Michael Lind has an interesting post on why we need to have both Big Government and Big Business as they’re absolutely necessary for our economy to function properly. I don’t have much to add to his overall points (which I mostly agree with), but I was taken aback by this claim:
It is true that 99 percent of Americans work for small businesses. But this is only because the federal government defines a small business as one with fewer than 500 employees. How many ordinary people think of a company with 499 employees as small?
Even with that loose definition, I had trouble believing that only 1% of the American workforce works for a company with more than 500 employees. The total American workforce is roughly 150 million. That would mean that only 1.5 million would work for large companies. From Wal-Mart’s website:
At the end of fiscal year 2010, Walmart and its subsidiaries employed over 2 million associates worldwide, with approximately 1.4 million associates in the United States.
Maybe those subsidiaries are considered “small businesses” and therefore not all of the 1.4 million count towards that figure. But McDonald’s still employs over 500,000. Doing some more searching, I found this census page which says that 56 million people worked for businesses with 500 people or more, so I’m at a complete loss as to where that figure comes from.
UDPATE: As was pointed out in the comments, each McDonald’s franchise is counted as a “small business”, so it’s not clear if all of those employees count in the 1%, although I’d question defining it that way. Either way, the census figures certainly don’t match up, and if the difference comes from how franchises are counted, that doesn’t really square with the perception of companies like Starbucks and McDonald’s, which few would exclude from the definition of big business.
UPDATE 2: Well, it looks like Lind corrected his post:
It is true that 99 percent of American firms are defined as small businesses. But this is only because the federal government defines a small business as one with fewer than 500 employees. How many ordinary people think of a company with 499 employees as small?
Quite a difference. And my earlier update appears to be incorrect. A McDonald’s franchise isn’t considered a small business in this record-keeping.
Hell, Blackwater is a small business. Halliburton is a small business. Bechtel, ADM, Cargill etc etc…
All small businesses. They get the tax breaks, they get the small-business set-asides, they get all the perks the teabaggers claim to be for mom-and-pop grocery stores and little machine shops.
But when you point out that most farm subsidies go to giant foreign banks, basketball players who’ve never even seen a real live cow in their lives, and hedge funds, they whip out that old adage about the free market and its not the governments place to interfere with the market or businesses.
The stupid, it is weapons grade with those folks. There is no stronger word for it, and there really needs to be.
McDonalds does the franchise thing for most of their restaurants. Each Franchise would be a small business.
Lee, you’ve laid out pretty good reason to not trust that 99% figure. Makes me wonder now what the real figure is.
You can also just look at our local economy. Boeing employs 72K in our state. As the population of our state is 6.66 million (as of 2009), Boeing alone employs greater than 1% of the workforce our state.
@2
I wondered that too. I’ll post an update.
@ 4
McDonalds and the other fast food companies are NOT in the restaurant business. They are in the property-leasing business. They own the land, and the building, but the “owner” of such a place is leasing from the company. They stipulate in the leasing agreements that the “owner” only contracts for all supplies from the leasing company.
McDonalds is not a restaurant company.
Big Government likes Big Business and Big Labor because they are easier to control. You guys never get over your love for the National Socialism movement.
@5
Right, but it is a single company, with a common corporate branding, set of products, etc. Most people think of McDonald’s as a large corporation rather than thousands of small businesses all selling the exact same stuff.
Deathfrogg is right and Lee is an idiot desperately trying to tie individual franchisee’s who take risk and have actual ownership to prove his silly point. Rather than get hung up on defining “small business” why not focus on Employment??
Small businesses continue to hold back investment capital…and will do so until the Tax Cuts are permanent and ImamObaMao makes it clear no more Big Government and big taxes & regs.
@8
Rather than get hung up on defining “small business” why not focus on Employment??
I think Lind makes a couple of good points on that subject in his post, so if you have any interest in having an intelligent discussion, you’re more than welcome to discuss that – rather than trying to pretend that I’m arguing things I’m not.
More unadulterated horseshit from MISTER Cynical-ASS-Klown, who never met a monopoly he didn’t like.
Small busineses…the heart of our capitalistic ecomonic system are FAILING…going out of business at a frightening rate. The lack of working class, living wage J-O-B-S is strangling this economy and premanently destroying the Middle Class.
“Small Business” has no excess of capital…small businesses (less than 100 employees or so???) can’t make it because of LACK OF DEMAND!!!
Supply? Demand??? Ever HEARD of that???
THis is a “bubble up economy”. MISTER Cynical-ASS-Klown thinks that firing workers and lowering taxes on already wealthy corporate gangsters is gonna change that.
