In March 2009 the prestigious Kaufman Foundation did a study that identified 78% of Americans as believing innovation is important to our economic health, while indicating that only 3% of Americans feel the stimulus package will encourage innovation.
Although the stimulus package contains many provisions and earmarks, there is one item notably absent. Usually government programs set aside about 25% for small businesses to help the less-than-mighty companies compete with the corporate giants. For unfathomable political reasons, small enterprises have been overlooked for the largest economic program ever enacted by Congress.
I am beginning to see climate change not just in Al Gore’s movie, but also in government’s attitude toward business, anger spilling out in all directions and trickling down to small businesses, which did little to cause the current calamity.
Although the financial crisis has illuminated the often-deceptive and unethical methods, banks, insurance and financial companies practice, these companies have been allowed to persist and are likely to resume their old ways through the largess of Congress at the expense of the American taxpayer. The rules and regulations being contemplated to avoid a similar financial catastrophe are aimed at these large firms, but they will also affect small business.
For ranchers, charismatic shipping magnates and wealthy local newspaper editors, these regulations will require more government reports, more accounting and likely higher taxes. This time the trickle down theory is likely to work in an unexpected way.
It appears that high taxes and over-regulation cause higher unemployment. According to CEO Magazine (March/April), the three states offering the worst business environment and the highest taxes, California, New York and Michigan, are topping the list for the highest unemployment. These states are also the largest recipients of state and corporate federal welfare.
It seems propping up the too-big-to-fail multinationals is a misguided strategy for several reasons. It may be my own Darwinism or a fondness for the ‘creative destruction’ theory, but if a company has been mismanaged, like Chrysler, GM, AIG, Bank of America and others, it should be allowed to fail leaving room for others to take their place. By nature, all businesses have to commit to profit, but multinationals tend to focus in the most economical market and in the least expensive places. Conversely, small businesses in America account for more than 50% of the GDP and provide relevant innovation and employ local people.
Logically, government intervention in any form should be directed to the heart of American enterprise—the small business—and not funneled to failing companies with abysmal track records.
May 26, 2009 at 4:35 pm |
Another good post and interesting take on what is happening and to “real” people.
Thank you for sharing your thoughts.
May 26, 2009 at 9:14 pm |
Gosh Lou, I haven’t even had a chance to post on “logic” and you’re already off on cap and trades. Your mind did not take off for the long weekend.
On logic, I mostly agree with you not so much from the business viewpoint but from the land use and development viewpoint which I follow a little more closely. It has certainly been true that stimulus money being spent on transportation projects – mostly new roads – as well as clean water projects is seemingly flying in the face of new and innovative policy and technology findings about what makes for smarter growth and development policy, including cost efficiencies and the use of technology improvements. It is often thought that necessity is the mother of invention but in these moments of crisis it seems like we humans are more likely to go back to the slightly worn and inefficient but easily mobilized. If the stimulus funds provide jobs it will have accomplished at least one thing. Hopefully we can stop the roads to nowhere and steer a little money to green infrastructure projects without ripping up too much land until the crisis is over and we can go back to slowly but surely putting some innovation back into our business and policy developments.
May 27, 2009 at 1:53 am |
I once read a study from an independent group that claimed about 20% of all the money from government programs gets lost between inefficiencies, fraud and incompetence. The government announced last week that it was having problems accounting and tracking all the TARP money that was disbursed and I suspect in another few years the same announcement will be disclosed about the stimulus program.
Hastily approved shovel ready projects may have little value and other carefully thought-out projects may have great value, but could take years to actually come on stream. The largest of these projects will leave little chance for small businesses to participate except as sub-contractors. That was the intent of my reference to the trickle down theory.
I wonder if better and more efficient roads proliferates more cars on the highways or if better roads will reduce traffic and add time and better gas mileage to the American economy? I don’t know the answer but I gather no one in Congress took time to examine either of the potential consequences.
If something needed to be done then the Administration should be lauded for the speed the stimulus bill was approved. Both parties pander to their base and that thrust is not always the best path for the country.
Tax credits for research and development and further government assistance for alternative energy are very positive aspects of the stimulus bill. Additional money for education is another good aspect although it was structured to literally wipe out charter schools. Not every voter in the country can be fully satisfied.
I am not sure I answered your question, but it seems to me that a monetary commitment of that magnitude might have been better targeted with a few more weeks of deliberation.
May 29, 2009 at 12:45 am |
“charismatic shipping magnate”??