Whichever candidate is elected president of the United States Tuesday, he is going to face the same collection of economic problems. And those problems — a credit crunch, recession, limping stock market, growing international protectionism, a burst housing bubble with the attendant mass foreclosures, inflationary pressure from the bail-out, rising unemployment — are all adding up to a perfect storm of economic woes, with the potential to play upon each other and create even more nasty system effects.
What this means is that for perhaps half of the first term of the new president, he will likely be unable to implement most of his social programs and deliver on his campaign promises … but, instead, will spend most of his time focused upon economic triage and be at the mercy of larger social forces.
And that doesn’t even take into account the fact that the new president, whoever it is, will (in Democratic vice presidential nominee Sen. Joe Biden’s words) likely be seriously tested by one or more of the bad guys around the world. If that occurs, and the odds seem pretty high, then whatever dreams the president-elect had when he decided to run for office, the reality will be a lot closer to trying to successfully navigate the ship of state through rock-strewn raging rapids.
The crucial challenge, then, for the new president is to figure out how to nurse the U.S. economy back to health — and quickly. Only a healthy economy can create the wealth needed to implement all of those changes the candidates have promised. Only a strong economy can absorb the next generation of workers, pay for added health care and lift the poor upwards to a better quality of life.
Happily, both candidates seem to understand that.
Unfortunately, neither one seems to have a realistic strategy for getting there.
There’s a good reason for that. Sen. Barack Obama, being a Democrat, seems to have very little idea of how the economy actually works and ritually evokes business not as the only true creator of wealth in our economy, but as a predatory menace.
Sen. John McCain, being a Republican, has a marginally better understanding of the economy and the role of business — but his attention, as usual with GOP elders, is focused upon established companies, which undergird our economy, but do little to create new jobs or new wealth.
What is missing from the economic debates of this campaign — as it has been from every presidential campaign at least since the Reagan years — is a recognition of the absolutely central importance of the entrepreneur to the health of the American economy.
Entrepreneurs, and the new companies they create, are the source of almost all of the new jobs, the new wealth, technological innovation, revolutionary new products, positive balance of trade, and improvements in productivity (and thus, international competitiveness) in the U.S. economy.
Yet, in the debate over how to ‘fix’ America’s current economic mess, they are the forgotten men and women. They alone have the ability to not just slice the economic pie more fairly, but actually make it larger, rewarding everybody — just as they have over the past century.
Indeed, at a time when we are arguing over income redistribution, no one seems to have noticed that the greatest income redistribution mechanism ever created is entrepreneurship — which essentially creates each year, from nothing, hundreds of thousands of new jobs, and billions of dollars of new wealth — money that is less likely to go to the same old fat cats, but smart young inventors, veteran middle managers, even secretaries and factory workers.
Entrepreneurial start-ups are also brilliant trust-busters, because they pull down or render obsolete older, less competitive big companies and replace them with smart, fast-moving upstarts. The result is a fairness, and equality, and a virtuous upward economic spiral that has never been duplicated by government fiat.
But to do that, entrepreneurs have to be protected. And they have to be unleashed. And even though I’ve heard Obama and Republican vice presidential nominee Gov. Sarah Palin both mouth the word “entrepreneur” in recent days, nothing I’ve seen in either platform suggests that this is much more than lip service.
The Republican Party, for example, despite being genetically pro-business, has over the last eight years done its level-best to slowly strangle all new high-tech business creation in the U.S. From the crushing cost and bureaucracy of the Sarbanes-Oxley corporate reform legislation, to the board of directors-gutting new governance rules or the forced valuation of stock options, the current administration couldn’t have done a better job of gutting new business creation in the U.S. (Yes, I know many of these new regulations emanated out of Congress, but where was the fight from the White House?) and strengthening the power of big business.
That, of course, may have been the plan all along. As I’ve written many times, entrepreneurs, busy with company-building, have little influence in Washington and no distinct constituency to argue their case.
Meanwhile, established and big companies understandably hate entrepreneurship and will do almost anything to slow the progress of entrepreneurs — like all of those onerous regulations described above. And it has worked: This year has seen almost no high tech company IPOs, traditionally that moment when entrepreneurs gained their freedom and rewarded their teams.
These days, the only recourse for a hot start-up company is to sell out to an established company — further consolidating power and wealth. And meanwhile, of course, those older companies find it much more pleasant to buy these new competitors than compete with them.
