STATE OF THE UNION By Michael S. Malone
Mr. President:
Got $2 billion to spare if it has a chance to turn around the economy?
You probably do, what with all of those hundreds of billions in repaid TARP funds you were talking about using for a ‘second’ Stimulus. Given that the first one didn’t do much good, it seems like a dumb idea to try to same old Keynesian trick again. When it comes to recessions, the rule is: If first you don’t succeed, try, try a different economist.
The advantage of this new strategy is that it is not only cheap, but it also has the best chance of creating all of those new jobs America needs if we’re not going to have a ‘jobless recovery.’ And you know how important that is: reportedly, job creation is going to be the theme of your State of the Union address in a few weeks.
But you’ve got a problem. After a year in office spent trying to restructure the economy instead of actually fixing it first, we now find ourselves sputtering along as other nations in the world begin to recover. We’ve taken on astronomic, historic debt. Unemployment is not only at Great Depression levels in some regions, but isn’t likely to improve anytime soon. And the nation’s economic heart, its millions of small businesses, are hunkered down, afraid to invest in themselves or hire new people, because they are rightly fearful of what bomb you are going to drop on them next: higher taxes, carbon offsets, card check, etc.
The FDR/New Deal model isn’t going to work this time (actually, it didn’t work the first time either: my family lost its Oklahoma farm in 1938, not 1933). Colluding with Big Business and Big Labor (and Big Pharma lately, too) in some kind of Progressive fantasy from 1910 won’t work either, as you saw last year. GM is still in trouble (with GMAC now added into the mix) and the unions you protected not only aren’t any stronger, they are more hated than any time in their history.
There’s no Hoover Dam/CCC/WPA solution available either. If you were going to try that, it would have been last year, when Americans were so frightened that they would have accepted some sort of shovel-ready make-work emergency action. But the panic has now passed, and, frankly, you don’t have the enough dough left to pull it off. Besides, emergency measures like that require the citizenry to put enormous faith in the competence of the federal government – and right now your approval numbers are tumbling, and Congress’s are so low they aren’t even in the tank, but in the dirt under it.
The only way out now is down a path that I assume is anathema to both you and the Congressional leadership. But you’ll take it because, no matter how much you dislike it, it was the only real solution anyway. It’s your one chance of saving both your legacy and your party’s majorities on Hill: You are going to have to unleash business.
I’m not talking Big Business here. Those guys are very good and making money and consolidating markets. But they stink at new job creation. No, I’m talking the little guys, the ones with businesses valued under $20 million, the ones who create all the new jobs. At best, you’ve ignored them and paid them lip service at a ‘summit’ for them in which they weren’t invited. At worst, you’ve tried to use them as a piggy bank for your various social engineering boondoggles and as a whipping boy for all that you think is wrong with America. And, understandably, they’ve responded by voting not with their feet, but with their wallets: lay-offs, cutbacks in production and inventories, cancellations of new products and services, abandonment of expansion plans. And who can blame them? They have made a rational response to an irrational situation. They have every right to be scared of you and the future you are trying to deliver.
As awesome as this suggestion may be, helping small businesses reach their first million in profits, I’m afraid this is one proposal we’ll never see from Prez Obama.
This administration has proven, time and again, to be completely against productivity, growth, expansion, and God forbid, creativity. Nope, small businesses are on their own with this Prez. ‘Course many of them already knew that.
Great article. I don’t think that Obama & team are going to understand (because it does not fit their mindset, etc.), but great advice and a great article nonetheless.
PS: Look up England’s 3i’s post war reindustrialization organization. It was a Foundation formed by GB’s prime banks to provide seed capital and mezzanine financing to promising new start-ups.
See [http://www.3i.com/about3i/history-of-3i.html]
3i’s roots were laid through the establishment of ICFC (Industrial and Commercial Financial Corporation) and the FCI (Finance Corporation for Industry) in 1945.
