Friday, December 17, 2010

John Galt's Revenge

So the tax cuts will be extended and the President is courting CEOs to get them to spend money and step up hiring. I was watching CNBC the other day with interviews of the various CEOs who met with the President and while they were talking a good game of cooperation with the administration, some of their body language and facial features led me to believe otherwise. Some of the CEOs gave the impression that they were no longer the pitchforkees but rather the ones who would do the pitchforking, metaphorically speaking, of course.

Not so long ago, businesses, in particular, small businesses with little protection from the government were under threat. Taxes, health care and unemployment were all going up and regulations that would stifle growth gave owners no incentive to hire or grow. Owners battened down the hatches by holding money on the sidelines and hired as few people as possible. In essence, they went John Galt, maybe not exactly along the lines of Atlas Shrugged,but for the most part, they withdrew their talents, protected their assets, and let the government feel the heat from those not able to get jobs or benefit from these companies. This heat led Obama to understand that his presidency was in jeopardy and that without the "motors of the world," he could not succeed. But more importantly, these businesses struck a blow against creeping collectivism. Good for them.

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34 Comments:

Blogger Stormbringer said...

Is it Galtness or cheapness? After B. Hussein Obama was elected, the Fortune 100 company that I work for announced that there would be no raises "due to economic uncertainties" (although certain people got raises anyway). Then, raises became merit-based only. While merit-based raises have their place as a supplementary incentive, cost of living increases and "thanks for showing up and being dependable" raises should not be supplanted.

12:54 PM, December 17, 2010  
Blogger Helen said...

Stormbringer,

If it was just cheapness, wouldn't the company have done the same before Obama got elected?

1:03 PM, December 17, 2010  
Blogger Michael said...

The Fortune 100 guys may be worried about their subsidies in the new Congress. THey were Obama supporters anyway before the election in 2008. Big Business is no longer conservative. Crony capitalism assumes you are big enough to be a crony. Small business has been the engine of growth, including those that got big, for the past 40 years. All the technology companies except IBM and a few others began small since the war.

1:08 PM, December 17, 2010  
Blogger familyfuninthekitchen said...

When the government makes penalizes efficient and productive business operation, who can be surprised if those businesses change their behavior to meet the new reality (going Galt ).

1:08 PM, December 17, 2010  
Blogger Easycure said...

It's America...businesses can give raises to everyone in the company but you. Companies should always be looking to "trim the fat", or let loose of people that think that raises should be tied to anything, especially "just showing up".

1:17 PM, December 17, 2010  
Blogger BarryD said...

LOL

Since when does anyone owe anyone a raise for just showing up?

1:33 PM, December 17, 2010  
Blogger Rich said...

Companies are not hiring to a certain extent because of all the unknown costs coming down the road. Think Pelosi saying we have to pass the bill to find out what is in it. I think the big corps did not realize just how bad they were going to get screwed but have woken up. The little guys knew it all along.
But the reality is just like the wall street bonuses at the top, the top is taking care of itself and screwing everyone else. It should be an interesting ride. My guts says more small businesses are going to go Galt to an extent

1:36 PM, December 17, 2010  
Blogger Charles said...

i think he meant showing up AND being dependable. but that's what the base pay is for. only showing up should qualify for termination.

1:48 PM, December 17, 2010  
Blogger HMT said...

Are we re-defining "going JG" as "existing in a supply/demand driven economy"?

Going JG is consciously removing your self from an obviously broken economy. I would extend that definition to also include: Moving yourself to an economic environment that more closely follows the ideal supply/demand curve.

Small buisness owners, for the most part, didn't move shop (although big businesses did) or close shop. They adjusted hiring based on the availability of cash and the risk profile of the availability of future cash.

Whether or not the continuation of the Bush tax cuts will improve hiring is yet to be seen. It only helps with the risk profile of future cash availability. They do not improve the current availability of cash as we've been working under these tax cuts for a while now.

1:50 PM, December 17, 2010  
Blogger TallTim said...

@Stormbringer:

Getting paid more, because you are worth more to the company? We need to stop that right away!

1:53 PM, December 17, 2010  
Blogger fred said...

