RANCHO SANTA FE, Ca., September 14, 2012 – Our Nation is facing serious challenges that require serious solutions. The Democrat and Republican Parties have enormous resources that they have chosen to use to craft perpetual campaigns. After four years of partisan name-calling, we are left with sound bites rather than solutions. Rather than offering definitive plans, we are asked to accept the rhetoric of fear.
Democrats argue that a vote for the Republican candidate is a vote “to return to the failed policies of the past.” Republicans argue that our country can’t afford to continue the “failed policies of the present.” Neither Party states what it will actually do other than in vague generalities. That may be because they can’t since both Parties are committed to offering recycled political solutions.
Albert Einstein once said, “We can’t solve problems by using the same kind of thinking we used when we created them.”
Rather than default to a political solution that by definition requires public sector resources, allow me to offer a radically different approach: one focused on private sector solutions. After all, our Nation’s problems ultimately impact the private sector. So, why not try to resolve them there … without Government intervention or the need to spend taxpayer dollars?
First, let’s examine the characteristics of public sector solutions to better understand why it may be better to avoid them.
The Government does not produce any tangible product. Instead, it consumes monetary resources under the guise of providing the necessary regulation of elements of our society. If the Government were to remain focused on the purposes described in Article I, Section 8 of the Constitution (i.e., “to provide for the Common Defense and General Welfare of the United States”), there wouldn’t be an issue. However, the Government often stretches well beyond the bounds of those words. It is at that point that problems emerge
Distinguish between public and private sectors (and sub-categories within the private sector) – Also differentiate between Controllable / Non-Controllable elements of any particular problem.
Every single tax dollar is subject to the following truism:
- Inefficient utilization of funds (regulatory/compliance/enforcement)
- Historically ineffective (unmeasured and no consequence for failure)
- Usually unwarranted (under Art, I Sec. 8) and merely reflective of a habitual quest to expand political power and control
Given that reality, I look to the private sector first. I divide the private sector into its component parts:
- Charitable organizations
- Educational institutions
- Privately-held companies
- Publicly-traded companies
Next, I focus on what’s controllable versus non-controllable, what resources can be leveraged, and what cooperative initiatives can be developed between these groups, either independent from the Government or with limited Governmental assistance. But before we explore those types of alliances, I would like to distinguish between privately held companies and publicly traded companies.
One of the few things upon which Democrats and Republicans seem capable of agreeing is that small business is the true economic engine of our Nation’s economy.
Generally speaking, small businesses are privately held.
Rule #1: Get out of their way! Do not layer needless costs on these businesses by way of non-essential regulatory control. Where licensing and regulation is appropriate, the Government should administer it responsibly (i.e., processing should not be monetarily burdensome nor should it be subject to undue delays – file the forms, pay the fees, and get a response in a timely manner).
Rule #2: If the Government is going to stimulate job growth and economic expansion, do it here, where access to capital is disproportionately restricted as opposed to well-established or politically-favored, publicly traded companies.
Rule #3: Do not tamper with the income of those who have taken all the risks and personally sacrificed significant aspects of their lives to build a successful company.
Now, let’s jump to publicly traded companies for a moment.
Level the playing field. If legislative mistakes have permitted some industries to become “Too Big to Fail,” correct the legislative mistake … level the playing field so that every company competes under the same rules. I encourage you to research which publically traded companies donate the most to the campaigns of the Party candidates (through their corporate PACs and/or union PACs as well as their senior executives) and compare that list to which companies have been deemed “Too Big to Fail.”
- Look at who receives waivers from programs like the Affordable Care Act as well. If you find a correlation, you should at least be suspicious.
- Secondly, the Democrats are right when they point to the growing income gap between middle-class Americans and, as they term it, the “rich.” While they don’t necessarily seem to grasp the impact of zeros behind a number (often confusing those with an income of $250,000 a year with “millionaires and billionaires”) the growing gap does present a serious problem.
- Unfortunately, raising tax rates for the rich not only wouldn’t make a serious dent in our Nation’s debt (and if President Clinton would like me to do the arithmetic for him, I would be happy to do so), but it also only masks the problem rather than fixing it. Taking money away from the “rich” to ineffectively spend it does not “close the gap.”
