare costs without laying off a bunch of employees?

Or letting them go and hiring all new people who are desperate for jobs and will work for much lower pay?

Or simply taking your business to Brazil or India or some other country where growth is actually rewarded?

Please send me your responses. What can be done?

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Oliver DeMille is the chairman of the Center for Social Leadership and co-creator of Thomas Jefferson Education.

He is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Economics &Entrepreneurship &Featured &Government &Leadership &Producers &Prosperity

Is China Really a Threat?

March 11th, 2013 // 1:01 pm @ Oliver DeMille

I try to read most new books on China, because I think the growth of China on the world stage will continue for some time and eventually conflict with America’s interests.

Whether the conflict turns to cooperation or serious difficulty remains to be seen, but keeping abreast of what is happening in China is essential for today’s leaders.

A new book, Is China Buying the World? by Peter Nolan, is an interesting addition to the field and adds several key ideas to the dialogue.

First, it makes the case that no, China is not buying the world any more than Japan bought it in the 1980s (despite widespread fears that this was occurring).

Second, however, China is certainly growing economically and in world influence.

Chinese firms have purchased ownership in a number of companies around the advanced world, as well as tying up access to a lot of natural resources in the developing world.

And numerous multi-national companies have heavily invested in China.

This growth will likely continue, and even expand.

Third, China’s major challenge is restricted access to oil and energy.

As it grows, its thirst for energy will continue to increase and drive its international business expansion.

Fourth, China wants to be a much bigger player on the world scene, and it is following a specific strategy for global influence.

This strategy includes major investments in two key sectors of the world economy, banking and the aerospace industry.

Chinese leaders hope that together, these things—increased investment in the developing world, increased ownership of international resources especially oil, growing global investment in China, increased ownership in multi-national companies, major growth of Chinese influence in the banking and aerospace sectors—will significantly strengthen China’s world role.

Fifth, advances in the aerospace industry are significant because of the close ties between military and business technologies and projects.

As China increases its role in this endeavor, along with banking, it becomes more powerful economically, technologically and, if it chooses, militarily.

This book is a detailed and important read for anyone who cares about the future of the big powers in world relations.

More to the point, more people need to read and think more about the specific issues currently at play in China’s growth.

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Oliver DeMille is the chairman of the Center for Social Leadership and co-creator of Thomas Jefferson Education.

He is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Book Reviews &Business &Current Events &Economics &Featured &Foreign Affairs

China v. Japan

March 1st, 2013 // 10:18 am @ Oliver DeMille

Interesting commentary with visuals:

Created by: OnlineMBA.com

Category : Blog &Current Events &Economics &Foreign Affairs

Bigger Isn’t Always Better

February 13th, 2013 // 4:04 pm @ Oliver DeMille

In the push for more gun control and changes to our national immigration policy, a few very important things have been mostly left out of the news in recent weeks.

They have been mentioned, yes, but not emphasized.

And these items deserve to be seriously considered by all Americans.

• First, economic figures came out last week showing that the U.S. economy actually shrank during the last quarter of 2012—with negative growth in the U.S. GDP. The Administration waived this off as hardly newsworthy, a mere blip in many months of growth, but for those who closely watch the economy this is a serious concern. Recession hurts us all.

• Second, a poll last week showed that 53% of American citizens consider the federal government a threat in their lives.[i] This is very different from an approval rating. In fact, this is extreme. A majority of Americans now see Washington as a threat. This is a big deal, because a nation that doesn’t trust its government is going to become increasingly dysfunctional—and solutions are going to be more difficult in such an environment.

• Third, a new article argues that Congress and some federal Executive-Branch agencies are prone to political corruption[ii]—especially from well-funded special interest groups. The article concluded with concern that it is probably only wishful thinking to hope we can ever return to being governed according to clear, known, accepted principles instead of bureaucratic complexities. Government now is just too big.

• Fourth, as a corollary of item three, the complexity brought on by the sheer size of the federal apparatus has created the same level of bureaucratic technicality at the state and many local levels of government. Even our towns, cities and counties now tend to operate in the complicated style of federal agencies, where simplicity is suspect and byzantine rules apply to things that should be easy and straightforward. Locales are often funded from Washington and find that their otherwise uncomplicated systems must be complex in order to interface with federal offices and programs. The World Economic Forum ranked the United States 76^th in free economic burdens on business growth.

