Saving the Golden Goose

There’s quite a furor over the President’s statement during a recent speech, “you didn’t build that, somebody else made that happen.”  The Liberal Left has been defending him, arguing that the statement was taken out of context and the speech was pro-American worker.  The Conservative Right is saying the statement sums up the President’s socialist ideology.  Whether it’s a “gaffe” or an ideological statement, the statement and the speech, has a lot of people talking about who deserves credit for their accomplishments.

A friend of mine sent me an email comparing the President’s statement to a passage in the book, Atlas Shrugged, by Ayn Rand.  In Atlas Shrugged, the character Rearden creates a new metal.  In one scene, two characters debate his contribution:

"He didn't invent iron ore and blast furnaces, did he?"

"Who?"

"Rearden.  He didn't invent smelting and chemistry and air compression.  He couldn't have invented his Metal but for thousands of other people.  His Metal!

Why does he think it's his?  Why does he think it's his invention?

Everybody uses the work of everybody else.  Nobody ever invents anything."

She said, puzzled, "But the iron ore and all those other things were there all the time.  Why didn't anybody else make that Metal, but Mr. Rearden did?"

While trying to find the passage on the Internet, I ran across a September 2011 speech by Elizabeth Warren, a candidate for the U.S. Senate seat in Massachusetts.  In the speech, she stated, “There is nobody in this country who got rich on his own. Nobody.”  Like the President, she argues that business owners utilize the infrastructure financed with local, state, and federal income taxes.  She specifically points out that a business owner brings his goods to market over roads paid for by others.  She enumerates several other areas where business owners are “helped” by others. 

I don’t know if she doesn’t understand taxation or if she is ignoring the obvious, but the business owner pays federal, state, and local taxes that build and maintain this country’s infrastructure.  Some of the business owner’s taxes likely paid for the roads she mentioned.  To complete her story, she should have mentioned that businesses pay vehicle taxes, fuel taxes, registrations, payroll taxes and many, many others.  But that isn't the point she wanted to make.  For now, taxation isn’t the point I want to make here; I want to talk about the importance of small business in our country and who bears the risk. 

According to the Small Business Administration (SBA), small businesses in this country (less than 500 employees) account for 99.7% of all employer firms, employ nearly 50% of U.S. workers, pay 43% of total private payroll in the U.S., and are responsible for 65% of the new jobs created between 1993 and 2009.  Looking at the data, it’s pretty obvious that small businesses are the backbone of the U.S economy.

The annual cost per employee to comply with federal regulations is $7,755 for large businesses (500 or more employees), but the cost is $10,585 for firms with 20 employees or less.  The smallest firms pay four and a half times more per employee for environmental compliance and three times more per employee for tax compliance than large businesses. 

But what Ms. Warren and the President didn’t acknowledge in their speeches is this; the business owners who started those businesses took a gamble.  It is by their initiative that the business exists.  They risked their life savings, their credit rating, their mortgage, and often their family life to start the business.  Not all small businesses are successful.  The SBA indicates that in 2009, (latest year for which data is available) almost 553,000 new small businesses were started, but over 660,000 closed.  The SBA also estimates that almost 70% of new businesses survive two years, but only half survive five years.  With only a 50-50 chance of being in business more than five years, why would anyone take the risk to start a new business?

In today’s depressed economy, shouldn’t the country thank the small business owners for taking the risk of starting or owning a business?  Shouldn’t the politicians, whose regulations impact small businesses more than the large ones, at least allow the small business owners to take credit for their accomplishments?  Instead, some politicians tell us that small businesses owe their success to the government.  Yet, in spite of tax and regulation burdens, successes and failures, small businesses are the backbone of the U. S. economy.

 Ronald Reagan once said, “We must not look to government to solve our problems. Government is the problem.” Politicians who refuse to acknowledge, or worse, don’t understand the contributions of the small business owners, are slowly strangling one of the geese that lay golden eggs.  This summer, dine at a “mom and pop” diner, get your car fixed at a local garage, visit a local farmer’s vegetable stand or buy lemonade from the neighbor kid’s lemonade stand and take advantage of the ingenuity and initiative that make this country great.  Before you vote in November, do the research and learn where the candidates stand on the economy, regulations, and taxation.  Don’t help them strangle the goose.

Thinking Logically

Overshadowed by the more recent ruling over the Affordable Care Act, the Supreme Court ruling concerning the Arizona immigration enforcement law hasn’t been in the news much lately.  The Arizona ruling struck down most of the provisions of the law, known as Arizona Senate Bill 1070, stating that federal law preempts state law and, in some cases, the state law served as an obstacle to federal law.

Recently, I discussed the ruling with a friend. We talked about the June CNN poll results that indicate 75% of American voters are in favor of the Arizona law. We discussed the recent announcement by the White House that the Department of Homeland Security would no longer initiate the deportation of illegal immigrants that meet specific criteria.   I pointed out that a Washington Post/ABC News poll, published earlier this month, shows that 52% of Americans do not approve of how the President is handling immigration issues.  My friend asked, “When the federal government fails to do its job, is it not the right of the state to fill the need?”