After the second world war and the MacMillan Committee Report of 1931, the UK’s labour government under Clement Atlee announced the establishment of ICFC. The report identified a “MacMillan Gap”; a chronic shortage of long-term investment capital for small and medium-sized businesses. Its recommendation was the formation of a company “to devote itself particularly to these smaller industrial and commercial issues”. This company would, in addition to its ordinary capital, issue preference share capital backed by the debentures or shares of the companies which it financed and therefore serve as an intermediary between small investors and small and medium-sized industrial borrowers.
“3i’s roots were laid through the establishment of ICFC (Industrial and Commercial Financial Corporation) and the FCI (Finance Corporation for Industry) in 1945.
After the second world war and the MacMillan Committee Report of 1931, the UK’s labour government under Clement Atlee announced the establishment of ICFC. The report identified a “MacMillan Gap”; a chronic shortage of long-term investment capital for small and medium-sized businesses. Its recommendation was the formation of a company “to devote itself particularly to these smaller industrial and commercial issues”. This company would, in addition to its ordinary capital, issue preference share capital backed by the debentures or shares of the companies which it financed and therefore serve as an intermediary between small investors and small and medium-sized industrial borrowers.”
The idea of a federalized (and therefore politicized) VC process seems very difficult. I predict its biases quickly turn to green or reverse-discrimination crusades given the current political climate. VC is not the business of the feds. I would support the relaxation or removal of state and federal obstacles to start-ups.
Love your optimism Mark. And your effort in putting forth an idea that is clearly defined and well defended – as you always do. Of course your plan would work. But I think all we need is to have the shackles removed. The economy would roar.
That aside, if we could get the $2B from private funds, the plan would be much more efficient, with less waste and fraud. Plus it would feel better than taking money from the govt.
But we still have the concerns about the lack of financial stability. Before investors will invest, they need to feel that the financial environment is stable, but their own eyes are going to convince them otherwise.
But things could change quickly, and we may have hope by the end of the year. If that’s the case, and we get a Reagan like Congress that strips regulations, the economy will turn around quickly. If Scott Brown wins, it’s a game changer. 41st Vote – go Scott!!
You can’t talk business management with a union thug,
nor Liberterian doctrine with a Stalinist.
Right sector, wrong mechanism. Gov’t is really bad at identifying new businesses. Let the market decide! But what gov’t can do is remove obstacles to new business. First off? Payroll taxes. Businesses should be rewarded for employing people, not punished. Also, end the bailouts of dinosaur businesses. How will new businesses ever get established when old crusty firms are rewarded for their failures? Recessions are great times for new businesses to get started since the old rules are under siege. Bailouts work against this and are just simply dumb.
But of course BHO and his fellow socialists will never do this because it goes against every myth they cling to. Too bad.
DD
Good article, thanks.
However, I think the best solution is a new president and congress…
The present elected officials are not interested, as success for America does not seem to fit their agenda…
“There’s no Hoover Dam…”
The Hoover Dam was constructed in an entirely different era. The federal government awarded the contracts—and then stayed out of the way. There was neither OSHA nor unions that had to be dealt with. The dam builders essentially had free reign to build the dam as they saw fit. That would never occur today.
The CCC and WPA were make work projects. The country would have been much better off with granting tax breaks to entrepreneurs and established businesses. Obama is never going to do that! Keynesian economics is nothing more than a handing over of power to elites. They want control and lucrative pay packages. Libertarian economic doctrines basically encourage elites to be quiet and stay out of the way. This is the last thing they wish to hear.
“No, I’m talking the little guys, the ones with businesses valued under $20 million, the ones who create all the new jobs.”
The Progressive movement minimally was indifferent towards small businesses—if not out right hostile. It always preferred to deal with the larger entities. The “elites” wanted to have few meetings with the large business owners, make some sort of agreement, and be done with it. Dealing with countless business owners was deemed time wasting and unproductive.
