November 14, 2009

The Passing-on-Costs Myth

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.

From  blog.robertringer.com/2009/11/14/the-passing-on-costs-myth