When the problems of Greece hit close to home

Americans have been in shock watching the images of buildings — and even people — in flames as the government of Greece implements austerity measures to stop the bleeding caused by decades of irresponsible fiscal policies and socialism. We Americans naturally think, "thank God I still live in the US. That could not happen here."

Recently Dale Hurd of CBNNews.com has painted a dark future of our own republic if we do not change our spending priorities. Furthermore, he points out several scenarios — none of them pleasant — if we fail to fundamentally change the direction our country is going.

Hurd points out in his column that the "federal debt as a percentage of the Gross Domestic Product now stands officially at around 60 percent. But with the course the country is on, it will hit 150 percent in 10 years, and 300 percent by 2050" (emphasis added). He goes on to compare our situation with the one in Greece, which began to spiral when its debt reached 115 percent of GDP. We will reach and surpass that number in less than ten years. Because Greece is a member of the European Community and its currency is tied to the Euro like most member countries, other countries have (at least) a short term incentive to bail the country out in order to protect the value of their money. Those countries are, in fact, doing just that. Who will bail out the United States? Considering the disdain by other countries towards the US, one should not have any hope that others will come to the rescue.

The columnist quotes Anne Vorce of the Committee for a Responsible Federal Budget, who said she is not sure when America will enter economic crisis, but noted that "The problem is you don't know when you reach a tipping point until you reach it, but we're well beyond normal peacetime historical experience already." If the US entered into any additional major national security conflicts or faced any series of natural (or other disasters), we could find our situation deteriorate rapidly.

What I found most disconcerting about the article was the words by Hurd about the future of the United States of America. He said we only have to look to our friends in Argentina to find a disturbing window of the future. "Before World War II, Argentina was one of the most prosperous nations in the world. With a strong industrial base and thriving middle class, it attracted immigrants much like America. But within 15 years, Argentina went one of the richest nations to one of the poorest. Argentina President Juan Peron, who some historians say was a fascist, fomented class warfare and bashed business, banks and the wealthy. He made labor unions his allies and unleashed massive social spending that the nation couldn't afford." This sounds eerily familiar as we have a sitting President with certain obvious "corporatist" inclinations and disdain for those in the entrepreneurial (most of whom are middle income) class.

So what does the future hold? Experts point to several possible scenarios, none of which offer much to be optimistic.

Long term economic stagnation. We as a nation simply get use to doing without. High unemployment becomes the rule rather than the exception and the idea of an expanding economy and growing opportunities becomes something for the history books. Many experts see this as one of the better scenarios.

On the opposite end — and the worst case scenario — we have a government that goes into default. This means it cannot fulfill financial obligations, pay its bills, and it leads to a rush on the dumping of its Treasury bonds as countries no longer see us as a good investment.

Another possibility is hyperinflation. On a single day last year the US Government pumped $1.4 trillion into the money supply in order to offset the high cost of bailouts. This "funny money" has the potential of devaluing all dollars that are out there and it appears this approach to monetary policy could become a permanent part of our economic strategy.

The bottom line is that the US is going to have to make tough decisions about the future of our spending or the consequences of our behavior will make decisions for us. "Doing nothing" is a course that was followed by countries like Argentina that was propelled from a major economic player into third world status. There has to be a better way for the United States of America.

Kevin Price is a nationally syndicated columnist and host of the Price of Business on CNN Radio. Learn more about him and his activities at www.PriceofBusiness.com.

Why Detroit and the Rest of the Nation suffers

I grew up in a suburb of Detroit, Michigan and thought it was a great place to live at the time. We had four seasons, beautiful trees, and it was a wonderful place to be a kid. However, it was also a place in significant economic decline and, by the time we left in the mid 1970s, Detroit was a place on the ropes. Like the many "Michiganders" that flew south to escape the economy of Detroit, we often joked, "would the last person to leave Detroit, please turn off the lights." With many economists indicating that real unemployment in the Motor City is around 50 percent, the day this city dies seems to be drawing near.

Detroit has reached such a dire status that its own demise has become a description for the decline of other economies. The Michigan based Mackinac Center discusses "Detroitification," which is defined as the "hollowing out of the private economy to prop up unsustainable (and often unresponsive) government establishments." That is a perfect explanation of what is going on in our nation's capitol today.

The federal budget is expanding at a breakneck pace, with the deficit growing annually at an amount our entire national debt was just two decades ago. The US already has the second highest tax rates of any industrialized country in the world. Our fiscal policies are going to make the government demand more. Every dollar the government takes is money that would go to an expanding economy and job creation.

