Topic: Economics
No Profit, No Growth or Know Profit, Know Growth: The Choice is Yours On 1/27/2010, President Barrack Obama gave the American people his State of The Union speech. One of the many focuses was the economy and job creation. Remarkably absent from the speech (at least for this viewer), was his use of the P word: Profit.by EJ Moosa
(libertarian)
Thursday, January 28, 2010
On 1/27/2010, President Barrack Obama gave the American people his State of The Union speech. One of the many focuses was the economy and job creation. Remarkably absent from the speech (at least for this viewer), was his use of the P word: Profit.
Like it or not, the potential for profits is what drives the American Economy. It is what drives any economic enterprise in a capitalistic society (of which I am certain Obama disproves). No one goes into business to break even or suffer slight losses year after year. No one hires additional staff or expands their business if the potential for profits is not there. Only someone who has worked in the private sector would truly understand this simple concept. Only someone who understands what a P & L statement is without having to explain what the P & L mean would understand. The President of the United States does not. He says no to profits, he does not know profits and what they translate into.
How do I know this for certain? Every industry sector mentioned by President Obama in his SOTU address meant subsidizing industries that ARE NOT PROFITABLE in their current state.
High Speed Trains- while AMTRAK is hemorrhaging Federal tax dollars daily.
Clean Energy jobs- if the demand and profit was there, the private sector would be financing these businesses as quickly as possible. But there is no profit there.
"But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. " President Obama, 2010 State of the Union Address
We are creating industries, and within those industries jobs, all without evidence that they will be profitable in the long term. We, the Taxpayer are left holding the tab.
"But here's the thing - even if you doubt the evidence, providing incentives for energy-efficiency and clean energy are the right thing to do for our future - because the nation that leads the clean energy economy will be the nation that leads the global economy." President Obama, 2010 State of the Union Address
No where does President Obama use the P word for these endeavors-Profitable. This means, that unless we are willing to admit a mistake, to change courses, we will be stuck with these endeavors until the end of time. AMTRAK, USPS, and other money losing propositions (losing money for decades, not just years) are still with us and will always be with us.
Profits are the driving force in our economy. The potential for profits is what drives hiring, research, development. Jobs follow those pursuits as day follows night.
Even employees understand this. It's why employees do not take jobs that cost them more to get to work, hire babysitters, purchase work clothes and tools, if their expenses for the job are more than they profit from doing the job. It's unprofitable for the employee, and it makes no economic sense to work at a loss. The same is true for businesses.
So while President Obama spoke on the chance to create jobs, (he mentioned jobs 22 times), he mentioned profit (or profitability) only twice. The first time mentioning that even small companies with a profit were having a hard time getting loans, and the second implying clean energy would one day be profitable.
President Obama should have spoken about what he was going to do to return profitability back to the business sector.
"We should start where most new jobs do - in small businesses, companies that begin when - companies that begin when an entrepreneur - when an entrepreneur takes a chance on a dream, or a worker decides it's time she became her own boss. Through sheer grit and determination, these companies have weathered the recession, and they're ready to grow." President Obama, 2010 State of the Union Address
Workers become their own bosses to make money. They are ready to grow when they have the opportunity to make more money. The equation is simple. Higher profits will increase hiring.
Unfortunately, profits are the antithesis of what any democrat is going to work towards. We have heard consistently of the evil profits of oil companies, bank, Wall Street firms, insurance companies, and drug companies(just to mention a few). So how can they state they want to increase profits for some while decreasing them for others? They cannot.
President Obama needs to get together with his advisers and discuss returning profit to the bottom line of American businesses, both large and small. President Obama needs to move away from an agenda that will reduce the bottom line for businesses, such as those he pursued during his first year. Only then, will the prospect of higher profits drive businesses to pursue a path of growth, and only then will true job growth return.
There will simply be no growth(and no job growth) without profits. It's that simple.
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The views expressed in this
article are those of EJ Moosa only and do not represent
the views of Nolan Chart, LLC or its affiliates. EJ Moosa is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Just a sidenote after today's GDP announcement. According to the BEA website, the year 2009 had the second largest GDP recorded, after 2008. This should be ample evidence that a large GDP is not the solution to the problem.
But if you look at line 17 of the GDP report, you will see that Corporate profits peaked several years ago. Very close, in fact, to the peak in employment.
So I ask, what is missing if the last two years were our best GDP performances ever, and we have record unemployment?
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