• Fifth, many modern governments are now in the business of creating new “rights,” telling people that they need these “rights,” and then finding that the government can’t afford to fund these “rights.”[iii] This causes government to grow even more, in the desperate attempt to fund newly-established “rights” by consistently increasing taxes. Note that such “rights” aren’t inalienable, but rather established by governments. Among these “rights” are health care, unemployment income, and the pursuit of money for a growing number of consumer wants.

• Sixth, the U.S. infrastructure of roads, bridges, electric grids and drinking-water systems will cost $2 trillion to bring up to first-world standards.[iv] This at a time the government can hardly afford its current liabilities.

In short, government policies are slowing or reversing our economic growth, the people don’t trust their government, the government just keeps growing and growing, costs are increasing, and government is becoming increasingly complex and difficult to manage at all levels.

This same bundle of policies—along with massive involvement in foreign wars—brought down many of the empires of history, including the Roman, Ottoman and British.

Perhaps the six items outlined above haven’t led the news cycle simply because they aren’t really anything new.

Most regular Americans probably already knew about these trends—at least at a gut level—before they were officially announced.

Still, these are in many ways the big news of 2013.

This is the new environment in which we live, and all of these trends are making freedom less likely to flourish in the months, years and decade ahead.

Government is simply too big right now, and as it continues to increase in size many more such problems will naturally arise.

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Oliver DeMille is the chairman of the Center for Social Leadership and co-creator of Thomas Jefferson Education.

He is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Current Events &Economics &Featured &Politics

Two Types of Republicans and Rising Socialism in America

January 29th, 2013 // 7:33 pm @ Oliver DeMille

The future of America depends on the House of Representatives.

If it goes along with the Obama Administration’s plans, we’ll see major changes in the next four years, and the move toward socialistic policies will be as momentous as the swing to the right under Ronald Reagan.

The White House and Senate are committed to this course, and only the House stands in the way of a serious socializing of America.

There are two types of Republicans in the House, and as long as they are split the White House will probably keep winning.

On the one hand, the Legislative Republicans believe in government.

They are conservative in the sense that they want the government to make good policy and live within its means, but they believe in government and in passing laws to effect change.

More to the point, the Legislative Republicans are against many of the Administration’s policies, and they believe in stopping the White House agenda by getting involved in the legislation and amending it to make it more conservative.

On the face, this may seem like a good viewpoint.

But these representatives have little support for their amendments. Democrats typically vote against such amendments, and so do the other Republicans.

Because of this, such a strategy routinely fails.

The Legislative Republicans don’t get their amendments passed, so they simply end up splitting the vote and allowing the White House to win.

The second type, the Limited Government Republicans, don’t believe in more legislation.

They want smaller government, major spending cuts and wise fiscal choices concerning entitlements.

They want tax reductions and a balanced budget, because they believe good fiscal policy leads to immediate and lasting improvements in the economy.

The White House wins whenever it splits the votes of these two branches of the GOP.

Legislative Republicans argue that the problem comes from the Small Government Republicans who don’t support  amendments to White House proposals, amendments that would make the laws less hurtful to the economy.

These two camps show little likelihood of working together, and as a result the White House agenda keeps passing.

So who are the bad guys?

Those who try to work with the president but slow down his plans, or those who want to stop his agenda in its tracks?

In truth, the Legislative Republicans are living in a fantasy world.

Even if they were to gain the support of all Republicans in the House, they would amend various policies and pass them, only to see the White House bring more and more proposals that would undo the slowing effects of their amendments.

Those in the House who are standing strongly against big government policies are the hope of America.

We need the Legislative Republicans to join them.

It takes three presidential terms to really turn America around.

In third terms, two things happen: 1) policies really take hold, and 2) more Supreme Court appointments come.

For example, Reagan effectively got a third term by putting George Bush into office and continuing many of his main policies.

Clinton wasn’t able to do this because Al Gore lost in the 2000 election.

In the case of Barack Obama, there is a strong sense in the Administration that enough changes need to be made that real change occurs even if a third Democratic term doesn’t come.

President Obama is very popular personally, not so much for his policies but because of his person.

Republicans keep winning in Congress, for example. So the president may not have a third term Democratic follow-up after 2016.

As long as the Republicans are split, the White House can keep pushing its agenda and promote two term’s worth of policies during the next four years.

This seems to be their strategy.

The future of freedom right now depends on the House of Representatives, and it is time for the Legislative Republicans in the House to step back, realize what’s at stake, rethink their stance, and take a more direct stand for freedom.

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