I may be jumping to an invalid conclusion, but I don’t think Mike Malone truly understands the mindset of Obama and his cronies. They believe in zero sum economic models. The very concept of dispersed knowledge is also alien to their worldview. These power hungry whack jobs adamantly believe they should be our benevolent dictators. It’s supposedly for our own good. We should be glad to hand over the power to them. Obama is not going to change! He is existentially committed to Progressive ideology. Obama can only be defeated. That’s our only realistic option.
These are all great ideas, that would improve the economic situation immensely if they were tried.
Too bad Obama & Co. aren’t the least bit interested in improving the economy.
Fall Of The Republic – The Presidency Of Barack H Obama – The Full Movie HQ
http://www.youtube.com/watch?v=F8LPNRI_6T8&feature=player_embedded
WORLDNETDAILY.COM
‘The Secret of Oz’ banned by e-commerce giant
November 21, 2009
After being sold on Amazon.com for only three days, a new DVD video
documentary on the state of the economy has been banned by the e-commerce giant for mysterious reasons, according to the fimmaker.
“You may no longer sell on our site,” said Amazon in an email to Still Productions at noon yesterday.
Still’s documentary suggests government debt is at the root of the world’s global economic problems.
“In the coming year, the federal government will spend $4 trillion, but it will have to borrow half of that from big banks, both here and abroad,” he explains. “It creates a vicious cycle of government debt dependency. Government just can’t say no to them – or so officials think.”
This was Thomas Jefferson’s main complaint about the U.S. Constitution as well: “I wish it were possible to obtain a single amendment to our Constitution … taking from the federal government the power of borrowing.”
So what can be done with the national debt rocketing above $12 trillion?
“You can’t just reduce the national debt,” explains Still. “You have to change the system and eliminate it entirely. We have to eliminate the ability of the government to borrow our money into existence. There are ways to do this. ‘The Secret of Oz’ shows that we’ve done it before in American history; and we can do it again. The federal government has to be put on a pay-as-you-go basis.”
In “The Secret of Oz,” Still, the filmmaker behind the mega-successful “The Money Masters,” warns the U.S. is heading for a deep Depression – unless lawmakers address the root of the problem: mounting interest payments
on the national debt.
http://www.wnd.com/index.php?fa=PAGE.view&pageId=116825
“The Secret of Oz” trailer – How to Fix the 2010 Depression – directed by Bill Still
http://www.youtube.com/watch?v=6cq9yEVcGIU&feature=player_embedded
Obama Says U.S. Long-Term Debt Load ‘Unsustainable’
By Roger Runningen and Hans Nichols
May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJsSb4qtILhg&refer=worldwide
Obama admits the terrible financial destruction wrought against Americans. WHY THEN DOES OBAMA NOT IMMEDIATELY REVERSE THIS TRAGEDY?
A major investor states America is going to reach Zimbabwe hyperinflation.
http://economyincrisis.org/articles/show/2942
Billions of dollars urgently needed for America’s defense is instead gifted to Islam. Nuclear Iran and nuclear North Korea both state they intend to destroy America. They are not idle threats. The same venomous hate for the U.S. is shared by other nations and Muslim terrorist organizations. The treasonous response of the U.S. government to America’s increasing danger, is to drastically reduce our defenses facilitating America’s annihilation.
See: Aloha, “Star Wars” By: Washington Times Editorial
Washington Times | Monday, June 29, 2009
http://www.frontpagemag.com/readArticle.aspx?ARTID=35383
Make no mistake, it will probably take years to fix the Republican economic disaster. Remember, it took eight solid years of tax and spend corruption to get us that special economic nightmare of 2007 and 2008… OBama will not be able to fix it in one year. However, it looks like he is at least making some progress !! Good Luck to Our President !!
Wrong. Obama policy continues to endanger the economy. The true reasons the companies have turned around are the massive layoffs and cutbacks making them more profitable, nothing more. Obama, et al, are fools and making claims of effectiveness that are just not there.
2,000 $1 million loans to small businesses, good idea!
