As a small business owner I can tell you we are putting of hiring for pretty much the same reasons mentioned in WSJ. Basically you are paying double to hire an employee.
I think the author was trying to point out that this is nothing new and he feels the op-ed author was only raising this issue for political reasons. I have to admit that the wsj could have mention some of the op-ed author's background.
As for the point about small business not hiring due to extra costs. I'm sure it's true but this isn't something that was put in place in the last 2 years. This was true in all the recessions and booms we've had sine world war 2 and FDR if not before.
I don't understand that logic. Yes, if I buy an Apple for 1$, it costs double than if an Apple would just cost 0.50$.
You are paying for employees what they cost, that is, what the market determines. What are you doubling? (The taxes and whatnot are simply part of the total cost).
The logic is that taxes and other fees are pushing the cost of hiring people over what he's willing to pay. To use your example imagine you only have $1 to your name and you can get by without the Apple. At which point you don't buy the Apple where as if it was $.50 you might buy the Apple because it wouldn't take all your money.
I'm not saying his logic is correct but it's not hard to understand
Yeah, except taxes have gone DOWN for that employee under Obama, and healthcare premiums have been skyrocketing for the last 10-15 years (and most of quote "ObamaCare" hasn't even kicked in yet).
So the author is either a total idiot or willfully dishonest. Hence, the article was poop.
It doesn't have to do anything with the taxes, though. Suppose he is willing to pay 40000$. If taxes are 30000$, he can pay 10000$ to a new hire. If nobody wants to work for that money, it is the fault of the new hires.
Of course it would be better if taxes were lower, but since they are a real cost, it makes no sense to say "I pay double". Maybe it costs 0.70$ to grow the apple, so it simply isn't possible to sell the apple for 0.50$. Taxes are the costs for growing employees. What good is it to complain that you would buy an apple if only it cost just 0.50$, if it already costs more than 0.70$ to grow the apple?
"Suppose he is willing to pay 40000$. If taxes are 30000$, he can pay 10000$ to a new hire. If nobody wants to work for that money, it is the fault of the new hires." - Wow I hope I never work for you..
I cannot see how you say this is the "fault of the new hires" its not their fault, its the employers and government. Because the employer cannot afford to pay them more, they have 40,000 to pay them. Its the governments fault because they are taking 13200(assume 33% instead of 30k) this only allows the employer to offer a job if someone takes it for 26800.
Hes complaining because it does not need to cost this much. If the government is all about helping the country out of this "recession" shouldn't they be helping businesses hire new people?
It's hard for them to do this when it becomes more and more expensive to hire.
Your analysis is too short sighted. Presumably the taxes are required to keep society running. So somebody has to pay them. In fact it doesn't really matter who pays them. Suppose businesses wouldn't have to pay taxes anymore. Instead there would be a new apple tax. So now apples would cost 2$ instead of 1$.
Now you can pay your hire 20000$ instead of 10000$. But the hire needs twice the money for food, so he needs to ask for a higher salary in return, so that he can still eat apples. So you still can't afford the hire.
That there is probably a lot of waste of taxes is another subject entirely. Of course it would be preferable to require as little taxes as possible. But taxes are not just some arbitrary costs governments can inflict or take away with the flick of a finger.
The tax burden in this country is lower than European nations, lower than Japan, lower than Canada.
The op-ed is a trite political attack piece (not out of character for the WSJ). Your comments, well, they seem directed towards the half-brained. That is, if you're smart, what your saying is obvious: Obviously Right if you're a conservative, Obviously Wrong if you're a progressive.
If you're a true neutral centrist and you care most about lowering taxes, I can point you in the direction of a gigantic defense budget that could be cut.
But in my experience, people who think Obama is an evil business killer also think that we mustn't cut a cent from the defense budget.
Finally, saw something interesting yesterday.. apparently annualized corporate profits hit 1.2 Trillion recently, the highest ever recorded.
Yes, socialist Obama is certainly proving himself the nemesis of prosperity for America's business community. Clearly.
"The tax burden in this country is lower than European nations, lower than Japan, lower than Canada." Possibly, I didn't compare it to other countries.
"If you're a true neutral centrist and you care most about lowering taxes, I can point you in the direction of a gigantic defense budget that could be cut." I do agree its WAY out of hand. They pay for all sorts of crazy ridiculous things, the budget should be closer then half of what it is.
"But in my experience, people who think Obama is an evil business killer also think that we mustn't cut a cent from the defense budget." Normally so, but I wouldn't say I follow that same boat. (see above)
"Finally, saw something interesting yesterday.. apparently annualized corporate profits hit 1.2 Trillion recently, the highest ever recorded." Its only the small businesses that are really be effected particularly non-tech around 25 people.
The thing is that the overhead isn't lower. Hires cost what they cost. Why does the hire need 10000$ in the bank? Because apples are 1$. If apples were only 0.50$, the hire could feed himself for only 5000$. So you could blame high apple prices just as much as taxes. It doesn't make sense to single out taxes.
So what you're saying is that we should dramatically cut the standard of living of the average American in order to solve our unemployment issues? In the face of increasing corporate profits?