Is the federal government failing to do its job? In a July 2010, Fox News poll, 72% of respondents felt the federal government was not enforcing immigration laws.  Since Arizona passed its law in April 2010, Indiana, Georgia, South Carolina, and Alabama passed similar legislation.  Apparently, some states agree that the federal government is not doing its job with regard to addressing illegal immigration.

I know that illegal immigration is a touchy subject with some segments of our population.  As with most touchy subjects, I believe that people allow emotions to cloud the logic of the discussion.  So what if it wasn't such an emotional subject? 

Let’s talk though another state-federal issue to demonstrate the logic.  According to the Federal Highway Administration’s website (http://www.fhwa.dot.gov), the Interstate Highway System is owned and operated by the States.  As such, the States are responsible for setting speed limits and for traffic enforcement.  The website states that 90% of the funding for the Interstate Highway System comes from the federal government, as designated in the Federal-Aid Highway Act of 1956. So, the states have the responsibility of operating the highways, but the federal government pays for the highways.  Let’s play a what-if game.  What if the Supreme Court ruled that Interstate Highways are under the jurisdiction of federal government and the States have no right to set or enforce the traffic laws on federal roadways?

Then, if the federal government decided not to enforce traffic laws on those roadways, could you imagine the chaos on the roads?  According to the Federal Highway Administration’s 2010 Highway Statistics Report, there were over 3200 fatalities on the interstates that year.  Imagine of the number of fatalities if there were no enforcement at all?  And, it’s not just lives lost that would increase.

According to the US Justice Department’s 2011 National Drug Threat Assessment, the Interstate Highway System is the primary route for illicit drug transportation.  “For Drugs or Money”, a July 16, 2006 article published in the Athens (Ga.) Banner-Herald, examines the small town of Brazelton, Ga., which sits astride a five-mile stretch of Interstate 85.  The city police patrol the interstate for traffic infractions.  Quite often, a seemingly routine stop turns into a drug bust.  In three and a half years, Brazelton officers seized nearly 70 kilograms of cocaine, approximately 1500 pounds of marijuana, as well as $4.5 million in suspected drug money, according to the article.  Without traffic law enforcement on those roadways, how much would the drug trade increase?  What other dangerous cargo would pass along our interstate highways unchecked?

Perhaps the comparison between my hypothetical situation and immigration enforcement is stretch. I agree that immigration reform is needed.  What bothers me is the failure of one branch of our federal government to “take Care that the Laws be faithfully executed” (Article II, Section 3, US Constitution).  Our government is complex and the federal and state governments must work hand in hand on most issues.  When the laws assign responsibility, then the responsible party should ensure that they provide the means to enforce the laws.  If any group fails to do their part, we should call them on it.

Among the list of grievances against King George and the British government in the Declaration of Independence, “He has obstructed the Administration of Justice.”  If you want the federal government to enforce the laws, contact your Senators (www.senate.gov) and your Congressmen (www.house.gov).  And by all means, vote in November.  Make the “government of the people, by the people, for the people” work for all of us.

Breeding Entitlement

I took my Boy Scout troop to summer camp this week.  It’s always an interesting experience, seeing how the younger scouts react to being away from home and away from mom and dad.  There were the usual tummy aches and homesickness, blisters and bug bites, but no major trauma.  During dinner on the first night, a young scout at the next table made quite a mess.  I pointed out to the boy that he should clean up after himself.  His response, in essence, “I don’t have to, someone else will”, startled me.  Over the course of the next two days, I saw several more instances of “give it to me” or “someone else will take care of it for me” attitudes from the younger scouts.  I wondered if it was just me, or is there a greater sense of entitlement among the kids today?

I did a little searching on the Internet and found a USA Today article from September 1, 2006.  It cited the results from a national survey conducted by Sacred Heart University.  Nearly 83% of the poll respondents agreed that America’s youth feel more entitled compared to 10 years ago.  Also, 54% of the respondents disagreed with the characterization of youth being more responsible.

Ok, so it’s not just me. Others also see a greater sense of entitlement in today’s youth.  But, what’s causing this sense of entitlement?  I did a little more research and came across an op-ed article in Street & Smith’s Sports Business Journal from June 2011, titled, “Well-meaning parents fuel kids’ sense of entitlement”.  The article was written by Jon Butler, executive director of the Pop Warner Little Scholars, Inc., the organization behind Pop Warner youth football programs.  He mentions that Pop Warner rules prevent tryouts, prevents cutting players from teams, and requires mandatory play, yet the organization faces lawsuits because the parents don’t think their child gets enough playing time.  Instead of encouraging their kids to improve their skills to earn more playing time, the parents take the legal route?  Mr. Butler wrote, “Instead of the positive values of team sports, they’re learning that Mom and Dad will fight their battles and will make any negative situation go away.”