2,000 business plans to review. Let VC chumps do it, monitored by the appropriate government office.
Make no mistake, it will probably take years to fix the Republican economic disaster. Remember, it took eight solid years of tax and spend corruption to get us that special economic nightmare of 2007 and 2008… OBama will not be able to fix it in one year.
No, but with a lot of hard work and determination, he managed to make it three times as bad in one year!
There is a trickle down process here: the financial industry started its recovery a while back, the larger non-financial companies a little while later, China — everyone’s cheap manufacturer — is doing well, and Christmas sales were up from the year before. But companies have been getting by with fewer employees than before, and those employees are willing, temporarily at least, to work harder and longer for the same pay because of the still scary employment outlook, but that can only go on for so long. Things will probably look a lot better overall by the spring, but there will still be structural problems like issues with derivatives and phantom banking that were a long time in building up and will take nearly as long to fix-fix.
The political system will promote inefficient enterprises because they require political protection to remain viable. The economic model that appeals to both politicians and business persons is the “Cartel.” Put the ambitious politician and business people together, and that is what you will get (it won’t be called that, of course).
But that will come later. Your idea will make a fine speech and might even encourage small business on some symbolic level. I think your other suggestions are quite good. Basically, we need to get Washington less involved in business, not more deeply entwined.
I realize your idea is not to entwine. But the politician’s idea is to entwine the Knot. And they certainly don’t need encouragement.
(hat tip, borrowing the moniker from something another poster wrote the other day- I just couldn’t stop laughing!)
As others have noted, the unfortunate reality is that the implicit agenda is to bring this country to it’s knees. At the rate we’re going, will there even be elections in 2010 & 2012? hope so… the frog in the hot water analogy. imho JTIC (Jihadist Trojan Horse In Chief)
18. The problem is that the money supply has exploded in the interim. If we get a recovery without normalizing money supply, inflation will skyrocket and choke off the recovery. We can handle 5% inflation, but 20% or more (which is what we’re likely to see) would crush the economy once more.
The last thing we need is for the government to get involved in picking more businesses to favor. There is too much of that already.
The best thing for Obama to do is get out of the way. Repeal Sarbanes-Oxley, cut or repeal capital gains taxes, and let the market go.
More government is not the answer. Less government is.
Totally rotten idea. Obama will just give the $2 billion to Acorn to start a chain of whorehouses.
Better to pass a law promising that the first million in earnings reported on Schedule C is tax free.
I like the essence of this idea. But permit me to add some salt that hopefully won’t spoil the broth.
1. Ask Warren Buffet and Bill Gates to establish a foundation for this purpose.
2. Endow the money from the US government.
3. Appoint your board of VC folks
4. Have them establish a minimum standard for the idea/business plans. This would be the most difficult part.
5. Assign only one grade to each proposal: pass or fail
6. Put all the plans that pass into a lottery and award the money based on the results of the lottery. If there are two thousand approved plans, then the chance of getting funded is 50%.
A lottery award would take 99% of the politics out of the award. Granted it might push those considerations back into the analysis, but for that phase you could use a blind application process where the evaluators would vote on a file.
I have a simpler plan. Pass a vote to keep this year’s budget unchanged from the last one, then declare a Congressional recess until 2011. In an atmosphere of no additional government interference, all businesses will be able to do what they do best.
Rahm Emanuel reportedly leaned on the House Finance Committee to agree to a permanent stay of the financially onerous Sarbanes-Oxley regulations for companies valued less than $75 million.
I did not know this–it’s very good news. Now, how about we repeal that ill-conceived, made in haste law altogether.
“Bring together a small group of proven, veteran Venture Capitalists – say, Don Valentine, Bill Davidow, Mike Moritz, Tim Draper, your buddy John Doerr, and a half-dozen other legends – and call on them to volunteer to serve their country by sitting on an investment board whose charter would be to invest that money in new ventures as a back-up to existing investors. ” Or better yet, offer to match the investments they make on a $2 for $1 basis with the same terms. They will make better decisions with their own skin in the game and you’ll be investing $3B, not $2B. (That is only $100 million per firm for 10 firms.)
my family lost its Oklahoma farm in 1938, not 1933
Rings true with the history in the Okie side of my family, also.