Nothing in McCain’s campaign suggests that he understands any of this, or will change the status quo. To look more hip and in-the-know about the tech world, the senator likes to point to the fact that eBay’s Meg Whitman is his campaign’s advisor on business.
She is, in fact, one of the finest business executives I know, but Meg is not an entrepreneur. And this suggests that a McCain presidency is not going to come to the aid of America’s entrepreneurs — and that the best we can hope for is that it will get out of the way, at least when it comes to taxes. That may work, but it will be a long, slow recovery.
As for Obama, leaving aside all of his other proposals for massive social change, the single most frightening plank in his platform is his plan to increase the capital gains tax. If there is one single factor in the U.S. economy that defines the rate of new company creation, it is taxation on capital gains — in particular, the differential between the capital gains and regular tax rates. To understand the long Reagan/Bush/Clinton boom of 1980-2000, you need only look at Reagan’s slashing of that differential.
Assuming that his comments about “corporate greed,” etc. indicate that he has no intention of getting rid of Sarbanes-Oxley or any other crippling corporate regulation, then Obama’s plan to raise the capital gains tax will all but kill creation of new companies — especially new tech companies — in America. No new Apples or Facebooks or Twitters, no explosive new industries spinning off endless amounts of money and jobs, no new competitive advantages in the global economy.
I don’t see how you can accomplish real change, finance massive social works and raise up the poor and middle class when you are stuck in a 1970s-type economic doldrums with the inevitable cultural malaise that follows.
I had coffee yesterday morning with a Silicon Valley veteran who is a serial entrepreneur and staunch Obama supporter, and I asked him about this dark scenario. He didn’t disagree with my assessment, but only replied that Obama was a smart guy and that he hoped the president-elect would surround himself with equally smart guys who would explain it to him.
I told him that was a pretty dangerous kind of hope.
So who does get it? Ironically, it may be my own governor, Arnold Schwarzenegger. Two weeks from now he is convening in L.A. a Conference on Small Business and Entrepreneurship (Edgelings publisher Tom Hayes and I are keynote speakers). The last time anybody attempted this was President Reagan back in the early 1980s — so long ago that the hot technology topic was the fax machine. I suspect Schwarzenegger is going to come away with an earful — and a far deeper understanding of what really drives California’s economy.
It seems to me that the new president-elect should take a clue. Right after his inauguration, he should invite the nation’s small business owners and entrepreneurs to a summit … and then, during the opening address, announce the death of Sarbanes-Oxley and the cutting of the capital gains tax. I guarantee that before that speech is finished, the attendees will already be rushing out the doors to make the new president’s term in office a roaring economic success.
Mr. Malone, you’re spot on!!
In the event of an Obama victory, that giant sucking sound you will hear is the entrepreneurs in this country moving their ambitions to other countries where they will be rewarded.
Those who don’t leave will go John Galt for at least four years.
That’s weird, at a recent VC annual meeting a survey of their CEOs seemed to indicate that an Obama presidency would be MORE favorable to them than a McCain presidency.
I’m afraid the the true Obama, bait and switch, economic plan was partially leaked by Biden.
The tax threshold is now down to $200K, per Obama’s own words, and possibly as low as $150K according to Biden.
The comments about, “Joe the Plummer,” not making close to 250K, which was a stretch at first, are now very valid if Joe buys a business that could realistically gross 150K.
This is going to scare the crap out of many small businesses/owners who thought they were safe.
If Obama goes down to $150K, we will see a depression.
Why? Because a huge number of jobs will be lost when the next minimum wage increase pushes hourly wages over 7 dollars an hour added to the increased tax rate.
And, indexed union job wages will see increases based on being adjusted by the collective bargaining agreements that are tied into any minimum wage shift. Corporations will have no choice other than to reduce their work force.
One might actually start to suspect that Obama’s plan is more directed at totally ruining our economy so that the government can eventually take over just about everything by default.
I’m the founder of a high tech start up that is looking for funding. We want to employ 122 people in good paying jobs with benefits and produce products and services we can be proud of and that provide real value to our customers.
Since the primary elections began to focus on a key few candidates, we’ve seen venture capital companies react to the possibility of a new president that would raise capital gains taxes and it is showing no signs of abating based on the polls.
Of course the economy is a concern as well, but VC generally are looking out two to three years or so in terms of a liquidation event (going public or acquisition) where capital gains become a factor.
It is not complicated. These people take a lot of risk with their money and must optimize their investment because most start ups fail and the money is lost. And if capital gains taxes go up, the math says they will invest less money – far less.