So, let me tell you how the private sector can heal itself without the Government’s intervention in this regard.
- Executive compensation has gotten out of control within many publicly traded companies. Their Boards have fallen prey to the same misplaced fears that professional sports franchises have: that they have to keep escalating salaries to retain “talent.” Note: that unlike owners of privately-held companies, the executives at publicly traded companies rarely, if ever, participated directly in the risk and sacrifice that led to the company’s success.
- Let’s assume that a particular CEO is paid $55 million a year. I guarantee you that, somewhere out there, there is another talented individual who could perform every bit as well for (let’s be extremely generous) $5 million a year.
- Now, the company would have freed $50 million to finance job growth that would otherwise be unobtainable; job growth that would improve productivity, development, or service and be accretive to the tax base and provide for economic expansion (since the newly employed individuals are consumers in their own right)
- But what if the company instead chooses to spend the $50 million on state-of-the-art equipment instead of people? All things being equal, either profits go up or prices go down, either of which serves to stimulate the economy.
- But what if the company decides not to reinvest the $50 million and instead distributes it to its shareholders? The shareholders have three options:
#1 – They will be taxed on the proceeds and may spend the balance, which in turn would stimulate the economy
#2 – They could put the money in a bank, which would in turn make it available for loans, which in turn would stimulate the economy
#3 – they could reinvest it in one or more other companies, which in turn would stimulate the economy.
Here’s where you come in. Publicly traded companies are publicly held. You don’t have to wait for a political election to begin to assert your rights as a shareholder. Demand that the Compensation Committees and Boards of the publicly traded companies in which you hold shares bring executive compensation in alignment with reality (whereas today, it’s nearly 360 times the income of an average American). You have that power today and, as President, I would make sure that everyone became aware of how that power can be used to correct the problem rather than mask it. Note that no Government interference was required, no taxpayer dollars were spent, and the problem got fixed sooner rather than later.
Why don’t you hear these types of recommendations from Party candidates: (a) either because they lack the private sector experience to even recognize them; or (b) because there is absolutely no political benefit to be derived from fixing the problem without the intervention of the Government.
Now, let’s go back and briefly discuss the cooperative alliances that could be established between Charitable organizations, Educational institutions, and Businesses.
I would work with businesses to identify ways excess food and inventory could be shared with Charitable organizations and Educational institutions to help lower their operating costs and more directly provide resources to those in need. That would reduce the need for Government programs to address the same need in a significantly less efficient manner.
I would also work with businesses to establish cooperative programs with Universities and trade schools that would align the employment needs of the businesses with the curricula focus of the Educational institutions. Let’s create an educational pathway that leads to long-term employment and enhances our competitiveness on a global basis.
Correspondingly, if the Government were to get involved in the Business and Education alliances, perhaps one of the more effective areas in which it could participate would be in transferring declassified technologies to these alliances to accelerate research and development. Consider this: as a taxpayer, you have already paid for a plethora of technology that has been developed for the public sector but that has not been deployed in the private sector. To the degree that these technologies are no longer classified, why not leverage those tax dollars and share them with our educational institutes and businesses? Arrangements could even be made with respect to any patents that evolved from such redeployment so that the American people could recapture some of the original cost of the incorporated technologies through future royalties. Under this scenario, the educational institutions win, the businesses win, and the taxpayers win.
Party candidates pontificate about what legislation they will pass and what they will repeal on their “first day in office” or in their second term. The truth is that Article II does not give the President any authority to pass or repeal any legislation. The best a President can do from a legislative perspective is to influence legislative direction.
As the head of the Executive Branch of Government, the President can directly impact the operating efficiency and effectiveness of that Branch … and should.
Conversely, it might be more accurate to suggest that many of our Nation’s problems originate with the Government when it attempts to influence issues that have little to do with the constraints imposed by Article I Section 8 of the Constitution (i.e., “to provide for the common Defence (sic) and general Welfare of the United States”).
T.J. O’Hara is an internationally recognized author, speaker, and strategic consultant in the private and public sectors. In 2012, he emerged as the leading independent candidate for the Office of President of the United States and the first nominee of the Whig Party in over 150 years.
This article first appeared in T.J. O’Hara’s recurring column, A President for the People, in the Communities section of The Washington Times.