It’s a good idea but will never happen. You might as well ask a global warming hysteric why they don’t support nuclear power. It’s not in their genes.
Sorry, this is just subsituting one bad idea for another. Why must we always ask some elite panel what’s best for us? The markets tell us more precisely than they ever could. Get the government’s taxing boot off our throats and leave the rest to all of us.
This is a stupid idea. If the government were to dole out $2 billion like this it would end up in all the pockets of their cronies. You’d have another program that creates jobs that cost $300K each in businesses no one wants.
Giving it to the VC’s is just as bad. They are a well known bunch of crooks and banksters, good only at lining their own pockets and stealing from the people who do the real work.
Give people an instant tax write off for investing in small businesses and let individual investors decide how best to most productively deploy their capital.
Obama will never do this because he is intent on destroying small businesses and turning the country socialist. He also needs that money to buy treasuries to prop up his ailing regime.
The bond market is about to dump soon and they’ll take the keys away from all the foolishness going on in Washington. The only choice O will have will be to devalue like his pal Hugo just did. Hold on to your wallets!
Nothing would annoy Barry more than to have America’s wealth spread out all over the country.
To the extent that he will allow ANY wealth to be outside the hands of Government, he will insist that it be in large, isolated clumps — i.e., big companies.
There is therefore far fewer entities he needs to regulate (shake down), negotiate with (solicit donations) and publicly criticize (threaten).
A million new companies making a million dollars each and passing it out to millions of employees? That is Barry’s nightmare, right there.
What bologny! More statist nonsense. Let me make it simple: Cut govt. spending 15%. Cut the govt. workforce by 50%.
No payroll taxes for two years. A 17% flat tax. Drill…drill…drill…….make natural gas our transportation fuel; build 100 nuclear power plants.
Result: tens of millions new jobs over the next two decades.
Malone, you and your idea are a joke. It must be your previous connection to govt. tv., i.e., PBS.
i am telling you, Bush had nothing to do with this mess, let’s bring him back!!!!!
The basic premise of this article is 100% correct. The economy is in the tank in large part because small business owners are hunkered down, because they don’t know what’s going to hit them next. I agree with some of the other posters, though. We don’t need grants and loans and bailouts and cash handed over to VC’s. We just need government (at all levels) to get out of the way.
“Simplify, and add lightness”
Aeronautical Engineer’s Rule.
Privately funded prizes for project performance.
Set aside funds for lawyers, lobbyists, and
publicity firms (to show State opposition);
There is no way to get there from here, without
running into the legal barriers set up over the
years to protect the economic status quo.
Government-run VC? Insane. Wasted, stolen, and gone.
Hey, Barack, here’s the recipe, from one of your former constituents in Hyde Park, who had you figured out from the get-go:
Just cut taxes on hiring and capital gains, for small business if nothing else. Declare that there won’t be card check, cap-and-trade, new regulations, increased income taxes, VAT, and all that other crap that’s SCARING ENTREPRENEURS TO DEATH.
Then stand out of the way and be a damn hero.
But you ain’t smart enough. I bet Sarah Palin will be, in the 2012 campaign.
Lots of good ideas are voted down by shortsighted people. History has a littered trail . . .
It’s too bad that this would widen the gap between the haves and the have-nots. Obama would rather have us all freezing equally in the dark. I think we all know who would be more equal than the rest of us.
I wonder how much more of this legalized looting by their own government the average American is prepared to take? Property taxes here are way up, and unless you work for the government, you’ve seen your wages remain unchanged if you’re lucky enough not to have been hit with mandatory furloughs or layoffs.
I’m voting against them all. If you’re in, you need to be out. I’m calling it results based voting.