I’ve sunk much of my savings into this business and have raised a couple of hundred thousand to get our initial prototypes created and file some patents.
I’m very concerned that capital is going to dry up if cap gains are increased. If so, our business is doomed.
Unless Obama stays true to his Davis/Alinsky roots and desires a total crash to drive change.
LAST GASP OF THE DYING BIASED MEDIA
This will be election that lives in big biased media infamy, as noted here:
http://greensrealworld.blogspot.com/2008/10/last-gasp-of-dying-biased-media.html
True conservatives need to vote Obama
The economy is in crisis and whoever is elected president will likely a one-term president. The times are very similar to the late 1970s in terms of oil, middle east conflict, and global markets. Things are likely to get worse into 2009 and beyond.
Jimmy Carter was ineffective. That paved the way for Ronald Reagan to sweep onto the scene. Had Carter not been elected… no Reagan revolution.
If McCain is elected, he is likely to look ineffectual, simply due to the times. That opens the door for Hillary in 2012. And she will have a full head of steam. By then, people really will be sick of the republican party. A vote for Obama now shuts the door on Hillary in 2012 and pretty much guarantees the strengthening of the republican party and a return to its more conservative base.
McCain will push the party toward the moderates. His goal is to be the first modern president to really reach across party lines. He will have dems in his cabinet. Indeed, he told Charlie Gibson today (Oct 31) that he plans to have plenty of democrats in his administration. He will not push true conservatives to the supreme court (why would he, he blocked them as senator). Meanwhile, Sarah Palin is truly horrible, as witnessed by her claiming that negative press attention violates her first amendment rights (she has it backwards). Once elected, McCain will return to the type of bills he proposed or supported and now repudiates, such as on immigration and tax relief. Its his last chance and he will do or say anything.
True conservatives need to think about the long game. Sacrifice the next four years, which will be horrible for whomever leads, and set the stage for the real conservative rise in 2012. Obama is the new Jimmy, and for that we should all be thankful.
“Obama is the new Jimmy Carter.”
Jimmy Carter destroyed just about the entire US textile industry in less than 3 years.
I’m not in favor of Obama in any way, shape, or form. Too much international instability in the works with Obama. The Supreme Court is too important of an issue as well. John Paul Stevens is 88 years old. Ginsburg is in poor health.
McCain is the only option for this election cycle.
Poster #9, WHAT A MAROON!
Sorta like, “VOTE CHAVEZ – he’ll bring out REAL democracy to Venezuela in a few years”.
FRAUDULENT THINKER…or FRAUD?
Good analysis, thanks. Let’s hope that Obama, if elected, is a pragmatist with a knack for getting things done. That would be exactly what is needed. Likewise if McCain is elected. Results over ideology and pandering either way. The world doesn’t call it “American know-how” for nothing. We need more know-how and less of the head-in-the-sand my-way-or-the-highway. History had the “know-nothings” but this is a time that calls for good old-fashioned American know-how.
Hey Malone, what’s with this phrase, “bad guys”? Sexist pig!
Hey Mr. Conservatives Can’t Vote for McCain….
I started five companies. Three were sold and one went public…one failed. I don’t need to work, but I am considering starting another company in the news aggregation area.
If Sen. Obama increases taxes the way his team (Obama, Biden, Richardson, et al) are advertising (btw, Bill Richardson is now hinting the number is down to $120K!!), I’ll take the next four years off. I’ll probably increase the size of my gun collection and spend my time outfitting a self sufficient compound out in the country. Yes, it’s gloom and doom, but you libs out there laughing right now will be the ones at my doorstep looking for a meal and roof, once the s*** hits the fan.
But back to business. it makes zero sense to work 16 hour days for these Obama supporters:
Sorry, link here:
http://www.youtube.com/watch?v=L6ikOxi9yYk
Dad is talking Romania, or Botswana (that one’s not very likely).
mccain would beat anyone:
http://i37.tinypic.com/2wmqc9c.jpg
The expectations of Barack Obama winning have been lowered considerably. Fox News had an article today that read “Obama sees Red” in reference to John McCain’s groundswell of support taking him to the top.
What is imploding his campaign? Joe the Plumber, New ads by Let Freedom Ring, and the perception by tens of millions of voters that Barack Obama is definitely a socialist — and the almost flat rejection of Obama’s “redistribution of the wealth.”
2008. The year The One … Lost.
“(btw, Bill Richardson is now hinting the number is down to $120K!!)”
This is amazing!!!
Are some of these high ranking Democrats coming to grips with the true Barack Obama?