HOW?? mister smarty=pants is that going to happen…
FDR had it right. Employ everybody. Rebuild the infrastructure (ever heard of a capital investment?).
Pay for health coverage and enact trade barriers so our American Companies can compete with the rest of the world on a level palying field and repeal the Reagan Tax Cuts.
@ 8
small businesses, real ones aren’t holding anything back. They are stripped to the bone. There IS NO CAPITAL for them to invest. They’re savings are gone, the local contracts are dried up because most of those are founded in a larger contract for supply to some large company such as Boeing.
Example.
Small businesses A, B, and C rely on somewhat larger businesses D and E to keep their machines busy. D and E are more than happy to oblige, as the smaller parts they produce for Big Company F can be farmed out after D and E pick the profitable cream off the top, taking the real money out of the contracts before farming out the smaller, money-losing parts to A, B and C.
C goes out of business, as the contracts became too burdensome to handle, the parts cannot make money, the materials are too expensive and the boss is tired of wrangling with D and E for a decent price on the parts.
So, D and E foist more of the parts on A and B, expecting the same pricing structure they got from C. But, as the parts cannot make money, and in fact cost B and A money to make, A and B tell D and E that they cannot be made for the money offered and they need a higher price, which D and E refuse to negotiate.
So, D and E pull the contracts, sending the parts to small company G, as they are new in the business, and eager to fill the machines with parts, and the cycle repeats itself.
This is a direct, personal example. There were these little cups, much like a freeze pug on a car engine, serving much the same purpose. They came in various sizes, similar tolerances on all dimensions. Made of 15-5 Stainless Steel heat treated to a certain yield strength and hardness. The tolerances for that were VERY tight, and big Company F had purchased almost the entire worlds supply of 15-5 in order to guarantee their continuing availability, then heat treat and certify the material themselves.
The smaller sizes took about 5 minutes each, the larger ones maybe 8-10 minutes each. The shop charged a basic rate of $75 an hour. That is the break even point when you include the costs of insurance, electricity, labor, cutting tools and machine maintenance costs, oil, coolants and such. Not to mention rent and maintenance on the building.
Larger Company D refused to pay more than $7 each for the larger ones, and would not negotiate at all. Their fixed price on the smaller ones stood at about $2.50 each.
You do the math.
11. Deathfrogg-
I respectfully disagree. Yes many tiny businesses of less than 10 employees are hanging on for dear life. But you’d be surprised at how many businesses with less than 500 employees have stashed money away…not buying new equipment or hiring additional employees.
No one who goes into business has a right to expect success. Businesses I work with started preparing for this recession 5 years ago. They had a plan for the worst. I’ve seen others who were in denial and did not cut fast enough. They are hurting or gone.
Lots of folks desire to go into business for themselves. I’ve seen great chefs with excellent menu’s fail because they lacked sufficient capital or other business acumen.
Or retail store owners who signed onerous leases and are lucky to break even because they sell products customers cannot afford or can buy cheaper elsewhere. Manufacturing businesses are particularly hard hit in certain sectors trying to compete with foreign produced products. They cannot compete due to labor costs, taxes & regs.
We need to compete. Big Government gets in the way.
99% of statements that “99% of people do X” are fabrications.
@12
Try starting or expanding a business without borrowing money. Try running a small manufacturing concern without having huge amounts of liquid cash available for expenses, when most of your customers wont obligate themselves any closer than net 90 days. Try hiring skilled employees when they can’t make enough money to pay their rent and feed themselves on their wages.
I cut metal for 25 years. I never saw more than $37,000 in my life. In those 25 years, my wages went from $10 an hour to $18.
In 25 years. Meanwhile, health insurance went from about $80 a month to $450. My rent went from $450 a month to $900. Electricity went from $40 a month to almost $100. Gasoline went from $1.25 a gallon to almost $4.00.
Then, because gasoline was so expensive, my boss decided to cut my hours to 32 so he wouldn’t have to drive that hour each way from his own home to get to the shop. He refused to cut the last two so I could get a partial makeup on UI benefits. He refused to pay more than 32 hours a week, even if I worked 36.
He refused to lay off the super stupid kid that was the son of his best friend, even thought the dumbass was less productive than a houseplant, and had to be retrained every single day.
So, when I was evicted from my apartment, I had no place to go, had no way to move into a new place as rents were similar all over the area, I had to quit and move 100 miles to squat a house that belonged to a friend, 40 miles from the nearest grocery store.
