Today I was on the phone with a series of customers in the South and Southwest, because I am going to visit with them in the next few weeks. The Economic situation is on everyone’s mind. One customer told me that “capital is on strike” and then he told me to look up the IBD editorial. I did and it is sobering. I have pasted a few portions from the article below.
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In the three months since the election, the broadest measure of the stock market’s value, the Wilshire 5000 Index, has plunged more than 30%, slicing over $3 trillion from Americans’ wealth. Investors have walked away from investing, while businesses shut down factories and offices and slash jobs.
This is both highly significant and dangerous. Capital, bluntly put, has gone on strike. Those who own wealth are pushing it to the sidelines, as a young and inexperienced president tries to jam through the most sweeping economic changes in over 70 years.
The prospect of these changes becoming law has already radically altered our nation’s economy. Entrepreneurs and CEOs who once created new products, new services, jobs and trillions in wealth for America’s workers and retirees now find themselves vilified and punished for their success.
*SNIP**
This isn’t the only warning sign. A new study asserts that some 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years. Ditto China.
Immigrant entrepreneurs are highly sensitive bellwethers of economic and social conditions. They know where the opportunities are — and where they aren’t. They’re voting with their feet.
***SNIP**
An estimated $1.4 trillion in new taxes planned by the new administration over the next decade explicitly target the people President Teddy Roosevelt once derided as the “malefactors of great wealth” — those in the top 5% of the income spectrum. Yet, they’re the ones who’ve made our economy the envy of the world.
By the way, under Obama’s plan the rich won’t pick up the whole tab. New energy taxes of $646 billion will hit the middle-class hard. Meanwhile, in just eight years, our national debt will double to $20 trillion, as nondefense federal spending jumps from the long-term average of 16.5% of GDP to above 23%.
You — or your children — face higher taxes for decades to come.
As our stock markets melt under a barrage of new taxes on incomes, estates, capital gains, dividends and energy, it’s good to recall that more than 100 million people own stocks or mutual funds. And that the stock market is the main wealth- and growth-creating mechanism in our capitalist society.
But when taxes go up, regulations proliferate and the rule of law and private property protections are weakened, the economy will invariably suffer. This is a universal lesson of economic history, one we ignore at our peril. And yes, this is what’s happening now.
No, we don’t blame all our current ills on President Obama. He came in at a tough time, when many bad decisions had already been made. But he is responsible for what he’s done since.
His stimulus package is little more than a down payment on a socialist economy. It raises taxes on the successful, brings back the welfare state, hands out favors and cash to friends of one political party, while imposing government control over the entire free market in ways that just a year ago would have seemed unimaginable.
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This is my twentieth year in business and as an entrepreneur, I can assure you that I am always listening to what our customers are doing and how they may need our help. Our customers are hunkering down, they don’t see a short term fix. They are looking to us to provide them a lifeline to get through these tough times, they don’t know how long they will last. I hear from our European customers and they say the economy of the world is in flux. Markets are looking for long term answers not short term patches. We are providing answers to our customers that solve their problems in our tiny niche, but they are worried about Macro trends. Our customers come in all sizes – they are spread all over. There is a lack of confidence in our leaders. There is a lack of confidence in everyone’s leaders.
As an entrepreneur, I am an optimist and I take risks with my capital to grow the business. I can assure you that I will bitch, complain, argue and laugh with my friends, customers and maybe even a competitor about the economic situation. I remain optimistic that over the long term we will continue to bring the innovations to our niche market that our customers want. We will figure out a way to solve problems creatively. But we need a steady hand at the controls, which we don’t seem to have today.