Bill Richardson is an experienced negotiator. He doesn’t make mistakes like this. This appears to be a calculated expression of distrust for Obama.
Dr. Dean:
Dammit don’t you realize that even though raising capital gains tax will actually generate less revenue its fairer. Just ask The One who never created any job other than government make-work.
Incidentally, not agreeing with him is making a virtue out of selfishness.
“The crucial challenge, then, for the new president is to figure out how to nurse the U.S. economy back to health”
Wrong. You’ve bought into the illusion that Washington can and should be in the driver’s seat when it comes to the economy (presidents create jobs, etc.). Virtually all of our economic woes can be traced back to Washington interference. Government is the biggest player in the health care, energy, and mortgage business, yet we’re being told more of what ails us will cure us. Doesn’t add up.
” . . . he should invite the nation’s small business owners and entrepreneurs to a summit.”
Wrong, again. Small business should invite our parasitic, permanent political class to a come-to-Jesus meeting about what it would actually take to fund their grandiose, keep-incumbents-in-power larceny. Then offer them a deal THEY can’t refuse. You’re already on your knees. Hell of a place from which to negotiate.
When are we going to remember that this nation’s success — and the jobs, wealth creation and tax receipts that go with it — depend upon innovation, self-reliance and risk-taking, aided by a government which seeks a level playing field but doesn’t interfere with the ‘creative destruction’ which allows me to communicate on this blog?
@4, Krusty:
“At a recent VC annual meeting a survey of their CEOs seemed to indicate that an Obama presidency would be MORE favorable to them than a McCain presidency.”
Are you astonished (“Is that for real, mommy???”) or outraged (“What, he is threatening them agaig???????????”)
After the majority of the CEOs said Obama will be a disaster for the economy his campaign tries to intimidate all of them. Anything new? NOTHING TO SEE HERE, “MOVE ON, DOT ORG”.
Obama isn’t Kennedy. Obama isn’t Jimmy Carter. Barack Hussien Obama is liken to William Ayers, Hugo Chavez, Jeremiah Wright, Rashid Khalidi. They are anti-American. Barack is a radical marxist in moderates clothing. They don’t care if the USA goes down. It’s their goal. He currently has a cast and crew in Congress that will help him do it. He is ranked the most liberal of all his collegues and that’s without knowing who all his real friends are. It’s not a black and white (racist)issue but a 9/11 issue. These characters shed not a tear on that day except with sickening joy. Marxists don’t like giving up power once its in their hands. They will change the rules to keep it. Go vote NObama and keep America standing before her light in this world goes dark and then get ready because they are not going to give up.
http://davidjeffers.thevanguard.org/wp-content/uploads/qr103108-the-real-polls.mp3
listen to the audio, Pitssburgh radio station got hold of some GOP internal polls showing a possible McCain LANDSLIDE!
Entrepreneurs?
If you want Obama’s fans to understand what you are talking about, ‘bourgeoise’ it might be a better term to describe just who it is you are talking about.
On second thought, perhaps it’s better to keep them confused with ‘entrepreneurs’. We don’t want to trigger any Pavlovian responses.
As for the Republicans, they would do well to retreat from their their foray into economic activism and just stay focused on preventing the Dems from killing the goose that lays the golden egg.
“I had coffee yesterday morning with a Silicon Valley veteran who is a serial entrepreneur and staunch Obama supporter, and I asked him about this dark scenario. He didn’t disagree with my assessment, but only replied that Obama was a smart guy and that he hoped the president-elect would surround himself with equally smart guys who would explain it to him.”
Whoever this “Silicon Valley veteran” is, he’s an idiot.
We are going to end up in a situation worse than that under Jimmy Carter. Just try to find a job when inflation takes off and marginal tax rates are raised over 50%. No successful business person with any sense will be expanding, risking, or hiring.
All you ignoramuses who think Obama will be so great for this country are going to learn one hell of a painful lesson.
Guys, I worked in Silicon Valley for years. Sadly, there are many, many of these pro-Obama people working there. Quite a few of them are dependent on the largesse of Venture Capital — that fantasy of money for nothing and your chicks for free. By this I mean they don’t actually invest their own money, they use Other People’s Money, hence they aren’t entrepreneurs. Venture backed executives get a paycheck and limited upside via free options if the company is sold. This lack of personal risk frees them from the constraints of reality, hence their distorted view of the world.