Then the bastard refused to allow me to take the UI benefits, after he told me he would. Six months after the fact.
So now, I owe UI 5 grand, have no money coming in, and am living in a tiny house behind a relatives barn. There is no work in machining. All the smaller shops, and may of the larger ones have closed their doors or are laying people off. They are cutting themselves to the bone in order to stay open.
There are a LOT of companies out there that flat out tell me, that as I am unemployed, I do not qualify for the job. They don’t hire people unless they’re already working.
How fucked-up is that?
I suppose all those parts from China are better for the economy, as the reject rate can be 90% and the larger shops still make money.
So you admit that businesses anticipated as early as 2005 that the Bush Tax Cuts and other Republican programs weren’t going to expand the economy, but were expected to result in a rescession within a few years?
And this was a year before Democrates achieved a majority in Congress, and three years before a Democrat won the White House, so you can’t say that it was in expectation of any expectations concerning Democratic control of the government.
@12
We can’t compete. It’s not possible. We can compete WITHIN our own country, but not globally. That’s why the very CONCEPT of tariffs existed. It’s theoretically impossible to compete against countries with nearly unpaid child labor, prison labor, or dirt cheap manufacturing (because they just dump all of their waste in the river behind the plant where we have to dispose of it properly). Granted half of China will be dying of cancer in the next 100 years as a result of the unbelievably horrible polluted rivers and land, but IN THE MEAN TIME we can’t possibly theoretically compete against folks who have a fake currency, virtually no environmental laws, and unsustainable crazy cheap labor rates.
http://www.newyorker.com/online/blogs/currents
Ed Rendell says it best…
China spends 9% of their GDP on infrastructure.
The US spends 2.5%.
We are sinking folks and the Republicans do not give a fuck.
Deathfrogg @ 14–
I sympathize with your situation.
Cutting metal is hard work. I certainly won’t even try to defend your employers actions on the UI. That’s not right. You are in a difficult situation.
I just don’t see more jobs created unless we incent employers thru lower taxes to invest more money. That we knock down regulatory barriers so we can compete.
I was against NAFTA and GATT.
100% against both of them
BTW..Clinton signed both of them.
People love buying cheap sh*t from China.
I agree our agreements with them are fraught with repurcussions.
In order to deal with our massive $13.8 TRILLION National Debt and $120 TRILLION of unfunded liabilities…we need to pay them back with cheaper dollars (ie inflation). The problem is the Government Employees, SS and Medicare are all tied to inflation.
We are f*cked.
That is why I moved to a very rural area.
Where I can grow my own food and be self-sufficient.
A friend of ours killed a nice Bull Elk on Sunday and we are getting 100 lbs of meat.
My freezers are already packed so I’m giving some stuff away. Our pantry is packed with canned goods. Does that make me a survivalist…or simply practical??
A short primer on Franchises:
A franchisor holds the company trademark, name, and business system. The Franchisee typically pays a significant up-front expense as a license fee, agrees to pay a percentage of gross revenue regularly as an additional license fee, and often also contributes to a “marketing account” which is usually handled by the franchisor to pay for advertising expenses which benefit both franchisor and franchisee.
The franchisee is an independent business from the franchisor, but agrees to some significant controls over the operation of his business so that the franchisor can protect the value of the company name. This includes inspection or premises, uniforms for employees, quality standards and uniformity of product, etc. In return the franchisee usually gets some protection of his/her investment, in the form of exclusive rights to operate a franchise in a specific area.
In the case of fast-food franchises, often the franchisee owns several restaurants in the same general area. This has some advantages to the franchisee (greater profits for not that much additional work), but it has some downside for the franchisor (for example, in Everett most of the Burger Kings dissapeared when the single owner of the franchises in the area went under).
In some cases the franchisor owns one or more “company owned” locations. But the general idea is that once they have proven the profitability of the system, the franchisor will devote it’s attentions to operating as a franchisor, not in running the individual businesses.
McDonalds learned fairly early the value of operating as a real-estate holding company. Banks hate lending money to restaurants because of their high failure rate, but love to loan money to company’s with real estate because of the underlying value. So McDonald’s early on decided to make it’s operations more like a real estate company than a restaurant operation.
McDonald’s also sought to get the maximum value out of it’s franchisees by leasing them equipment, selling them the logo’d paper products, trays, displays, pre-packaged food, etc. But that’s been the subject of some litigation as McDonald’s can’t legally force their franchisees to buy only from them (an illegal “tying” arrangement).
