Evan Bayh Retiring From Senate, What Are The Implications?

[Red Arrow]

I am a firm believer that rising the lower class better invests our money. They won't invest it in travel or precious metals. The poor will turn that money over often within their own neighborhoods and communities.

How to best raise the lower class has always been the question.

[Conan71]

I think I've got a new man crush:

"In an interview on MSNBC this morning, newly retiring Sen. Evan Bayh declared the American political system "dysfunctional," riddled with "brain-dead partisanship" and permanent campaigning. Flatly denying any possibility that he'd seek the presidency or any other higher office, Bayh argued that the American people needed to deliver a "shock" to Congress by voting incumbents out in mass and replacing them with people interested in reforming the process and governing for the good of the people, rather than deep-pocketed special-interest groups."

http://news.yahoo.com/s/ynews/ynews_ts1134

He's sort of like the Jerry McGuire of Congress.

He had me at "dysfunctional".

I applaud you Senator Bayh.  I wish more Congresspeople shared your views. 

Folks, those words exemplify a great American statesman.

[we vs us]

Huh?  By far the majority of LLC's and S-corps are people investing directly into business and they are the largest source of private sector jobs in the American economy. 

Banks and investment houses have always bundled funds from various depositors to lend to support business via commercial loans directly and they help support consumption in the economy which supports business by making personal loans and property loans (i.e. homes & cars).  Banks have always made money by essentially re-distributing wealth in the form of loans and making interest for being the broker of the transaction.  You make it sound as if passive investment is simply money evaporating from the economy into rich people's bank accounts that's simply not true.

No, and that's not really what I was getting at.  Corporate forms create an entity to own and disburse the funds, right?  The entity is taxed, it pays the bills, it pays salaries, it pays dividends, etc. It protects investors from liability. It does the hiring and the firing, not the people who initially created it.  That's really what I mean . . . that the engines of growth are corporations making decisions to hire and fire, not individual investors.  One guy may have started a corp with his savings account and run the business alone, and make those hiring and firing decisions, but that's very rare these days.  More likely it's a pool of investors, with some additional seed money from a bank or investment house, plus miscellaneous grants, grantors, etc.  Many different cooks, many different stakeholders.

That's why tax cuts for the rich aren't stimulative to the economy.  Rich people aren't directly hiring and firing.  The entities that they're investing in are doing the hiring and firing.

[we vs us]

Folks, those words exemplify a great American statesman.

. . . who decided to suddenly quit rather than work for reform. 

Meh.

[Conan71]

. . . who decided to suddenly quit rather than work for reform. 

Meh.

He can't do it in this political climate.  I can understand his frustration because, as a moderate, that's how I feel.  He makes a great point that it's come down to Senators campaigning six out of every six years whereas when his father was a Senator they would campaign for two and legislate for four.  I can't blame him.  Governor Palin on the other hand...

[Gaspar]

I think that tax cuts for the higher income brackets used to work. The top 10% became wealthier and they then spent that money on luxury items or as entreprenuers creating new businesses and jobs.

Something changed. Now the rich travel, keep lots of cash on hand or invest in gold then hire temps to work for them. Maybe it is the fault of all the employee lawsuits or maybe union threats...something is making businesses cautious about real hiring.

I am a firm believer that rising the lower class better invests our money. They won't invest it in travel or precious metals. The poor will turn that money over often within their own neighborhoods and communities.

RM You are getting close. You almost hit it on the head.  The wealthy are not spending, and businesses are not hiring, but money has little to do with it.

Lets look at how things really work, and not focus on tax cuts, stimulus, rebates or other silly things.  

Many incorrectly tend to focus on the exchange of money as the economic engine.  

When speaking of "stimulation", Conservatives justify rewarding productivity, or top down economic stimulation.  Liberals focus on "bottom up" elevation of the poor to a more economically productive status.  Both philosophies have merit, but both ignore the true prime mover in a capitalist economy.

Capitalism is a "value" based economy.  Money only exchanges hands and benefits the market when there is "value".  Trickle-up and trickle-down models both fail in many circumstances because they do not take value into consideration.  In a healthy economy, investment in the community has value, in a sick economy savings is valued more.  In a healthy economy growing your business and increasing productivity has value, in a sick economy safe investment is valued more.  

The economically challenged feel that throwing dollars in all directions will fix things.  This is a juvenile assumption.  Value cannot be created by politicians, it can only be destroyed in their hands.  Value only exists in the free exchange of ideas and the innovation and labor of people.  

