Redcoats to the Rescue!
January 12th, 2011 // 11:06 am @ Oliver DeMille
Republicans and Democrats have increased government spending for years. Bush’s budget was drastically higher than Clinton’s, and President Obama has continued increasing spending.
The White House blames the Bush Administration for the economic meltdown it inherited, and rightly so.
But now independents, conservatives and many working-class Americans have reached a point where they feel frustrated that the Obama Administration has not fixed the economy — indeed, many feel that a number of programs have made things worse.
Big corporations have significant cash reserves right now, but they are unwilling to spend it with the Obama Administration’s general dislike of business. Capital goes where it is treated well, and right now that’s not the United States.
In fact, many businessmen are concerned that things will get worse before they get better, that the government will continue to make war on business, increase regulation, buy up and control more of the economy, and generally harass free enterprise.
Many believe we will see a return of recession in the next few quarters, and even if we achieve double the economic growth of the 1990s (which is obviously unlikely) it would take us over two years to get back to normal levels of unemployment.
With Moody’s report on August 21, 2010 that jobless claims are rising, “the economy is weakening,” “the rate of growth is slowing” again, and “unemployment is going to rise higher,” this is even more important.
Yet Washington is increasing regulation on business, making investment and entrepreneurial ventures more difficult, and sending the message that business is not really welcome anymore in the United States.
We need a major economic boost in the worst way, and instead our leaders are showing aversion and at times even loathing for the entrepreneurial spirit that grows any free economy. What are we thinking?
The British Way
More to the point, where is the national leader that will reboot the economy? The answer is: in England.
If that’s surprising, consider the evidence. The new British government, led by David Cameron, is taking drastic action to fix Britain’s economy. This path is difficult, but it is based on the reality of the new world economy. Americans should pay close attention.
Specifically, the new English budget balances the government’s books, shrinks most government departments by a quarter, and brings down programs and costs in schools, health-care services, welfare and many other areas of spending.
The government is “handing power to parents to run the schools,” putting doctors in charge of health care, and attempting to change “a culture in which Britons have looked to government for services and answers they could provide themselves.”
The Obama and Cameron administrations both inherited a major economic mess, but they are responding in nearly opposite ways.
So here we are in 2010 with a striking scenario: Washington is drastically increasing government spending and regulating at levels that would probably impress Marx and certainly Keynes, while Britain is reducing government and incentivizing free enterprise in ways reminiscent of Hayek or Milton Friedman!
It’s the “world turned upside down” (a song played at the end of the Revolutionary War when the British found out their invincible empire had given in to the American rebels).
President Obama and his team deserve credit for making GM profitable again and for moving forward plans to sell it back to the private market. And they are making similar progress with Chrysler.
Additional burdensome regulations and taxes on business are still being proposed, however. One recent political cartoon shows President Obama standing near a dying man named “Economic Recovery” saying, “The bloodletting didn’t work. Maybe we should try some leeches.”
For many in the business community, (whether or not it’s true) the White House appears more of an enemy than a friend. The British leaders at least seem to be on the side of trying to help those who run businesses rebound and succeed.
Enterprise Needed
Of course, it remains to be seen if a nation with as much government intervention in the economy as Britain can make it work, but certainly any good news for business and enterprise is positive for the world economy.
In addition to Britain, nations including Canada, Israel, India, Brazil and even China are doing more than before to actively incentivize entrepreneurs, investors and small business.
The U.S. should take notes: Government overspending and a campaign of alienating investors and small business isn’t really the best way to boost the economy or overcome massive unemployment.
At some point, the United States will either choose to reemphasize its powerful free-enterprise roots or it will decline in world power, freedom and prosperity. Perhaps now, with the British trying to lead the way, is the right time.
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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.
He is the co-author of the New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.
Category : Current Events &Economics &Featured &Government &Liberty &Politics
Building With Kryptonite: Small Business “Bailout” and the Future of the American Economy
January 3rd, 2011 // 4:00 am @ Oliver DeMille
When recessions make things difficult for a lot of people across the nation — especially when accompanied by high unemployment — many turn against markets and seek government solutions to economic challenges.
This is both predictable and understandable.
But one group typically responds in a different way that is surprising to most modern Americans: Many small business leaders and entrepreneurs, instead of seeking government bailouts, turn instead to ingenuity, innovation and flexibility.
Small business people believe in the free market. They believe that when things change in the economy they need to change the way they are doing business to deal with the new realities.
They also believe in free enterprise: the idea that their work, resourcefulness and risk can turn any challenge into a positive.
As one report pointed out, General Electric, Hewlett and Packard, Microsoft and CNN all started (or were brand new and really got going) during recessions.
Small business people have gotten us out of nearly all modern recessions — not by waiting for others to fix things or turning to government, but rather by applying leadership, inventiveness, creativity and originality. They look around, assess the situation and the needs, and put themselves (and others) to work.
Those with little experience running businesses, establishing start-ups or meeting payrolls often think that what small business needs is easier financing terms, government credits or bonuses.
The truth is that what they really need is less government regulation to deal with and lower taxes on their profits (which makes the risk worth the effort).
So why did the Bush and Obama administrations try to boost small businesses by making credit more available but increasing regulations and (in the Obama era) seeking to raise taxes?