So it’s quite possible that McDonald’s headquarters has less than five hundred on the payroll, despite hundreds of thousands of “burger-flippers” across the nation selling burgers and fries under it’s golden arches and wearing it’s uniforms.
19. Mr. Cynical spews:
Bullshit.
More Bullshit. By not living in an urban area, you simple have no fucking idea of what you are taling about.
@19: Your post is arguing that you’re employers won’t start hiring unless they get government incentives to do so. Doesn’t that sort of contradict the ideals underlying the vast majority of your posts? You’re also arguing that we need to knock down regulatory barriers while simultaneously railing against NAFTA and GATT (agreements that knocked down regulatory barriers to our products in other countries and vice versa). I’m honestly curious as to how you reconcile those disparate beliefs.
I don’t disagree that the government should be incentivizing businesses to start hiring again, but preventing the Republican Tax Hikes is an odd way to go about it. And there’s not much we can do to make companies like MS that are sitting on HUGE piles of cash to start hiring, particularly when they are strongly incentivized to let the economy tank for a few more years so they can get even more pro-corporation Republican office-holders.
@22: Don’t know where “you’re” in the first line came from.
@19
I just don’t see more jobs created unless we incent employers thru lower taxes to invest more money. That we knock down regulatory barriers so we can compete.
I was against NAFTA and GATT.
Do you even realize how much you’ve contradicted yourself here?
Cutting taxes used to be a way to give the economy a push. But it doesn’t work that way anymore, especially not in this rescession.
First of all, we aren’t talking about cutting taxes to the unemployed. They aren’t paying enough taxes to make a difference. What makes a difference to the economy is the undemployment benefits, which makes sure that not only they can buy groceries and shoes for their kids, but also that the local grocer and shoe retailer doesn’t have to lay off even more people (or go out of business altogether) in the meantime.
Secondly, giving a tax break to the middle class MIGHT create some temporary upward benefit as they spend that money. As the old saw goes, consumer demand creates orders which creates jobs. But in today’s economy, that might be a temporary seasonal job at Best Buy as the middle class buys a new 42″ flat panel plasma TV which was made in Korea, Tiawan, or China. A temporary retail profit, but no factory jobs, at best a “flash in the pan”. But if they use it to pay down debt, then there is only a marginal long-term benefit to the economy, certainly not the immediate economic benefit we wish to achieve.
Third, giving money to the wealthy is CERTAINLY no guarantee that the money will go to jobs. They can use the money for personal consumption overseas (another trip to Cannes, anyone?), invest in business which are out-sourcing jobs to China, etc., buying gold double-eagles to keep in their vault, etc. If it’s economic goosing we want, giving a tax break to a wealthy person is like trying to cut a tomato with a baseball bat – you might accidently achieve some benefit, but not in the way you imagined.
Finally, cutting tax rates on company’s and businesses who are losing money will hardly help anything at all. They aren’t paying any taxes in the first place. What they need is customer demand, not tax breaks. Only the business who are still profitable benefit from tax breaks, and they don’t really need them.
In fact, spending money on local infrastructure projects in the U.S. is the most likely way to support the economy. Because bridges and highway construction can’t really be out-sourced overseas, you create local jobs, which create a bottom-up surge of deamnd.
On Lee’s subject of employement numbers:
Remember that when Wal-Mart announces that it employed some two million workers during a given year, it is probably counting every employee who was on the payroll during that year. But that’s probably not the current employment count at any given time. Wal-Mart, and other large retailers, tend to hire lots of part-time employees who work there for short periods of time, expecially during the holiday season. Many take temporary jobs there only until they can find other jobs, it’s an “employer of last resort” for many.
Thus Wal-Mart’s overall employee count at any given time, excluding seasonal fluctuations, might be half of that number, for all we know.
Would tax breaks for the rich based upon their investment in companies that do not outsource work?
Like repairing infrastructure with steel made only in the U.S.
@26
Beyond what you’ve already said, do you have any other potential explanation for where Lind is getting that figure?
Sorry, no.
But remember that large employers have an incentive to exaggerate their employment impact to local politicians for a wide variety of reasons, and the press release is sometimes intentionally deceptive in hiding those exaggerations. Local newspapers usually print those numbers without askign any questions.
Sometimes this is done by a company listing the numbers of workers who were on the payroll within any given year, as I suspect Wal-Mart has done, without subtracting those who no longer work there at the end of the year.
At other times it is to use a “workforce multiplier”, which assumes that each job created by one company results in numerous other jobs, either among vendors, construction workers, or simply businesses who profit from the wages earned by the companies’ employees. Sports teams do this regularly, arguing that a team brings in a lot of money which justifies tax breaks and subsidies for the team.