So back to the point. . . Business are not spending because there is little value in it.  There is little value because good business people are not reactionary.  They forecast and plan.  

The promise of penalty, regulation, tax increases, higher energy costs, caps on production, and the looming inevitability of inflation from run-away debt, combined with the administration's anti-profit philosophy change the game plan.  The smart business person will make sure that he/she can weather the storm and the best way of doing this is by shedding unnecessary personnel, and curtailing spending.  

There is no injection point where we can just add money and the economy will turn around.  The administration must prove that it will not interfere with production or profit, and this administration has based its platform on the contrary.

We are in unchartered waters now.  

[Cats Cats Cats]

"Republicans who had co-sponsored a bill with him to rein in the deficit turned around and voted against their own bill. "

http://news.yahoo.com/s/ynews/ynews_ts1134

[Conan71]

No, and that's not really what I was getting at.  Corporate forms create an entity to own and disburse the funds, right?  The entity is taxed, it pays the bills, it pays salaries, it pays dividends, etc. It protects investors from liability. It does the hiring and the firing, not the people who initially created it.  That's really what I mean . . . that the engines of growth are corporations making decisions to hire and fire, not individual investors.  One guy may have started a corp with his savings account and run the business alone, and make those hiring and firing decisions, but that's very rare these days.  More likely it's a pool of investors, with some additional seed money from a bank or investment house, plus miscellaneous grants, grantors, etc.  Many different cooks, many different stakeholders.

That's why tax cuts for the rich aren't stimulative to the economy.  Rich people aren't directly hiring and firing.  The entities that they're investing in are doing the hiring and firing.

Yes S corps and LLC's do provide a veil of protection against certain liabilities for the owners and investors that sole proprietorship does not grant.  In today's litigious climate, I can't fathom anyone not being an LLC.  I certainly was when I was in business for myself.

Take a walk down Brookside between 33rd St. and 51st St.  Many of the businesses lining either side are perfect examples of what S corps and LLC's look like.  Many of those are operated by the direct investor in the business.

Physicians and small law practices are another example of S corps and LLCs (or LLPs).

The company I work for is a locally-owned corporation with three stock-holders from the same family.  It employs 12 people and two of the three stock holders are involved in the day-to-day operation of the business.  The third stock-holder is a family member and he is responsible for the day-to-day operation of another corporation the family owns.  That company employs about 20 people.  Between these two companies, they generate about $8mm in the local economy.

The family is free to close down or expand any or all of their business operations any time they see fit.  I assure you, it's two brothers making decisions, not a nameless corporate phantom and that's the case with the majority of what passes for the definition of small business in the United States.  I can think of multiple clients of mine who personally oversee and invest in small businesses employing anywhere from 5 to 200 people.  One in particular took the funds from the sale of his previous business venture and started another one up about five years ago, soley using his own funds.  That company presently employs about 100 people in the Tulsa economy in jobs ranging from welding to engineering.  At last count they are doing about $30mm per year and the owner is quite involved in every phase of the operation.

Your characterization of LLC's and S corps being deft entities is incorrect.  Your description is more fitting of companies like Boeing, AEP, Ford, etc.

[we vs us]

That's fine, I agree that certain small businesses have three direct investors, or two, or one, and that it's family run, etc.  In many ways the number of investors is beside the point.  The point is that when I buy a beer on Brookside, the profit from that sale doesn't directly go into the bar owner's pocket.  It goes into the company coffers.  The owner might draw a salary and take his profit that way, but it still must be paid back to him.  Similarly, the family that owns your company almost certainly doesn't run it as a sole proprietorship.  The profits don't flow through to them.  They invest in the company and the company pays them dividends. 

All I'm arguing is that individual investors aren't running businesses directly from their bank accounts, and because of that, cutting their individual income tax rate isn't effective as stimulus. 

[Gaspar]

All I'm arguing is that individual investors aren't running businesses directly from their bank accounts, and because of that, cutting their individual income tax rate isn't effective as stimulus. 

Why?  Their corporate profits are counted as income in these situations.  LLCs and S Corp filings are affected by such cuts.  Significantly!

[Red Arrow]

I was part of a S Corp in the early 90s.  I paid personal income tax at my highest bracket on money that went back into the Corp. No income, just tax.  Actually, I think we tried to distribute enough to cover the tax. It came close but I don't remember if it covered all the tax.