While former CIA chief, David Petraeus, testifies before closed door congressional committees this morning, disagreeing with what the White House told the press about the terrorist attack on Benghazi, other top congressional leaders are meeting with the incumbent about how to avoid the looming “fiscal cliff.”
In the meanwhile AFL-CIO President, Richard Trumka, called the fiscal cliff situation far less important than it’s being portrayed, and feels that the government should simply keep on spending increasing amounts of money until the economy grows back to the levels it should. And that way, he believes, the financial problems will be put off to some future date which he isn’t worried about.
However, at the very same time, CNN on-line (among many others) wrote that “Hostess Brands -- the maker of such iconic baked goods as Twinkies, Devil Dogs and Wonder Bread -- announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them. The closing will result in Hostess' nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide, as well as 570 outlet stores. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union represents around 5,000 Hostess employees.”
So, here we have this guy Trumka on one hand spouting ridiculous gibberish while seeking to gouge as much from employers as he can for his union members, regardless of the incredible financial damage they do overall, while as a practical matter unions simultaneously shut down a major business adding 18,500 to the unemployment rolls.
And what these stories remind me of is a personal experience I wrote up quite a while ago.
One day back in the early eighties I called on a prospective customer in Brooklyn needing almost $1 million worth of manufacturing equipment. At the time my primarily responsibility was sales, and I had no formal accounting or financial analysis credentials, however, I’d learned enough on the job to have a very good idea of what prospect’s financial conditions were about. And having this sort of knowledge gave me a very good idea of the circumstances I was dealing with, saving me significant amounts of time, and also permitted me to quickly offer the best solutions.
In this case then, during my first visit to the prospect’s plant, when I was asked to present a financing suggestion I requested financial statements to get an idea of what to offer. In response I was handed three years of federal Income tax returns, all of them showing major losses.
When I told the prospect that from what I’d seen there was no way his business could afford the new equipment, I was informed that they’d not made a profit on paper in many, many years and thus paid no income taxes of any kind. However, he then took me by the arm, walked me to a room with a hidden wall safe, opened the camouflaged door and smiled as he pointed to what had to be millions of dollars worth of negotiable treasury bonds.
The bonds, he told me, were amassed resulting from sales the company made for cash, most of which he chose not to report to the IRS or anyone else. Nonetheless though, he felt they established the fact that he was running a very profitable operation, could now clearly afford the equipment, and asked again for a quotation on financing his new equipment.
I responded that from my perspective, he was asking my employer to install very costly equipment in a business that lost money hand over fist on paper for years, evidenced by the only hard documentation we could rely on. While at the same time, by hiding significant income, he evidently wasn’t afraid of exposure to the federal government which had a very sophisticated IRS, squads of attorney’s and collectors, federal courts, an army, air force, marines and navy. So, by comparison, whatever kind of measly threat could we ever make if we had a collection problem with him? And that’s when I politely told him we were unable to accomodate his business at that time because the lack of profitable evidence didn't exist on paper thus tying our hands.
I mention this today because between the unions, governmental interference and exposure to excessive taxation, I believe the small business sector is being forced to mislead, avoid, circumvent and elude additional assessment it can’t afford if it wants to survive, much like the situation cited above. And this will be especially true for operations dealing in cash transactions who will now be incented to bury, hide and avoid reporting every cent they can. Not because they're crooks, but simply in order to sustain.
Therefore, while all the threats of tax increases may sound good to the inexperienced, work-avoidance, shortsighted malingerers of the Democrat base, the major losers in this equation will be them. Because they have no clue as to what they’re doing income or tax-wise and never, ever did.
That's it for today folks.
Adios
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