The Passing-on-Costs Myth
Date: November 14th, 2009
Category: Liberty / Politics
By Robert Ringer
Any civilized person dislikes the thought of minorities being oppressed, and I would argue that the most oppressed minority in the U.S. is the small businessperson. But he is not without his supporters. By and large, his employees think highly of him. Why not? After all, he gives them the opportunity to earn a living.
So, who is it that doesn’t like small business owners? The government! Why? Because small businesspeople are stubbornly independent. They don’t need or want government help. They make their own way in the world. Profitability is the name of the game for them, but it’s not an easy task.
In a truly free society, it would be difficult enough for a small business to make a profit. A small-business owner is like an orchestra conductor. He has to be on top of every aspect of his enterprise. He has to make sure that every employee is doing his job correctly.
And when he goes broke — as millions of small businesspeople have done — he often feels like all he has to show for his work is that he gave his employees a good lifestyle for an extended period of time. They go on to the next job, and he goes on to face his creditors.
Ironically, the small businessperson’s biggest threat is also his biggest employee — the government. I say biggest employee, because the government is supposed to work for him. It says so in that antiquated little piece of work called the Constitution. But those who hold the reins of power don’t much care about the Constitution.
As a result, the government taxes the small businessperson at every turn, regulates him to death, and harasses him in an almost sadistic fashion. Rather than being his humble servant, the government has transformed itself into the natural predator of the small businessperson.
Without government, it is breathtaking to imagine what the average small businessperson could accomplish. In a true laissez-faire economy — which, by the way, has never existed on this planet — the small businessperson would be able to create wealth on a scale that is impossible for a socialist thinker to comprehend.
Now, along comes government’s next big roadblock for small business — government-run healthcare. In one form or another, sooner or later, a bill will be passed — over the objections of a majority of American serfs. And when it passes, the one thing of which we can be certain is that it will mean higher taxes for everyone — particularly small businesspeople.
Having said this, I thought it would be a good time to disrobe an economic myth that even most libertarians and conservatives buy into. For as long as I can remember, conventional wisdom has insisted that companies don’t pay taxes, only consumers do. The idea is that any increase in a company’s taxes are merely passed along to its customers.
While this is true, to a great extent, in some industries (utilities being the most obvious example), it is not true in most. A government-enforced monopoly like a gas or electric company can, for the most part, pass along higher taxes to its customers. Even with utilities, however, there is, at least in theory, some degree of choice.
But in most industries, especially those that sell discretionary products and services, customers always have a choice. Whether it’s parallel competition (alternatives to a product or service), dollar competition (people making decisions to purchase some products and do without others), or invisible competition (entrepreneurs always being ready to enter into an overpriced industry and compete at lower prices), companies can’t treat their customers as though they are cows waiting to be milked at the whim of corporate executives.
Which brings me back to taxes. No matter what kind of healthcare bill finally emerges from the Criminal Crowd in Washington, you can bet the farm that small businesses will get hit the hardest. Small businesspeople stand for everything that politicians hate. Small businesses provide jobs. Small businesses produce products and services that people are willing to purchase, without the threat of government coercion. Small businesses create wealth and thereby grow the economy.
All of the above conflict with the current administration’s desire to collapse the economy and get as many people as possible on the dole (the Cloward-Piven Strategy). That’s why the government’s omnibenevolence never finds its way to small business. Small business is the enemy, because it eliminates the need for people to look to the government for benefits.
Healthcare legislation — in whatever grotesque form it ends up taking — will surely increase operating costs for small businesses across the board, starting with taxes and/or fines. And, as I said, a business cannot automatically pass along an increase in expenses to its customers. This is even more true in a bad economy, when people are not willing, or able, to pay higher prices.
Instead, they will find alternatives — often government-subsidized alternatives — or do without. Either way, the higher cost of doing business will cause small businesses to lay off employees, which will increase unemployment, increase jobless benefits, and further depress the economy.
And, of course, many small businesses will shut their doors — either through voluntarily or involuntary liquidation. Some of the more fortunate ones will go the Atlas Shrugged route and simply stop producing and walk away. Any way you slice it, the biggest cost of government-run healthcare to all of us will be the devastation that it will do to the engine of our economy — America’s 27 million small businesses.
But it’s okay, because Baltimore-bred, airhead Nancy — with her glued-on, toothy smile — has already congratulated herself and her Congressional partners in crime for “delivering affordable healthcare to every American.” Doesn’t her upbeat nature make you feel warm and fuzzy all over? Arrgh!
Now let’s sit back, reminisce about the golden days of Western civilization, and see what kind of Trojan horse the Senate Mob comes up with. Perhaps they’ll pleasantly surprise us, but don’t hold your breath.