Further, there's another massive flaw in your argument: You're not going to hire twice as many people unless you have excess work even after the first hire. There are a few companies in that enviable situation, but for the most part, demand is lagging right now. So at best those companies would hire one worker at half-price and then keep the money saved.
Do you believe that the costs are too high on an absolute level or just too high to hire given current business conditions? If too high on a absolute level, I'm curious to know what you believe to be a reasonable tax rate is.
What services and level of service would this provide?
Is it inefficiency or uncessary services that makes taxes too high? Or something else?
Re health care benefits : that's not something you HAVE to give your employees. Why do you choose to offer them?
Extending this point a little, in a competitive environment I believe it matters what your competitors are paying for their labor and services. Since overhead (taxes and insurance) is relatively uniform, taxes should matter very little to his ability to compete.
But what's the argument? That there are taxes or overhead? The truth is that you're not hiring for charity in the first place. So if the true cost (burdened cost) of a new employee doesn't make you more than enough money to cover that, don't hire.
Just because the cost of an employee is not the "sticker" price, and is somehow more complicated, doesn't mean that you're being punished to hire people.
1) On the first day/week/month, the employee is probably not going to contribute much, and in general you are taking a risk. The lower the sticker price on that risk, the more people are likely to take it.
2) If your business is making 250K and spending 240K on employing 4 employees @ 60K each and you want to stay net positive, you need to wait until you reach 300K before you hire the next person[1]. So there are these gaps in ramping up a business which can only be overcome with growth. When salaries are lower, these gaps are smaller. Looking at the broader labor market and assuming growth, lower taxes would mean smaller gaps and potentially less unemployment.
[1] Note that because of their opportunity costs, its harder to hire professionals for part-time.
I hate the fact that somebody can explain how arithmetic works, and folks will trash them for political reasons. I hated watching the comments on HN when the first article was posted, and I hate watching the reaction today.
Honestly, everyone reading the WSJ knows how math works. The point of the article was not to explain math - it was to blame "government" - and Barack Obama - for the lack of private hiring. A political statement gets (and deserves) a political response.
Let's assume that you are right -- he is making a blatant political point.
It's also true that these things add together. And I believe the reasons he states to be a true indicator of why he's not hiring.
When somebody explains to you why they are not hiring -- and gives you the numbers to back it up, arguing about his politics or opinions of your pet causes is total idiocy. Who cares? Just assume that all those things on his balance sheet are wonderful goodness from above. Assume he's a bigoted moron. Whatever works for you.
Numbers still add together to make totals. And people make decisions (and form opinions) based on those numbers. Arguing about his politics doesn't change any of that. You can't argue yourself into a profit margin.
Next year there will be a new pet cause and a new item on the balance sheet. Maybe these are all great things, maybe the inmates are running the asylum. Probably a great discussion for somewhere else. None of that political stuff is relevant here, no matter how strongly you feel about it. This is the cost of doing business, and this is why he is not hiring. It would have been an entirely different piece without the numbers, but the numbers are true indicators of the nature of his business decision. Ignoring them or having a snit about them is just so much noise.
Did you read the linked article? The guy's business is in the tank. He wouldn't be hiring if the government paid him to hire. Which they might, actually, via tax credits under certain circumstances, I'm not too up on that stuff.
The guy's numbers were ridiculous. The changes to his cash flow, year over year, regarding employees, are dominated by healthcare costs. That's not a government problem (although it arguably should be). To the extent that his cash flow is affected by taxes, Obama cut them.
You're saying that we should ignore his political affiliations and focus on the numbers he presented.
I'm saying the numbers he presented don't add up to the point he was making unless you add them up totally wrong -- and the point he's making is manifestly political and has nothing to do with anyone's business reality.
Additionally, the article's author gave no indication that he knew how arithmetic works.
Round number from memory, paying someone 59k, gov't takes 20k, and healthcare costs 12k, so everything is 100% government's fault. And Obama's fault. Even though he cut the taxes for that employee.
EDIT: Hi downmodders. 100% factual post here. Obama cut your taxes. Sorry.
While ad hominem is usually bad, I don't see the problem with using it in response to anecdotal evidence. If your argument is "I, personally, can't run my business while paying employees an average wage!", then "your business was spiraling downwards while before the downturn and well before healthcare reform and wage bumps" seems to be a decent response.
Similarly, knowing someone's background is pretty crucial for an op-ed. If the piece is being sold as "I'm a typical businessman, and Obama's policies are keeping me from hiring people", then it's important to know if the businessman in question is typical, or if he's politically connected.
It does seem unfair to have to respond to an inflammatory anecdotal op-ed with a reasoned non-anecdotal argument, but I think that's the burden of a good faith response.
In that respect, I think Michael Fleisher's background is a good indicator that his piece has a bias, but pointing it out doesn't necessarily negate what he wrote.
I've always lived by the rule "if you think someone's wrong based on who they are and not what they said than your argument is too weak to present to others".
It's true, he didn't spend nearly enough time explaining why the argument was false. But then again, the 2-3 sentences he spent on that was enough. The rest is, I suppose, filler.