Almost the exact post again as above. Venture capitalists are the problem, not the solution. We have grown our company from earnings, which current tax law makes almost impossible and Obama’s tax will totally destroy. Our success is due to the near infinite decrepitude of our much bigger competition. Our customers are large end users of heavy equipment we build, and they can’t believe our high competence by comparison to the likes of GE and Siemens. These guys can’t play fair, so they game the system against upstarts. Which candidate does that remind you of most? Who does GE support through MSNBC? Me, I’m moving to Korea if Obama wins.
Chester White – ACtually the biggest threat is not inflation et al. The real monster is DEFLATION. This happened under FDR. It’s what really made the Depression so Great. Excess money printing makes inflation. Confiscatory taxation produces deflation.
Try making your mortgage payment when your wages continually go down because of deflation. It has already started. Look at the price of oil as the world economy shrinks. This is going to affect the rest of prices. This is okay by itself, as prices go back to normal.
However, China and others based their economies on exporting to the U.S. and others. They now have too much inventory. Expect some dumping. Oil prices will continue to decline. Again, this is okay… as long as the government doesn’t jack up tax rates. The moment they do, watch out! If you’re in debt, you’re very screwed.
If home ownership again starts hemorrhaging, because of deflation, the economy will really tank. Just my $.02.
The more socialist and un-meriticratic a country beccomes, the more its smart, productive people go elsewhere.
America attracted the best and brightest from the whole world for the last 140 years, due to the follies of those governments. Most recently, we received a windfall of geniuses from China, India, and Eastern Europe who were escaping those socialist economies.
Now, however, with China in some ways more capitalistic than the US (even if undemocratic), and with India having zero capital gains tax on long-term gains, could the impossible happen? Could US-born AMERICANS decide to leave to go there, particularly if they offer a deal of no income tax for US expats (quite possible).
Imagine if you could live in some ‘special economic zone’ in China, with no income tax, good schools, good corporate housing for expats, etc., while still working at a major US corporation (Intel, Apple, Google), but simply out of China. Would you go? Many would.
An the US would lose the top-1% who pay 40% of all income taxes. What then, for the Obama socialists?
Always remember that globalization even forces COUNTRIES to compete with each other on tax rates. Countries that don’t have the disease of wussy leftism will reap the biggest windfall ever.
“Obama is the new Jimmy Carter.”
No, it is much worse. Go study the history of Germany from 1920 to 1937.
America is presently in the ‘Weimar’ phase. We are about to go into the post-Weimar phase, led by a charasmatic leader with hate-filled followers.
#6 Dr. Dean,
As has been noted elsewhere, if Obama wins and you’re a small business owner who will be forced to raise prices and cut staff, a look your parking lot will help with the latter: Fire those with Obama stickers first. Think of it as “spreading the pelf around.”
its going to be good as it was under Clinton
http://pajamasmedia.com/blog/obama-tax-plan-a-frontal-assault-on-entrepreneurs/
Despite what they think about Obama being interested in start ups, his tax rhetoric would bring the opposite effect.
Obama will feed the entrepreneurs. He will feed them after putting them in an aquarium, and keep feeding them until he either finds something more interesting to spend the money on or just plain forgets.
And then they’ll die.
Health insurance, health insurance, health insurance. I know many people who cannot leave employment to start businesses due to difficulty getting health insurance. The same obstacle applies to the experienced people they would want to hire to staff these fledgling business small enough to be subject to underwriting.
You poor wee bastards.
I have a job in an industry that does not just generate electricity, it generates vast sums of profit. In any economic climate. Its baseload, fools.
I was going to retire next year, but I am pretty good at what I do and I can stay on until I decide to quit. Not so the rest of you. When he kills the economy, your jobs will just fade away, like that old soldier of yore.
I’ll weather this punk like I weathered his Nuncle Jimmah and his cousin Bill (you remember Bill, don’t you? the 1st black president?). When Barrack and Nancy and that idiot Reid are done with you, you’ll be lucky to have enough to eat, let alone fly over my head in a Lear jet.
Me? I’ll do just fine, thanks. I’ll pay the goddamned taxes and I’ll John Galt every cent I can and outlive the bastard and, hopefully, the stupid sheeple that elect him, and I’ll still have my head above water in the end.
You Obama beleivers? Not so much.
PS: drunk blogging. I highly recommend it. Liberating.
PS: lest some of the more excitable amoung you misunderstand the term, when I say I will outlive the bastard, I mean, I will have my job a long time after Obama has lost his.
I want that little shit to live forever.
What is the latin for “I wish this damned thing had a spell checker!!”?