Reply From A Stubborn "Conservative"

Son,

I'm not a Republican---never have been, never will. I tend to be liberal on most social issues--abortion should be up to the woman, don't care if gays marry or are in the armed forces, am not racially prejudiced---but am conservative on economics--small government is best, low taxes are the goal, and freedom of economic choice above all. I don't like to see the U.S. pushed around, so I suppose that I tend to be more of a hawk than a dove. I'll be honest, I watch Fox news whenever I can and absolutely love Dexter. But, I also like American Idol and always tear up when I watch "Sleepless in Seattle," no matter how many times I've seen it. That's your Dad. Pretty straightforward.

I meant what I said. Any stimulus money that has not been spent, should be canceled. You have to ask yourself why unemployment went from 7.4% in December, 2008 to 10.1% in the first six months under Obama. http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=USD

Why did the US GDP grow by 5.6% in the 2009 Fourth Quarter, and unemployment remain unchanged? Lack of demand is not the problem, as evidenced by fast growth in the last quarter. Employer confidence is, as evidenced by the lack of hiring and the high unemployment rate.

The demand side of the equation has been taken care of by monetary policy. Literally, trillions of dollars have been pumped into the economy since September, 2008, which is why the Stanford kids concluded in January, 2009 that the recession would be over by mid-year---even if the government did absolutely nothing.

If stimulus is pulled, it will not cause a double dip recession. The reason why economists fear a double dip is because all that money sloshing around is leading to high demand---and inflation. When inflation starts to kick in, the Fed will have no choice but to tighten monetary policy, interest rates will go up, curtailing growth in the process. By the way, that's what you believe. Why else did you buy a house in October and lock in a nice low rate mortgage? You believe that both housing prices and interest rates will go up. At least that's how you explained your reasoning to me. So, you see, Obama's stimulus, especially because so much occurs in 2011, actually makes a double dip more likely.

I read Rush's article. It was very wordy, and he could have made his points better, but nothing you said means that raising taxes on those earning over $250,000 doesn't hurt small business.

Let's take a ten person company, which I'm sure you would agree is a small business. According to Rush, the payroll might average $50,00o per person, with let's say the owner taking $100,000, and the other employees averaging less than $50,000. That makes total payroll $500,000. No one makes just enough revenue to cover employee costs, though. In fact, most of the top 100 NASDAQ companies have revenues per employee of $400, 000 to $500,000, and many go up to and over $1.0 million at the high end. http://www.jbryanscott.com/2009/02/07/nasdaq-100-revenue-per-employee/


But let's use $200,000, the low end of the range. At that number, our little 10 person company has revenues of $2.0 million. If the company makes 10% pre-tax, the income is $200,000. Most likely, the owner has structured the company as an LLC to avoid double taxation, so the entire $200,000 income flows to him. Added to his $100,000 salary, his income is now at $300,000, and he is in Obama's crosshairs.

Using our little example, if the owner is worried about higher income taxes, higher health care costs for his ten employees, higher state and city taxes because his city and state are broke, is he or she going to hire #11? Probably not. If sales increase due to higher demand, the owner will either increase productivity or take the risk of losing that sale. I don't know about you, but I'm always looking at my breakeven point and trying to keep it as low as possible.

There are tens of thousands of companies with ten employees, and there are tens of thousands with between 10 and 100 employees. Obama targets this group not understanding the way the economy works. How could he, Son? He never held a job that wasn't paid for by government funding.

Dad