What is the government doing with its expanding expenditures? According to USA Today, during the current recession, the number of federal workers earning six-figure salaries has grown at a rapid rate. While Americans struggle with economic decline that is demonstrated in higher unemployment, falling wages, businesses going under and housing foreclosures; federal employees are flourishing at the expense of taxpayers.

USA Today provides an example of this growth in government employment, at the beginning of the recession, the Transportation Department had only one person earning a salary of $170,000 or more. Today there are 1,690 employees with salaries above $170,000. The growth in six-figure salaries has made the average federal worker's pay climb to $71,206, compared with $40,331 in the private sector. Furthermore, government jobs usually include many benefits that are not typical in the private sector, making the public jobs even more expensive. One can easily see how the costly nature of the government and private sector trade off.

Michael Jar of the Mackinac Center rightly notes, "So much for shared sacrifice." The same tragic policies that have economically wiped out the city of Detroit are now being applied on a national level. Such policies keep certain political parties in power, and certain bureaucrats happy, but create ruin for the rest of the population.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Corporate Salaries are under Microscope as Federal Wages Explode

You have seen the headlines, "The Worst Unemployment in 25 years," "First Mark of Double Digit Unemployment in Decades," and more. Unemployment is rampant and the American people are rightly concerned. Many US employees are taking salary cuts, hour cuts, and any other type of cuts necessary to stay employed. We live in very trying times indeed.

We are told that the government is concerned about the disparity between employers and employees and we see additional headlines that reflect this fact. "Retro TAX on AIG Executives," "Corporate Salaries need to be brought to Earth," and "New Czar will Tackle Outrageous Salaries.” The Obama administration has responded by hiring a "pay czar" who wants to put limits on how much CEOs make. What we are not seeing much of in the news is that while millions are unemployed, the government has its own salary issues that have created a scandal of its own.

According to a recent article in USA Today, the number of federal workers earning six-figure salaries has exploded during the last year and a half. Leary taxpayers are not very comfortable with reports such as this in the best economy, it is even more disconcerting as we navigate through one of the worst recessions that we have experienced in a quarter of a century.

The growth in the number of people who work for the government and earn six digits is significant. Federal employees that are earning salaries of $100,000 or more jumped from 14 percent to 19 percent of civil servants during the recession's first 18 months -- and that does not include overtime pay and bonuses. Federal workers are enjoying an extraordinary boost at this time -- in both pay and hiring -- during a recession that has cost 7.3 million jobs in the private sector. Remember, every new job that comes from taxpayer dollars cost significantly higher than one created by the free market. These jobs are always more expensive because the average government salary is virtually always higher than a job in the private sector and they come with bureaucratic and other costs that are not found in the market place.

According to the USA Today article (depending on the Congressional Budget Office), the highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, according to the most recent figures available. When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more; 18 months later and you will find 1,690 employees with salaries above $170,000. The trend towards six-figure salaries is occurring throughout the federal government, in virtually every agency and in virtually every job type. What are the reasons for the huge jump? There have been substantial pay raises and new salary rules.

The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared to only $40,331 in the private sector. Each one of these jobs, paid for with taxpayer dollars, would create two truly profit making jobs outside of government. Congressman Jason Chaffetz (R-UT) is quoted by USA Today as noting that "There's no way to justify this to the American people. It's ridiculous." I believe that the vast majority of Americans would agree whole heartedly.

Tax Policies in a Small World

The cliché that the "world is small" has increasingly become fact and not merely a clever statement. In fact, one of the most important books on the changes the world has faced in recent years is "The World is Flat" by Thomas Friedman. In it, Friedman points out that the lag time between information and decision making is at a all time low. Not only do people know where the best places are for the best deal on a car or a TV, they know the best states and countries for doing business.

Ireland went from what was practically a "third world" country in Europe to one of the fastest growing economies in the world. That was directly linked to its efforts of pursuing the lowest corporate tax rates in the industrialized world. Meanwhile, in the same time frame, Japan's economic situation has only become more dire as it continued to pursue high tax policies and garnering the dubious distinction as having the worse tax environment for business among modern economies.

The problem facing governments is simple, because in addition to being able to find our information fast on changes in government policies, people are able to move capital at a more rapid rate than any time in history. This is particularly true for the very wealthy (who have the resource to move money), who are always a popular target for high tax policies. The problem is not only among countries, but among regional or state governments (depending on the country).

