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Businesses prep for new management

Marketplace Staff Nov 7, 2008

Businesses prep for new management

Marketplace Staff Nov 7, 2008


Scott Jagow: We put a call out looking for small business people to tell us what they’re thinking with a recession coming on and a new administration coming in. A lot of people responded and now we’re gonna hear from two of them.

Jeff lives in Irving, Texas. He’s a consultant to hotels.com. He voted for McCain. We’re also joined by Raul in Palo Alto, California. He’s trying to launch his own internet company and he voted for Obama.

Raul, I’ll begin with you. You’re starting a business in this economy. What, are you crazy?

Raul: A lot of people have said that. Sometimes situations happen where you’ve made plans and you have to move forward with them. But on the other hand, a startup is a good company to create during a recession because you have to develop a product and if you can develop it during the 12 to 18 months that you’re in the bad period, hopefully as your product comes out and you begin to sell it then you’re coming out of the recession into a growth market and then to have a product when customers are ready to buy again.

Jagow: Alright, I can buy that. That’s a good philosophy Raul. Now Jeff from Irving, Texas, is also with us. Jeff, you didn’t get what you wanted. You voted for McCain.

Jeff: I did.

Jagow: So now what for you? Is there anything that you’re going to do differently now that you know that Obama will be in the White House?

Jeff: Yeah, I think the major thing differently is there’s so many different stories in terms of what’s going to happen tax-wise and who’s going to see their taxes increased. My wife and I have spoken about limiting after-tax outside investments and instead keeping as much as we can in 401(k), IRA, tax-advantage type pieces that help also decrease your taxable income level.

Jagow: So you’re going to play pretty conservative; is that what you’re saying?

Jeff: Yeah, especially for the next couple of years.

Jagow: Now Raul, what about you? Are you going to do anything specific — beyond obviously starting your company here — to either take advantage of the fact that Obama is in the White House and the Democrats rule Congress or as a preventative measure against whatever policies might be coming?

Raul: I actually agree quite strongly with Jeff that the prudent thing to do in a very difficult economic situation, regardless of who’s in power, is to be very conservative with your investments and to be very careful how you spend money. To be honest, I can’t really say that my plans have been changed that way by Obama, only my hope that he can get us out of this difficult time more quickly.

Jagow: Now let me ask you both about the T-word: taxes. In your email, Raul, you were saying you would support high taxes rather than continue with government borrowing against the future, which means the future for your kids, right?

Raul: I very much agree with that. One of the things that I find extremely distressing at this time is the amount of borrowing that’s going on for the wars in Iraq and Afghanistan that my children and perhaps their children are going to have to pay for and it doesn’t seem fair. So to that extent, I believe that one has to pay one’s way. I don’t like higher taxes, I don’t want to pay more taxes, but I do believe that you have to be responsible for the environment that you live in.

Jagow: Alright. Jeff, what’s your view on the tax situation?

Jeff: In some cases, I think our taxes are still too high. We pay the highest corporate tax rate in the industrialized world, but then here or there Congress exempts certain special interest groups or special industries from those taxes. A smarter, lower tax rate that would actually increase revenue but get rid of all the loopholes would serve our country better, especially with us trying to get out of an economic downturn. I think personal taxes are the same way: there’s so many different ways that with a good accountant or a good lawyer you can avoid paying your fair share. It’s not so much the tax rate; it’s the means we use to collect it.

Jagow: The system, the way it works or doesn’t work?

Jeff: Precisely.

Jagow: Alright. Here’s your chance to look into the future. Give me your crystal ball, Raul, for the next couple of years.

Raul: I believe that the next 12 to 18 months are going to be a very difficult economic period. Toward the end of 2009, I believe that we’ll start to see the economy bouncing back and really starting a new growth period.

Jagow: Jeff, how about you? What’s your vision of the future here?

Jeff: Well, the long-term vision is good, but I would agree that in the short term, particularly in the next 12 to 18 months, are going to be very difficult. I think a lot of it is investor psychology more than anything else. Probably in 18 months we’ll at least have a good idea on where the national debts for all these stimulus is going to end up and hopefully with some closer to living within our means on a government basis, that’ll help turn the tide on that.

Jagow: Jeff from Irving, Texas, thanks so much and best of luck to you.

Jeff: Thanks.

Jagow: And Raul from Palo Alto, California, thanks for being on and good luck with your business.

Raul: Thank you so much.

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