Dear Beltway Bandits:
In late February, while flipping channels one night, I overheard Chris Matthews on MSNBC declare that President Obama was “promising to tax the rich people in order to pay for health care for the working people.” I’ve since heard this sound bite repeated over and over again by those sympathetic to the Administration.
Now, I have sometimes been accused of taking things literally (my wife, kids, and employees would attest to that). And in this case, I did/do as well. I resent his remarks and others’ too. Deeply. I resent his implication that “rich people” must not be “working people.” In other words, that a business owner (generally considered a “rich person”) doesn’t really work for a living. And if you, Beltway Bandit, owned your own business and made the climb only an entrepreneur knows . . . overcame the obstacles that we all must, then you’d probably find Mr. Matthews’ remarks as irritating as I do.
You see, we DO work for a living. Most of us “rich people” work longer hours than our employees do. We take home more work to do in the evenings than our employees; we work more hours over the weekends; we travel and spend time away from our families, working; and we have enormous executive responsibilities and the stresses that come with those.
And by the way . . . the work we DO, generally is more valuable work, too. We have worked extremely hard to make ourselves more valuable. We made a conscience choice to learn more and keep learning more; to read more; to play less; to develop expertise. And most of us worked much, much, much harder than the “average working person” for years, even decades to create our businesses, master our crafts and skills, build our reputations, and finally put ourselves in positions to harvest our current high incomes. There may just be — oh the horror! — some cause-and-effect to all of this.
We not only work harder than all those we provide jobs for, we also provide nearly ALL the capital and take ALL the risks to create businesses and everything else that provides the majority of jobs in America. Those they see as “working people” create no jobs for themselves; us so-called non-working “rich people” provide nearly all of them.
And as I’ve pointed out in these pages before, we also pay an exorbitant share of the total US tax burden — far, far in excess of the difference between our incomes and those paying less, little or none, and far in excess of our ratio to the overall population and our consumption of “public” services. In fact, data was just released that shows the top 1% now pay 40.4% of all federal income tax, yet earned just 22.8% (source: Tax Foundation’s “Fiscal Fact No.183”, based on 2007 data from the IRS). The top 5% (income higher than $160,041) paid 60.639%; top 10% (incomes of $113,018 and above) paid 71.22%, and the top 25% (income of $66,532 and higher) paid 86.59% of Federal income taxes.
Back to the letter . . .
WE are Atlas already carrying the entire Nation on our shoulders, and you, Beltway Bandits, throw tacks on the road before us and tempt us to shrug. You see, we could go on strike, too — choose to reign in our spending (already being done), choose to reign in our investing in tomorrow’s innovative companies (already being done), and choose to “take time off” while we continue to be antagonized, assaulted, and abused by you. For every one of us who takes this reactionary tract, dozens, if not hundreds, can kiss their jobs good-bye. If you doubt that or it’s a surprise to you, I’d be happy to explain.
I’m getting just a little tired of the attacks against the employers in America (the “productive class” as I called us in my recent FOX Business News television interview). The constant cries of class warfare are more than just bothersome. Somehow, those pursuing a profit have recently become the personification of Evil according to the Fourth Branch of government (the Press, which is showing few signs of profit themselves these days). I’m not sure I can pinpoint when this started to happen, but it’s very troubling for our country’s economic future. Believing in a better future and having a meritocracy in America where anybody can rise up if they just work hard enough is a very valued, yet currently being extinguished, fabric of our culture.
You see, capital is on strike in America because we’re living in economic times where you are openly hostile to capitalism and the champions of capitalism: the men and women small business owners in the economic trenches every day battling to grow our businesses . . . who provide up to 80% of the net, new jobs in this country. Now, we have to battle you, too. It’s not enough for us to battle foreign and domestic competition . . . we now have to take on the ignorant, the condescending, and the fanatically righteous. The people, including you, who no longer believe in that traditional American mantra, “to the winners go the spoils.” No, you’d rather we share the pain, bring us down to the lowest common denominator, and in the process, stomp out all incentives to excel. The last time I looked it up, that’s the very definition of socialism. Government can’t provide ALL the jobs. We need some, competitive businesses still staying open, don’t we? If everybody works for you, than we’re no better than the glory days of the old Soviet Union, and we know how that turned out, don’t we?
Let me give you an example of just one of your latest, many follies: the SBA’s new ARC loans. They are a joke, plain and simple. $35,000 for a small business?!? Are you kidding me?!? This shows how out-of-touch you (our political class) truly is. This is like throwing a cracker to a starving person — he’ll think it’s the greatest food ever, but he won’t last long enough to enjoy a second one.
