January 19, 2021

Demystifying Economics

Posted on 13. Dec, 2011 by Stephan Helgesen in Economy

There’s one topic taking center stage in America – the economy – however the conversations rarely go below the surface where the real challenges facing businesses lie. Maybe it’s because the subject is so foreign to people that we only discuss it from the 50,000 ft. level, but we had better start cramming for this exam because it will be THE dominant theme in the 2012 elections. Here are my ‘Cliff Notes.’

I make something and I sell it. I collect the money and pay my expenses and plow a bit of the profits back into my company. If I have stockholders, I may declare a dividend and pay them a portion of my company’s earnings after I pay myself, my overhead, bonuses to my top-performing employees and give the government its taxes. Sounds simple, but there are hidden costs such as collecting sales taxes and payroll taxes and remitting them back to the government, but my government responsibility doesn’t stop there.

I must pay for the privilege to operate my business by getting state or city licenses. I must hire an accountant, a lawyer and sometimes other professionals. If I manufacture, I must adhere to certain OSHA requirements to operate a safe workplace. If I have government contracts, I must jump through a few more regulatory hoops as well. If I sell edible products or pharmaceuticals I must deal with the FDA and open my place of business to occasional inspections. I will need a Human Resource Department to make sure I abide by laws concerning the hiring and firing of employees. If I’m a union shop I must deal with a union representative and negotiate wages and benefits.

If my business is doing well, I might consider increasing my workforce and borrowing money to expand, pay interest on the loan and make those additional expenses part of my costs of doing business and then pass them on to my customers in the form of higher prices (or swallow the costs myself).  If I’m successful, I’m bound to create competition, so I might have to lower prices, improve my products or carve out better agreements with my agents, distributors or retailers. Staying in business is a whole lot more difficult than starting a business.

You’re probably asking, “Why did he spend so much time telling us things we already know?” The answer to that is, there are many people who DON’T know what it takes to be in business these days, otherwise they wouldn’t be demonizing them the way they do. That goes double for government bureaucrats who’ve never run one, managed employees, cut their checks or disciplined them. They haven’t fought tooth and nail for market share, stayed up nights worrying about meeting payrolls or how they were going to modernize or replace worn-out equipment. They’ve never dealt with foreign competition or excessive government intrusion into their businesses or an administration that is determined to ‘level the playing field’ and redistribute the wealth that they have created.

They haven’t pulled a 16-hour shift, worked holidays or not taken a vacation for years on end. They haven’t watched their costs rise exponentially because of high energy prices due to bad government policy or had to downsize their workforces and seen the hopelessness in the faces of their laid-off workers. These are the realities that America’s businesses face every day while Washington ideologues figure out what constitutes ‘rich’ or how much money is ‘fair ’ to take from America’s men and women to support the bloated government programs they administer at an average yearly salary of $125,000.

Those of us who’ve run companies need to stand up for ourselves and push back when our government starts demeaning America’s businesses. We also need to be part of the political process and support candidates who value our enterprise and entrepreneurism and who will challenge the ‘emperor’ when he has no clothes. If we don’t, we might as well close our doors now and save ourselves the trouble of giving away the store later.

- Editor

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