Sunday, November 29, 2009

Basic Business Facts missing in Government

It appears to me that the basic business facts are just getting blown by in the current spending trend of our Government. The belief that the income can increase for the foreseeable future through the use of taxation is not only a flawed theory but one that is destined to destroy not only our economy but the country as a whole. In business school we are taught that the purpose of your ongoing concern is to service the profits of the shareholders. If meeting the basic premise of that rule begins to be one where the profits can no longer be serviced then the Ongoing Concern must be terminated. A classic case in point is recently I read an article in the Orlando Sentinel about a company that has had to close down because Charlie Crist (Florida Governor) accepted TARP money which required the company to pay unemployment on part time workers. It was cheaper for the company to close the doors then to continue to operate. Who does this affect? The ongoing concern employed workers who purchased things, paid taxes, supported their families... Now they are out of work and that cash flow is gone. The ongoing concern paid taxes, provided a valuable service, and provided profit for the shareholder(s)... no more.

So, what was once several credits on the balance sheet for the government is now not a zero dollar amount, but a debit because they are paying unemployment to those workers, perhaps welfare. This is basic accounting. The problem is that nobody in our most learned government is taking into account Organizational Behavior and the will of the people. This is an example of a small local company. What if you are a large Multinational? If it becomes cheaper to incorporate in China do you not think they will do that? Then they are no longer subject to the rules set by Washington. How does that help the American worker? Why do you think that many large organizations are incorporated in Delaware?

Basic human nature and the will to survive will lead the way... eventually... I just hope it is not too late.


Monday, November 09, 2009