Peter Schiff - the full testimony 1

13 Sep 2011
Peter Schiff and other speakers give testimony at a U.S. House Government Oversight & Reform Committee. They are asked to examine the economic effects of the tax and spending proposals offered by President Obama.

(Peter Schiff)
I would rather profit from America's success rather than her failure which is why I am here today. We have some serious structural problems underlying the US economy.

As a nation we have borrowed and spent our way into a ditch. We are not going to get out of the ditch by digging deeper. We have to reverse the mistakes of the past not repeat them. Government stimulus will never grow this economy, it will never create jobs. It is the equivalent to trying to put out a fire by pouring gasoline on it. The housing bubble and the financial crisis of 2008, two events that I predicted and warned about, were the consequences of government stimulus.

The stimulus is preventing the free market from unravelling the problems that years of bad monetary and fiscal policy have created. We don't need more spending, we need the opposite of spending [!]. We need under-consumption. What the economy lacks is savings, investment, production [Absolutely]. If we try to preserve the jobs of the bubble economy with more reckless money printing and borrowing and government spending all we will succeed in doing is preventing a restructuring that we will need and preventing more productive jobs from coming into existence.

I am an employer. I employ about 150 people. I would probably employ a thousand more if it weren't for government regulations that have inhibited my ability to hire and grow my business and which have forced me to move portions of my business overseas instead of here.


Jobs come from profits or the profit motive and they come from capital. You need both.

If there aren't enough jobs Congress needs to ask what are we doing to inhibit this process?

In order for me to hire somebody I have to be able to make a profit. That means the person I hire has to deliver to me more value than the cost of employing them, which is not just the wages I pay them but all the mandatory benefits, taxes and more importantly the legal liability that I incur when I hire somebody. One of the riskiest things you can do in America is to hire somebody. That is a consequence of government.

The other thing you need to create jobs in addition to profits is capital. I have capital. I have tools that my workers lack. They come to work, I give them an office, I give them secretarial support, I give them computers, I give them leads I give them a brand and all sorts of things. But where does capital come from?? It comes from SAVINGS. It comes from under-consumption; either I have to save it myself or I have to borrow it from someone else. But there is no money to borrow because it is all going to government! Or something that government guarantees like education or home mortgages. There is no credit available for small businesses. It's actually a paradox but what we need is higher interest rates. Higher interest rates encourage savings. Low interest rates are no benefit to typical businesses. Yeah it benefits government. Major corporations have access to money. Wall Street can gamble with it. But small businesses can't sell bonds. They need to borrow money and businesses can't get capital. There is no incentive to hire because the costs are too high.

I was actually fined $15,000 by security regulators because I hired too many people. I incurred over $500,000 in legal bills defending myself because I hired too many people. I was on a hiring freeze for 3 years. I had plenty of demand, my business was growing but regulators prohibited me from doing this. Rules and regulations have prohibited me from doing this. I started my securities firm in 1996. There is no way that I could have started that firm today. It costs me millions of dollars a year just to stay in business just to comply with rules and regulations that are not doing anything to protect my customers!

{Sips water}

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