Take the problem facing Maryland. The Wall Street Journal notes that the state of Maryland was in a terrible fiscal crisis and the government decided to saddle the deficit on the backs of the rich and "created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were 'willing and able to pay their fair share.' The Baltimore Sun predicted the rich would 'grin and bear it.'" The article goes on to point out that a year after the tax increases, "One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a 'substantial decline.' On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates."

There is no doubt that the recession is playing a role in the problem of less revenue coming into the states. However, the amount of revenue that Maryland is losing far out paces the majority of the states in the union. The rich are people and not blocks of wood. Unlike an inanimate object, when people are attacked (in this case "the rich" in the form of high taxes) they "fight" (which is why they join the many other income groups adversely affected by government in protests) or they "flight" (capital leaving to find safer or more profitable places).

Obama has waged a war on those he deems affluent. This is beginning to include those who make less than $250,000 a year as seen in cigarette taxes and Cap and Trade. Even before many of Obama's policies have been put into law, businesses are responding. USA Today reports that Federal tax revenue "plunged" by the largest amount since 1981." There is no question that many of the dollars disappeared due to the recession, but there appears that much may have taken "flight" to safer places.

If the US is serious about increasing its revenues, it will need to develop tax policies that allow it to compete with other countries that are fighting to improve their economic circumstances. Just as companies have to compete with low prices, countries now have to compete with lower taxes.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

The Price of Business and the "Syndication Effect"

One of my objectives is to get the media that my company is developing in front of as many ears and eyes as possible. That is, after all, the purpose of media. The Price of Business Show is the longest running program on CNN 650, which is in the Houston market. Lately, I have been getting calls and emails from all over the country. Florida, Michigan, New Jersey, Pennsylvania are just a few of the states that have been taking a part in the program (you will get an example by clicking the image above). Thanks to the Internet, the show may already be "syndicated." I like to call this phenomenon the "syndication effect." We are nationwide, even thought the program is broadcasted locally.

CNN 650 is a partner with AOL radio and as a result, many of my listeners are listening to my show in their car, on the bus, and at the restaurant on their Ipods. Furthermore, with the ease of finding our media through Google searches (with over 150,000 unique visitors each month) and our growing business media platform (including USBusinessDaily.com, ChicagoBusinessDaily.com, etc.), our reach is only expected to expand.

The syndication effect doesn't end with AOL radio. Rarely does a day go by that I don't see an article of mine from BizPlusBlog.com in Reuters.com, USAToday.com, ChicagoSunTimes.com, or other major media. Blog syndication services, such as Blogburst, is continually changing the way people get seen and heard.

A very popular concept these days is the effort to become "almost famous." With some solid and consistent content and strong efforts to get your information seen, it is easier than ever. Furthermore, with websites like ours enjoying visitors measured in the hundreds of thousands monthly, it is very feasible to be a player in media today.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

On Two Years of Blogging

June 26, 2006, a date that will live in infamy! This is, at least, the day I began blogging. My First post, "Taking the Plunge," expressed my genuine concern that this would be one of those things I would begin and eventually stop. I have a checkered history when it comes to such commitments. Two years later, it has become an obsessive habit (according to my darling wife).

The reason for concern persisted for quite some time. I only wrote that one post in June and five each for July and August. None had a single photo. I struggled over what to write and early on it looked as though it would have a strong, local appeal. In September, the number of blog posts exploded. In fact, I almost consider September 1 as the day BizPlusBlog.com began. In that post, I committed to write much more often and I have. Photos didn't come until November of 2006 and became a regular part of the blog every post after that until videos and other media came much later still. The effort to make this a "real" blog has slowly proved itself.

In the past two years, the blog has become rewarding on many fronts. It now enjoys a title sponsor (ITEX), response from readers came from around the country, and syndication of the articles has occured in many national publications. Examples of many the posts found else where include Reuters, Chicago Sun Times, USA Today, and many others.

I know I have lots of work left to do. It remains an interesting journey. If you have been thinking about blogging, jump in, the water is great. On the subject of blogging, I thought you might enjoy the above interview with Denise Wakeman of the Blog Squad.

Want to learn more about the twin economic tsunamis of Social Security and Medicare? Get a free audio program featuring Rick Ray of the Wealth Design Group and Kevin Price on this important subject by sending an email to Info@HoustonBusinessShow.com.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.