Mr. Butler referenced another Sports Business Journal op-ed piece titled, “The secrets of leadership are often found at the bottom”.  Written by Rick Burton and Norm O’Reilly, professors in the areas of sports management and sports business, the article discusses that many of the leaders in sports and sports media started at the bottom and worked their way to the top.  They wrote:

“We believe strongly that a disconnect exists between parents’ excessive coddling and their children’s ability to learn valuable leadership traits. It may be a parents’ right to assist their child, but keeping a young person from starting at the bottom may alter his or her capacity to master group dynamics and truly seek out servant-leadership moments on thankless tasks. This problem manifests itself when these same children graduate from college expecting to lead departments or divisions, less than 90 days after graduating. Trust us, this is a major challenge facing higher education today, and not just in North America.”

 As a parent, I want my children to succeed. I don’t want them to be unhappy.  I would like to protect them from the heartache of failure.  But, if we, as parents, coddle and protect our children from experiencing failure, do we prevent them from learning that success comes from hard work?  If we lead our children to believe that they are deserving of better than what they earn, are we breeding entitlement?

I think we have to stop coddling our children and stop responding with instant gratification.  We need to teach them to do for themselves, that choices come with consequences, that demanding is not the same as earning, and that sometimes they won’t succeed. Otherwise, we may create a society of parasites or adults that cannot cope with failure.

Raising kids is a tough job.  Being a Scout Master isn’t easy either, but the rewards of watching the younger scouts take the first steps towards self-reliance and older scouts taking on leadership responsibilities are immeasurable, even when compared to the benefits they experience themselves. Trying to provide for our kids without spoiling is often a tough line to walk.  Messrs. Burton and O’Reilly wrote, “Entitlement without hard work is a recipe for disaster.” Let’s avoid the disaster.

Affordable Healthcare?

Like most Americans, I was surprised by the Supreme Court’s ruling on the Affordable Care Act (ACA), known by many as “Obamacare.” While the Liberal Left praises the ruling and the Conservative Right is ready to hang Chief Justice Roberts in effigy, the rest of us are left to deal with the impact of the legislation.

What are those impacts?  I tried to read the health care legislation (Public Law 111-148 and Public Law 111-152) to understand the impact on me and my family. Nancy Pelosi, Speaker of the House at the time the legislation was passed, famously stated, “But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.”  Well, I’ve tried reading the nearly 1000 pages of legislation and I still don’t understand what’s in it.

I have read many articles and editorials on the subject in hopes that someone smarter than me could put it in simple terms I can understand.  There are lots of graphs, analyses, and tables of numbers circulating to explain the costs.  So much so that I am reminded of Mark Twain’s quote, “There are three kinds of lies: Lies, Damn Lies, and Statistics.”  As best I can tell, the impact for me will be an increase in insurance premiums and an increase in taxes.

What is the impact to the country?  The Congressional Budget Office estimates that over the next 10 years, the deficit will increase by over $1 trillion to support the ACA.  As I pointed out in a previous post (http://active-thinker.blogspot.com/2012/04/taxman.html), the bulk of the federal revenue comes from individual income taxes, so the individual taxpayers will shoulder most of the burden. But the number of taxpayers is shrinking.  A Brookings Institution’s Tax Policy Center study indicates that 46% of Americans will pay no federal income tax in 2011 or will receive more from the IRS in the form of a refund than they pay in. According to the Heritage Foundation, in 1984, the number of Americans that paid no federal income tax was 14.8% (http://blog.heritage.org/2012/02/19/chart-of-the-week-nearly-half-of-all-americans-dont-pay-income-taxes/).  As I said before, the country cannot sustain this level of deficit, especially with fewer and fewer taxpayers providing revenue for the government.

One editorial in the 1 July edition of the Greenville (SC) News really made me stop and think about the non-financial impacts of the ACA.  The editorial, “Sense of entitlement is likely to metastasize” (http://www.greenvilleonline.com/article/20120701/OPINION/307010058/Sense-entitlement-likely-metastasize), is written by Edwin Leap, an emergency room physician.  In it, he discusses patients that have “no sense of accountability, who “take” as a way of life.”  He goes on to talk about patients who demand medical care and other entitlements because they have no money, yet afford iPhones, cigarettes, or drug habits.

I know that some people truly cannot afford health insurance.  But I wonder how many of those who say they can’t afford insurance own big-screen TVs, cell phones, and other non-essential items?  How many are willing to allow others to pay for their medical care so they can maintain their lifestyle? Can this country afford to subsidize the lifestyles of such people?

Dr. Leap summarizes his editorial by saying “If anyone thinks that providing a means to insurance for everyone will make all people better or healthier, they’re wrong. While it will likely benefit many, the patients I’m discussing won’t work on their diets, smoking, drinking, Meth use or their serial paternity.” He goes on to say, “All they’ll understand is that there’s one more way to get things they want without contributing to the solution.”

It’s true that health care reforms that lower the costs of health care are needed.  But this country can’t afford to finance more government dependence. Health care reform and the ACA are sure to be hot buttons during the upcoming elections.  Learn about the candidates’ position on health care reforms, learn about alternative reform ideas, and by all means vote.  The consequences are too grave to be uninformed about this issue and to sit on the sidelines while the outcome is decided by others.