There seem to be so many various interpretations of a few simple acts or things that I am inclined to say there is no one or true interpretation of the act of the president meeting with business owners, and I am reminded of the old nugget: we see things not as they are but rather as we are.

1:54 PM, December 17, 2010  
Blogger grichens said...

90% of financial assets (other than home) held by U.S. residents are now controlled by the top 20% of taxpayers.

It may come as a shock to most voters, but these people have options including investment overseas.

That also extends to major companies: Standard and Poors reported in 2009 that approximately half the earnings of the S&P 500 companies are now generated from business conducted entirely outside of the United States - and that more than half of the income taxes paid by the S&P 500 goes to governments other than the U.S.

1:59 PM, December 17, 2010  
Blogger Steve said...

My 22 person company has gone half Galt/Ramsey for a while now. I have two open positions that are currently filled by temps. I'm not real excited on bringing them on full time.

We've also decided not to borrow money for a couple big acquisitions and are instead making sure we are free of the need to use any lines of credit at variable rates - I don't want to be stuck with any variable rate debt if rates bounce up to 10%.

I am willing to spend money to make my place nicer to work (for me) and take a few more optional business trips as much of the money would otherwise go to the gov. They in turn would spend a lot on things that actively damage our country. (yes I know they'll still spend it by borrowing more - but frankly I'm not sure there's much of a moral obligation my kids have for that debt.) shrug.

2:04 PM, December 17, 2010  
Blogger USA Citizen said...

As a small buisness owner and taxpayer I am insulted and outraged. Congress learned nothing from the election and demonstrates economic ignorance.
A two year temporary extension of current tax rates, even with some cuts, isn't going to instill the condfidence to hire or invest in capital. Add to that the cost and statement of extension of unemployment benefits without cuts in federal spending and our dept and unemployment just keep rising.

Our posterity really deserves better.

2:15 PM, December 17, 2010  
Blogger MB said...

In my experience, pay is not just based on value and performance, but has a political component as well – the blatant “sleeping with the boss” comes to mind, but there are many other more subtle examples.

It seems to me, that in small business there fewer examples of political-based jobs, or more accurately political performance will only get you so far when the bottom line of performance is more obvious. In a large corporation the ability to dilute and obscure responsibility is easier to “tolerate” dead weight or advancement via office politics such as golfing with the boss is a much larger factor, versus actual job performance, especially since performance may be subjective. This would be even easier with crony capitalism since one is inhibiting the competition via regulations, subsidies and taxations. Nepotism can only go so far in a small environment if the relative does not pull his or hers own weight. In a large setting, lack of performance can be hidden.

Getting to my point finally, I think some of the resentment of those not getting raises or promotion is the belief that the decision is not based on merit. It does not surprise me that those with political clout, large corporations and unions got the spoils, but it does disappoint me. To rephrase and old joke used by Dick Van Dyke in a movie, if the Federal bailout/stimulus was a gold mine, the big corporations and unions got the gold and the rest of us got the shaft!

2:28 PM, December 17, 2010  
Blogger Charlie Martin said...

"Sitting quietly, doing nothing. Spring comes, and the grass grows by itself."

The fascinating part of this is that we didn't need a John Galt: excessive statism stops the motors of the world on its own.

2:35 PM, December 17, 2010  
Blogger LPF said...

@Stormbringer: "'thanks for showing up and being dependable' raises"

Really?

"First prize is a Cadillac ElDorado.
Second prize is a set of steak knives.
Third prize is: 'You're Fired'"

If I was one of the CEO's contacted by Obama, my response would be "Yeah, I'm gonna have to get back to you on that." followed by a dial tone. And that's if I was in a polite mood.

2:52 PM, December 17, 2010  
Blogger BarryD said...

Charlie Martin, a Randian Koan? Love it!

2:56 PM, December 17, 2010  
Blogger Larry J said...

During the past 4 years that the Democrats have controlled Congress, the minimum wage was increased more than once. Throw into the mix new government regulations, uncertainty about the future, and the unpredictable costs of Obamacare and it isn't surprising that many companies are holding off on hiring more people.

Gee, you make labor more expensive and companies consume less of it. Who would've thunk it?