The $255 million ARC loan program will only help about 10,000 businesses, by the OMB’s estimates (plus having nearly 60% default rates in their esteemed projections) . . . yet BILLIONS go unused EVERY year in other, already existing SBA programs! These programs (like the one we specialize in, the 504) only need slight tweaking to unleash a flurry of job-saving and job-creating activity. But no, ’tis better to create more, unnecessary programs that steal the spotlight, than boringly fix already existing programs. Better to brag to the malleable press that you’re “really doing things” to help America’s small businesses, like waiving loan fees — hoping the all-too-compliant press fails to research the fact that those fees hardly EVER come out-of-pocket for borrowers; they’re financed-in every SBA deal. Now, banks that are providing ARC loans (if a borrower can even find one) are only providing them for their existing, mostly defaulting and desperate borrowers, but are failing to give consideration to paying down credit card debt, home equity debt or line of credit debt — virtually all of which was taken on by small business owners to keep their businesses afloat. Remarkable.
When you total the entire amount that your highly touted Stimulus Bill (now called the ARRA) set aside specifically for America’s nearly 27 million small businesses, it was only 0.08% of the $788 billion. That’s right . . . you did NOT read that incorrectly . . . it was just 0.08% (that’s less than 1%, if you’re someone who slept poorly last night). I find that appalling! Truly appalling!
To put that into better perspective: the new ARC program, alone, was only roughly 1.5% of 1% of what you invested (on our behalf) into just one of our bailed-out companies (AIG). And that $255 million in just that one new program was just slightly larger than the $165 million AIG bonuses of early Spring that you reacted so quickly to (within 48 hours you had passed legislation in the House exorbitantly taxing it, if I recall . . . which either means your priorities are woefully misguided or you can simply pass higher taxes quicker than you can wink). So this is how you expect to stimulate such an important sector of our economy, huh? Amazing!
This feels the same way it did to me when I was in college (and yes, I paid my own way to go — no silver spoons in my family to go around) and late one night on an “L” train, I saw the pan-handler with the bum leg who, by day, begged for money near the university subway station, but who that night, picked his cane up, rolled his pant-leg down over “supposed” sores and nearly sprinted onto the subway platform like an Olympic athlete. It was all a fraud. Magicians call it the “sleight of hand” — look this way, so I can fool you where you aren’t looking. I was shocked then, and if I hadn’t become so cynical watching the jokesters in Washington all these years, I’d be shocked now, too. But, sadly, I’m not.
Many small business owners are NOT taking a family vacation this summer — frankly, few of them can afford it these days and most are too busy trying to “right their ships.” Why you feel compelled to take your traditional “Summer Recess” when these are NOT typical times is beyond me? I think you should be required to stay in Washington until you pass a stimulus bill aimed squarely at helping small businesses, rather than just the old, dying dinosaur businesses. And no, I’m NOT suggesting we need more drunken spending from you. Give small business owners access to funds left over every year in already approved and authorized small business lending programs (I project about $4.5 billion this fiscal year alone in just one SBA program, the 504). Give us (and our employees) payroll tax relief so we can try to recoup what we’ve lost and invest in keeping our businesses afloat. Give investors a massive tax incentive to move their parked capital off the sidelines and into our businesses — that may not quite be what you had in mind when you said you wanted “public-private partnerships,” but it’s what’s needed if you’re going to get anyone but those near Wall Street to participate. Debt capital shouldn’t be your sole focus — we need equity capital reforms, too.
Perhaps you should stop patting yourselves on the back long enough to re-read the Declaration of Independence like I just did to my young children (ages 8 and 6) the other day, as I do every Independence Day. Jefferson very clearly stated, “Whenever any form of government becomes destructive of these ends, it is the Right of the People to alter or abolish it, and to institute new Government.” I’m thinking that time is again, at hand. And if you need me to translate what those austere words mean, like I did to my kids — getting a kindergartner and a second-grader to understand it — I’d be happy to do so. Sadly, I think the rest of what Jefferson said has been the case for us for some time, “all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.”
You can keep beating up us “working folks,” but eventually you’ll kill the geese that lay your golden eggs. What will you do then? With leadership goes responsibility and no matter how you try to spin it — that this “problem” was the previous guys’ doing — you’re going to get the blame, so it would be wise to heed my advice. I believe it was Margaret Thatcher who once said socialism works until you run out of other people’s money.
Sure capitalism is far from perfect, but I’ve read/watched our free-market economy receive pot-shot after pot-shot for months by you and the compliant talking heads in the media . . . as if we should now simply scrap what got us here . . . to the place of being the wealthiest society the World has ever known. You seem to forget how truly awful socialism has been for many other countries. Those formerly suffering under repressive regimes (often “justified” in the name of “sharing the spoils among all people”) are frequently the greatest defenders of our free-market economy. I wonder why? Maybe first-hand knowledge of its failures, perhaps?