But at the same time it makes sense. Blaming the government for your inability to afford employees is just a blame game. You can afford and employee or not. If you're a moderate veteran in business you know the burdened costs so you factor that in.
The article has good detail about how he's blaming the government for his own failing business. He's just trying to egg on the government for more breaks or he won't hire and supposedly the recession will continue.
Maybe he'd like to turn off the HVAC system in the offices to save some money too.
Definitely the worst article to ever hit the #1 spot on HN. It looks like yesterday's WSJ editorial must have hit a raw nerve with a lot of HNers, and this makes them feel better. I'm okay with quality HN articles about politics. It's just a shame that the top spot on HN is being reduced to this sort of cheap partisan bickering. I hope HN does not become yet another MotherJones/MSNBC or WSJ/FoxNews.
that's what put me off Digg. But I fully understand that HN will have a bias towards more libertarian views. I really don't think a site dedicated to entrepreneurs and hackers will go the MotherJones/MSNBC way and Fox News hardly has any article with substance online.
Garbage in, garbage out? The original piece wasn't particularly impressive (rather than blame taxes for business problems, why not suggest targeted tax cuts offset by targeted tax increases?), but this somehow manages to be worse.
The ostensible reason the op-ed was crap was that Micheal Fleisher is related to someone who served in the Bush Administration. Now, while I agree that not divulging that information was a mistake on the Journal's part, I hardly think that shores up MJ's argument. It is necessarily fallacious-- his point is wrong because he was wrong in the past, because he was associated with people we don't like, and because his business is in trouble. It is certainly possible that these things might be true, but they have little bearing on the (equally bad) arguments in his op-ed, which are: taxes are slowing job growth-- see, just look at my business!
MJ notes that the original article wasn't worth much comment. Why they decided to then ignore their own conclusion and comment on it anyway is a mystery to me.
The least they could have done was try to raise, rather than lower, the already miserable tone of the debate.
I think Kevin Drum meant the article wasn't worth much comment, but the fact that the WSJ chose to put it on the op-ed page was worth a few comments.
Why did the WSJ publish it? Perhaps it was a poor choice, perhaps it was a slow news day, or perhaps it was a double-cross to destroy Michael Fleischer's credibility with his own words.
But its the tone of that response that's the problem. Even if the fact that the WSJ chose to publish it is worthy of comment, its certainly worthy of more thoughtful comment. MJ looks as bad as the WSJ by responding to a clumsy op-ed with such a petty, ad-hom piece.
While I agree his business is doing lousy and thats a huge reason why he cannot hire more, his point still rock solid.
The government takes way to much for each employee hired. 33%! The author would realize this is a HUGE problem for employers, but I forget he is only a political blogger.
Thus when you hire 3 and a tax rate of 33% + 33% + 33%, you are really paying for 4 people and getting 3. That makes it hard to hire more employees.
Then comes the health care, which drives this 33% even higher. As the wsj author states
"Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%."
28% is a HUGE increase..
Don't turn this into a political "I must defend/attack obama/bush" article. He stated everything with facts to defend why. 33% per employee and rising quickly in just a years time is a huge reason not to hire someone new.
Wait for it.. someone is going to again point out that taxes in the US are slightly lower than some other developed countries, and therefore they will imply that since everyone's taxes are high, we should assume that high taxes are perfectly sane.
Sanity isn't the issue. The issue is that in no way do US taxes make you uncompetitive, and therefore, as portion of the total cost of employee retention the point is moot.
It's irrelevant if my apples are 50 cents or a dollar. What's relevant is what everyone else is selling apples for.
The totality of compensation (benefits, taxes, salary) scales primarily with living standard, not with economic or political structure.
If we moved those taxes off income into sales, then you'd have to pay your workers 25-33% more for them to be able to buy the same stuff. If we moved healthcare and other benefits onto the employee, you'd be paying that money as extra salary, or else they're getting effectively less compensation. If we went with a libertarian model, you'd just be paying higher wages so that your employees could buy their current stuff and also hire their own police and fire companies (and you'd need to pay for your business's protection).
That's not to say you couldn't trim some fat with other methods, but the only real ways to eliminate paying that 33% involve cutting your employees' standards of living. I'm not saying it's your job to care about that, but let's call a spade a spade here. That money isn't dead weight loss, it's money that straight up improves the quality of life of your employees, and is therefore compensation.
I agree that there is probably a lot of waste of tax payer money. But then I would like to read articles detailing the waste and what could be done about it. An article saying "I wish taxes were lower" contains no useful information at all.
Maybe we should elect a "fiscal conservative" president for 8 years and let him cut the budget...
oh wait.
My biggest issue with your argument isn't that its wrong on its face - its that in the last ~20 years I've never seen a fiscal conservative in gov't both A. reduce taxes and B. reduce spending.
"All his complaining about taxes and benefits is just a smokescreen for his own incompetence."
Actually, I'd call that 'more proof that he's incompetent', personally. I read that yesterday and shook my head at disbelief that a CEO could say such a thing seriously.
Well, well, well. A man who sucks at the government tit complains about taxes that pay his bills. He's probably also getting stimulus money, but that's just an unfounded jibe.