3:30 PM, December 17, 2010  
Blogger David said...

I think the uncertainty factor is huge. For example, there are proposed draconian EPA regulations on industrial boilers...these have been put in abeyance for the moment, but may not stay that way for long. Who would want to invest in building or expanding a boiler-dependent factory when in a couple of years additions to capacity may become prohibitive?

6:18 PM, December 17, 2010  
Blogger Xiaoding said...

Can we gat a list of companies no longer giving cost of living "raises"? I beleive in shorting the retarded.

Gee, they are fine with getting more for their services.

They will soon find, that their employees are no longer showing up, and no longer dependable. And people just love buying from companies that have no one to answer the phone, or have no one who KNOWS anything anymore, because that guy was just let go.

Don't worry though, they will hire new, better employees! Who know nothing, and quit soon, because this is the internet age now, and word gets around quick.

And those who do get the "merit" raises? They will soon find out, that without the support they previously got, their "merit" ain't so meritable any more. The bozo's at the top ALWAYS think the ones in the middle are disposable.

6:27 PM, December 17, 2010  
Blogger Xiaoding said...

"As a small buisness owner and taxpayer I am insulted and outraged. Congress learned nothing from the election and demonstrates economic ignorance.

A two year temporary extension of current tax rates, even with some cuts, isn't going to instill the condfidence to hire or invest in capital. Add to that the cost and statement of extension of unemployment benefits without cuts in federal spending and our dept and unemployment just keep rising. "

Where have you been for the last thirty years? This did not happen overnight.

Your comment is true, but infuriating. The future is uncertain for all.

I blame, for this situtation, the conservatives. True idiots. I mean that in the classical Greek sense.

In ancient Greece, a man who tended to his farm, his own affairs, and who did not attend to civil matters, was called an "idiot". Someone not able to see beyond his own personal world.

If that does not describe conservatism of the last thirty years, save for Reagan, what does? They withdrew from society, and now we have the result.

Washington, Jefferson, Adams, et al., risked everything. But we got business people whining about uncertainty.

If you think certain things need to be certain, than get in the fight, and MAKE IT CERTAIN.

This country is on the brink of revoloution...our forefathers did not shrink from the battle, we must not either.

6:47 PM, December 17, 2010  
Blogger Robert said...

You'd be wiser to think that these companies that were invited by Obama were campaign contributors and were probably looking for some stimulus money. You can't expect a person with the ideology of Obama to deal with anyone without first asking, "what will you do for me" first. Although your general thesis is correct, many businesses are "going galt"; but they are doing it because it is sound business policy in this age of confiscatory and re-distributive government. In substance, Obama will never change into a capitalist. There will always be a catch.

9:20 PM, December 17, 2010  
Blogger Hodge said...

I know one of these CEOs personally and have good insider info about two others. Your reading of their nonverbal communications is probably very accurate. Most of them want nothing to do with this gang but they have to put on a good game face and play nice in public. I know one who didn't and his company suffered much regulatory harm. CEOs of public companies can't go Galt in any big way. However...us little people who run small companies and who can fly under the radar are doing everything we can to stay off the grid. Who is John Galt? A whole bunch of us, thank-you-very-much.

10:17 PM, December 17, 2010  
Blogger Stormbringer said...

So, who said anything about raises "just for showing up"? My comment included "being dependable". Good managers know that they need to give raises to keep morale up, keep loyalty, keep dependability — and keep the workers.

This company complains about not being able to keep good help, people who have been there for fifteen years are not getting raises for cost of living... and the company wonders why they are not listed in the "best places to work" surveys. Merit-only raises do not keep good talent, especially if the "standards" to earn said raises are almost unattainable.

Dr. Helen said to me, "If it was just cheapness, wouldn't the company have done the same before Obama got elected?"

That is something I will have to ponder. Thanks for making me think again, that's one of the reasons I read your material.

10:28 PM, December 17, 2010  
Blogger Alex said...

"Washington, Jefferson, Adams, et al., risked everything. But we got business people whining about uncertainty.

If you think certain things need to be certain, than get in the fight, and MAKE IT CERTAIN.