Lately I’ve been deluged, almost daily, with press releases from Boeing promising millions of dollars in benefits and jobs to virtually every state in the Union, as long as Boeing wins the Air Force tanker contract. Clearly this is intended to create political pressure on politicians to support Boeing’s bid.
Even without considering distinctions-without-differences such as the McDonald’s franchising operation, Lind’s 99% figure is clearly false. He doesn’t even specify whether he’s limiting his purview to private employers.
Thus, his 1.5 million who aren’t employed by “small businesses” would include at least 16.6 million FTEs in state and local governments (2009 figures). It also includes about 2 million civilian federal employees (link not provided, as I don’t want this comment to be held) and 1.4 million active-duty military.
That’s 20 million Americans who are merely the public employee portion of Lind’s 1% who aren’t employed by small businesses.
This stinker doesn’t pass the laugh test. Doesn’t Salon have any fact-checkers?
22. Xar spews:
Incent was a bad choice of words.
I should have said…”keep more of their hard-earned money”.
But it is an incentive of sort when you are allowed to keep more of your own money.
X’ar–you presume a man or woman’s earning belong to the government. I believe they belong to the earner. And the tax-collector has taken on an over-reaching life of it’s own.
@31: No, I assume that the price of living in a civilized society with roads, the military, and some basic social services is paying taxes. Our earnings belong to us, but our government services aren’t free.
I would note that during GWB’s presidency (with the lowest effective tax rate on the wealthy in modern American history), the richest ten percent of americans nearly doubled their average income (~$1M to $1.86M), while the average american family’s income went from $38k to $41k, barely pacing inflation. Lowering taxes on the wealthy makes them wealthier. It doesn’t help out anyone else.
[Deleted – off topic]
@31
But it is an incentive of sort when you are allowed to keep more of your own money.
How so? I can see an incentive as being something that you would have to do in order to keep more of your own money, or as being something where you could keep more of your own money if you were to spend it a certain way. But being allowed to keep more of your own money isn’t an incentive by itself. It doesn’t compel people into any specific action. Some may save the money, some may spend it. It’s simply welfare.
[Deleted – off topic]
We’ve had tax cuts for the rich for many years
How are they working out for us right now?
This is a truth that’s only beginning to dawn on me and explains why the right wing always knee-jerk lower taxes.
Raise taxes and wages naturally rise to keep pace. This has been borne out time and time again. It just takes 2-3 years. This is generally true for anyone who works for a living.
Lower taxes and wages lower to keep pace. Anyone now see why the middle class haven’t had a wage increase for 30 years?
Lowering taxes also – bingo! – increases the wealth of the wealthy by leaps and bounds.
Anyone see the pattern???
This was all explained to Thom Hartmann long ago:
http://www.truth-out.org/roll-.....-cuts65332
A salient quote:
As one of the millions who, as of today, has been notified of the end of my unemployment benefits I am moved to look for like minded citizens who will join me in mounting a continuing vigil, both in front of public buildings and at local places of worship, until the unemployment extension is funded. It is time that we make the faces of the unemployed, no matter what their prior employment status, visible by way of such gatherings throughout our area and hopefully throughout the nation, until there is no defense for the cruel and selfish behavior of lawmakers who care more about political advantage than the welfare of so many of their fellow citizens. We are not dead beats, drug addicts, people unwilling to take any job, or do whatever else is necessary to climb out of this canyon of despair, fear and sometimes depression so deep that ending our lives is actually considered a solution. Knowing that you are people of conscience with the ability to connect with like minded people I am appealing to you for any assistance you might offer in this crusade. Surely in this holiday season we can perform this blessing, not just for those of us directly effected but for their families and loved ones and. in the last analysis, for all of those yet to face unemployment for there will surely be many more to come before these terrible times end. You may ask why I am doing this today, after months of searching for a job, it is because I have come so close to employment and been put on hold and now I know that it is time to look to my fellows for the simple strength our numbers will show to one another and our employed neighbors and friends. I haven’t lost my humor, even in concern and despair, but I understand I need to summon a higher power to remind those in power in our country of our collective humanity and the shame we bring to all of us by our lack of constructive concern. Please contact me directly as soon as possible so that we can accomplish this goal before the end of the year and the swearing in of the new Congress and Senate in January. Any help you can render in this effort will be greatly appreciated. Thank you for taking your time to consider these words and best wishes to you and yours in this holiday season.
Take care,
Pam McCollough (please contact me through Facebook e-mail)