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November 14th, 2009 at 10:17 am
The Atlas Shrugged – Galt’s Gulch option – that’s the route this physician and many others I know are getting ready to take. This will be a double whammy to Americans as a large number of the practicing physicians are small businesses themselves and are going to walk away from the whole mess. We will probably work in some other area entirely or for the “hospital-medical-industrial-governmentcomplex.” But not very hard and just until we figure out another way to make a living.
Fedup MD
November 14th, 2009 at 10:36 am
Unfortunatly Mr Ringer is only pointing out a historical shift that started with Henry Ford. The economy of scale. Big Business took over long ago and it is the Goal of the Corparations with their whore the Federal and State goverments to drive out the small business person because the economy of scale is to small with a small business but it is enough to steal the crumbs from the corparate table, and the Modern Robber Barons will not stand for one penny escaping their greedy grasp.
November 15th, 2009 at 8:09 am
The leader of the Free World has such disdain and disgust for We The People – and the fact that he has found so many like-minded zealots to carry out his agenda to destroy the very fabric of this great country would be unbelievable were it not for the everyday evidence. I find it hard to believe that the Senate, House and Congress all jump on board – As a small business owner – you realize even more quickly the evil of his ways. God Bless America
November 15th, 2009 at 6:39 pm
As publisher of an information site for business owners preparing their businesses for sale, I find that your views on the implications of this myth are disturbing. And, they certainly need to be carefully considered by all business owners and anyone advising them. As a somewhat uninvolved observer, I fear they are correct. I live in Canada so I can’t claim the same emotional attachment to the health care issue.
Keep up the good work.
November 15th, 2009 at 10:12 pm
Well said, and I’d like to borrow the “road block” part to use in my response.
Whomever wants to begin a journey on the ascending road to wealth will find that the federal, state, and local governments have built an almost insurmountable road block, out of red tape and taxes, with an army of bureaucrats, that prevents the little guy, young or old, but mainly young, from moving ahead.
Again, the government has broken the bottom rungs off the ladder of success, and all but the most persistent and gifted climbers will fail to elevate their lives.
For example, lets say that you’re a young person who wishes to buy a half-dozen calves; and raise them up into organic milking cows, so that you can provide your community with fresh milk. Do you think that this small business plan is viable on its own? Yes, without government interference it is viable. Many years ago, that’s how numerous small-rural-farms got their start. The formula is simple: 1)Start out small. 2)Work hard. 3)Sacrifice. Do this in order to grow and move ahead. This pattern, the start out small pattern, is timeless. Currently, however, the small business model is almost impossible to achieve with nearly a 100% failure rate.
The little young guy now has to face off with the oligopolists and oligarchists that rule America. The hoi oligoi don’t want the little young guy to compete on any level unless, of course, it’s their young people. It’s O.K. for them to compete. The hoi polloi’s young are used for war, labor, and to support government schemes, such as Social Security. The little young guy can flip burgers, become a nurse for the elderly, or join the military and become a modern day human sacrifice for those who run America.
If you’re a young person, then I’d advise you to prepare yourself to be used as a pawn of war. Why? Because the socialists— many of whom could also rightly be called oligopolists, and oligarchists— will eventually use war to stimulate the economy and divert your attention from the impending mother of all collapses. If you’re a young person, then keep your wits about you. Watch closely how the hoi oligoi are pillaging the country and using Wall Street as the primary tool to accomplish their robbery. They are paper pushes, and that, I assure you, is far worse than being a drug pusher.
Yes, I know that you can feel in your gut what’s happening, but take the time to get it straight in your head. Don’t be fooled by specious lies. Learn how the big boys are ruining your future. Watch how they devalue your future by printing more and more worthless paper money. In short, follow the money and don’t be fooled by all the lies. If you’re young, there is still time for you to prepare. How long? Good question. Lets hope, for your sake, that you have years and not months.
November 16th, 2009 at 8:25 am
There are always three parties to any business to whom costs may be passed, depending on market conditions: The customers, the employees and other service and product suppliers, and the owners. In most small businesses, it is the owners who bear the increases in costs of doing business.
November 18th, 2009 at 1:39 pm
People are only entitled to what they earn.
We now live in an entitlement society where those who earn nothing, are given the fruits from those who do actually work hard and validate their worth and manifest their potential. These earners are becoming frustrated at an alarming rate, due to having little or nothing to show for their efforts and self discipline, and more and more will begin breaking the teeth off the gears of a once great economic engine, by deciding to quit the now well defined “loser’s game” where everyone receives the same, no matter what effort and sacrifice is exerted to attain excellence and self reliance.
Perhaps a cleansing and collapse are needed and inevitable, though it would have been more sagacious as a nation of supposedly educated people, to have avoided the quandary we currently find ourselves in, long before it reached this point.
Hindsight clarifies all to those of understanding, which is little comfort when we ALL have to suffer for the folly of those who could not grasp or understand the progression of our nation’s decline and decay over the past 100 years.