This country is on the brink of revoloution...our forefathers did not shrink from the battle, we must not either."

That's right comrade! So risk your personal fortune, your business, the livelihood of yourself and your employees and those you trade with! What's uncertainty but an unacceptable dedication to the revolution!?

11:18 PM, December 17, 2010  
Blogger MarkD said...

Why, exactly, would anyone invest in a climate that is so hostile to business?

Farmers take care of their crops and animals, lest they have nothing to eat. Our elites and civil servants are not that smart. What will they do when there's nothing left to tax, and the mob forms with ropes and pitchforks? Metaphorically speaking, of course.

10:50 AM, December 18, 2010  
Blogger David said...

"Farmers take care of their crops and animals, lest they have nothing to eat"...I'm afraid many members of our political class are less like farmers than like ravening hordes who steal from the farmers, burn what is left, and go on to the next victim.

This has of course been the default behavior of many if not most of the world's governments for a long time. For a while, the U.S. was a rare exception.

12:45 PM, December 18, 2010  
Blogger dr.alistair said...

the only economies that closely follow the supply/demand cycle are drugs, prostitution and warfare.....

...and governments know this implicitly.

5:23 PM, December 18, 2010  
Blogger br549 said...

The small company (250 people) I work for will not hire. For the hourly workers in manufacturing, overtime is offered to those who want it when the frog's butt bounces off the bottom for a minute, and more product needs to be made for a burst of time. It's been like this since mid 2006.

Those of us who are paid salaries have not seen a raise in years, but are averaging 60 hours a week at previous 40 hour wages. Commissions? I remember those.

Nothing happens until somebody sells something.

I still wonder how much the "graying of America" has to do with much of it. I am beyond my consumer age. The kids are grown, I don't need much besides incidentals. I can't remember the last time I bought a washing machine, etc. New cars (especially American made) lose too much of their value immediately after a title has been issued, much less after being driven off the lot. I buy nothing newer than 2 to 3 years old.

7:44 AM, December 19, 2010  
Blogger Jack Shaftoe said...

None of my business clients are hiring. Why? Simple: they have no way of accurately projecting how much their employee costs will be - especially the health care costs - and they're erring on the side of caution.

They are sitting on capital, but the uncertainty coming from Washington has them frozen in place.

There's just no way to budget for gangster government.

9:31 AM, December 19, 2010  
Blogger Sam Lee said...

I would never give someone a "thanks for showing up and being dependable" raise.

"Show up on time, be dependable, and do your job" means you *get* the job and *keep* the job. The day you stop being able to do even that is called "go find another job".

You get a raise when your work brings in more money, and you demonstrate this to the boss. Bottom line.

Way to go on thinking like a eurocrat, raise-seeker!

11:40 PM, December 19, 2010  
Blogger Stormbringer said...

"Way to go on thinking like a eurocrat, raise-seeker!"

You've never been in management, have you? If so, you can't keep good help with that 1950s thinking. Do you know anything about Fortune 100 companies with many offices and 70,000 employees? Tell me, enlightened expert, how can someone at the bottom of the feeding chain, off the upper management radar, demonstrate that they are bringing in more money? Especially to what I call an "absentee landlord"? That's right, the boss is literally hundreds of miles away.

I suggest that you do not make such ridiculous blanket statements and slurs when you do not have experience and knowledge in such a company, capice?

1:52 PM, December 20, 2010  
Blogger Sam Lee said...

Why yes, I have been "in management". Funny thing is, I've owned businesses, too. As an owner, you don't get "paid" for showing up--you get paid for providing value, solving problems, and doing so in quantifiable ways.

I paid well for good help that contributes to the bottom line, and treated the people well, like the contributors they are. Whenever possible, I got rid of people who don't and found someone who did.

A company too big to determine which employee helps increase their profits is one with too many unnecessary employees.

Recessions, like receding tides, show who's swimming naked and who's not.

Scale counts, sure. But there's also this thing called "diminishing returns". I'm sure you've heard of that one.

Then again, I *am* frittering my time trying to talk to someone who feels entitled to raises just as a "thanks for showing up and being dependable" employee.

3:33 AM, December 22, 2010  

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