I think it’s time that someone defended the economic system that has served this country so well for centuries. We are still a county where more want to come into, than want to flee — and speaking of learning, whatever happened to those Lear-jet-liberals, I mean celebrities, who were going to move out of the country if a certain President was re-elected a few years ago? Gee, I guess they changed their minds and realized how good they truly have it here, with or without him.
See, you need to understand that capitalism creates an economic environment where businesses must evolve over time or simply become extinct. Yesterday’s “great” company is today’s bankrupt debacle (think GM, Chryler, AIG, many of our biggest banks, etc.). Therefore, your policies should predominantly go to encouraging the creation of fast-growing, innovative companies, not the dinosaurs of business yesteryear. And this doesn’t mean every “mom-and-pop” business with a handful of employees who thinks that $35,000 ARC loans will save them — those businesses probably won’t be adding many of the jobs of tomorrow.
We are perilously close to no longer being the wealthiest country in the world sometime in the not-too-distant future.
We are under-going an economic shift, as I’ve written about previously. Things will NEVER quite be the same as they were in the “heydays” of 2006 and 2007. Our economy is constantly evolving . . . but we have a choice of letting our economy evolve naturally and most efficiently or impose governmental and societal impediments that “channel” the evolution (“well-intended,” as it always is, of course), yet serve to restrain it.
Self-reliance is dying in America. We are teaching, by your heavy-handed actions, a whole generation to look to Big Government to solve our problems. We wait for you to fix things, to improve things. This is highly dangerous . . . as you’ve clearly shown you have no ability to restrain your own spending. If you had to spend less than you take in, like a business owner does to stay operational, you would have long ago quit your racket. Without the ability to “print-on-demand” and “earmark” at will, your power loses its appeal.
For too long in our culture, we have turned to Big Business as the “ideal” — the “good job,” the “good benefits,” and “stable and secure” with a “decent pension.” Those ideals of only 25 to 30 years ago have gone up in flames. Big Business will not save us. Big Government can only engulf us. It is high time we actively push the development of more self-reliance in our society. That means encouraging entrepreneurship. That means telling our young NOT to “go get an education and then get a good job at a big company and work there for your whole working career.” It may mean suggesting that your children (or your siblings or others looking up to you) take some time off from the pursuit of “traditional education” and go get “hands-on” education — an apprenticeship, for instance. It may mean encouraging their creative dreams for how to earn a living. It may mean seeding their first business idea with your capital.
You and I know the parable of “giving a man a fish” versus “teaching him to fish” . . . in America, right now, you’re giving fish out like it’s about to spoil. We need to go back to the basics of how our Country became great in the first place . . . and that means independence and self-reliance, not dependence and central planning.
And by the way, roughly 5 million Americans earn $250,000 a year or more (where you seem to define the “rich”), but no matter how much of our incomes you tax . . . even if you confiscated 100 percent… you simply can’t raise enough revenue to pay for everyone’s health care. Five million paying for the health needs of 300 million? Absurd. Those fifth-graders on TV are certainly smarter than you on even this.
What you don’t realize is that every dollar stolen from me and others like me with taxes, will be retrieved right back from those “working folks” you so desperately, parentally want to protect. How will I do so, you ask? By downsizing companies and cutting jobs, by outsourcing jobs, by not investing in expansion and creating new jobs, and by raising prices. It’s already been happening in anticipation. The last, raising prices, causes inflation (as does your heavy borrowing to finance the supposed stimulation of big, broken, dying companies) and inflation is the biggest tax on the “working folks” there is and the ONLY tax on poor people. Every tax-the-rich scheme costs far more than it gets. Nothing else could come close to the destruction guaranteed by you abusively taxing the rich.
Us “rich” ought to be thanked, daily, for our contributions to our society . . . better yet, we should be encouraged to work at creating and building things, rather than trying to outmaneuver you Bandits in Washington. We’ll be working very hard at that, trust me, rather than what we ought to be working on (using our creative powers to invent the industries of tomorrow). It’s called the Backlash, and it’s been a major reason why the “Stimulus” has been failing so miserably. A plan long on social engineering and short on truly stimulative effects was doomed to failure from the beginning, but that’s what we get when you’re so out-of-touch with the real, daily goings on. If less of you were professional politicians, rather than ex-business owners (meeting payrolls rather than playing with others’ money), you’d understand that better.
Chris Hurn, CEO/Cofounder
Mercantile Capital Corporation