“Thanks,” many small businesspeople are saying, “but no thanks. Forget the government credits and loan programs, and just get rid of all the bureaucratic red tape and high taxes which make it hard to build businesses, hire employees and meet our payroll.”
The Problem With Washington
Small businesses need consumers to buy their products, and that means stability from the government — not an on-going agenda of governmental change, change, and more change that creates increasing uncertainty and kills investment and consumer confidence.
They also need investment. As Nobel Laureate in economics Joseph Stiglitz said, there is a lot of investment money globally right now, but as investors are asking where is the best place to invest, the primary answer is “not in the United States.”
The on-going stimulus programs and other over-use of government interventions in the U.S. economy are driving away capital.
Experts say the housing crash hasn’t hit bottom yet and the unemployment rate will increase. The real unemployment rate is actually over 12 percent.
Government intervention is not solving the problems, and in fact the governments around the world that are intervening the most in their economies are struggling more.
It may be argued that these countries obviously have a greater need for remediation; but it must also be acknowledged that government has been the go-to in the U.S., and its sound-bite friendly solutions have been conspicuously shy of either restraint or principle.
When the crisis hit, most experts agree that government intervention helped stabilize falling markets. We are all glad things didn’t get even worse.
Thank goodness for President Obama’s leadership aura at the end of 2008 and the first few months of 2009. We may well have been headed for a depression but for the positive sense of leadership he brought to the nation. It was short lived, it is true, but it helped when we needed it.
The McCain team at that point simply did not have the national support to lead us through that challenge. We needed a president-elect and new president with “the leadership thing,” and Obama had it. I think this is why so many independents supported the Obama campaign in 2008 election.
Now, however, we have now reached a point where, as Treasury Secretary Timothy Geitner said, we need business to lead out in healing our economy.
The best thing government can do now is get out of the way and let small businesses innovate, hire and grow. Unfortunately, this is unlikely to happen unless Washington stops increasing regulations, taxes and other blocks to business growth.
The recent growth of government spending has been drastic, and it creates a drag on growth in the private sector.
For example, Reagan increased government spending by 2.6 percent, the first Bush by 1.8 percent, and Clinton by 1.5 percent.
But since 2000 we have increased spending with Bush at 4.7 percent and the Obama Administration at a whopping 12.7 percent (actually 22.5 percent if you include money approved under Bush but spent under Obama!).
In 2006 and 2008 independent voters swept Republicans out of office as a response to high government spending and a loss of trust in the decisions of the White House. Republican leaders now concede that they “got fired” by independents largely because of overspending.
Now independents are deeply frustrated that Democratic leaders have spent even more. Not surprisingly, given the unpopularity among independents and moderates of massive government spending, Americans now rate Barack Obama and George Bush almost equally — a major change from one year earlier where Obama had a 23 percent lead over Bush.
Only 20 percent of Americans are now pleased with Washington; 80 percent of Americans are disappointed or upset with Washington. Time magazine recently ran a cover report on conversations with Americans across the country.
The reporter Joe Klein noted that “There was a unanimous sense that Washington was broken beyond repair.”
This is not surprising in a nation where every baby born today “owes” the federal government over $43,000 to pay off the debt. For the first time in generations, many [some would say most] Americans are concerned that their children will inherit a worse nation and economy than they did.
The Solution Class
With all this government spending and constantly increasing regulations on business, it wouldn’t be surprising to see entrepreneurs and small business simply giving up; no doubt many do.
Most big venture capital is going abroad to places like Brazil, Israel, India, Britain, etc. All of these places are cutting government spending in order to incentivize small business growth.
Even France, Germany and Sweden are following this strategy. Indeed, France’s financial minister said on October 10, 2010 that unless nations reduce public deficits through reduced government spending, consumers will buy less and producers will produce less.
Nations, including France, who are following this policy are now seeing unemployment rates decrease. And when such a central-control powerhouse as France has an admonishment for us on this point, we ought to take notice.
At the same time that our growth money is going abroad, the U.S. government is increasing its debt to other nations.
For example, China holds 11 percent of our Treasury debt, Japan 9.5 percent, OPEC nations 3.5 percent, Brazil 2 percent, Russia 1.4 percent, there are significant holdings by North American and European lenders, and domestic lenders carry about 52 percent of the government’s debt.
Imagine what would happen to our economy if the government defaulted — and it does happen. In fact, the cost to insure our debt against default has risen 30 percent since August — just two months ago.
In short, the government owes too much to too many, but instead of incentivizing business growth in America it is attacking the very ones who are trying to fix things — small business.
Still, the American entrepreneurial class is fighting to overcome any and all challenges — even those posed by their own government.
Ken Kurson wrote:
“Today’s brutal economy and credit freeze should have most entrepreneurs running for cover, or at last signing up for the 99 weeks of unemployment our Congress has generously provided, courtesy of our kids and grandkids. Instead, many steel-stomached small business people are using this crisis as an opportunity to expand.”
In order to overcome the downturn and slow growth, entrepreneurs are asking what will sell in this economy and going to work providing it.
If past business strategies won’t work in the new reality, they are changing their businesses and seeking what actually will succeed. They see the economic meltdown and its aftermath as an opportunity, not a crisis. Instead of whining about what they’ve lost or asking for more government help, they are tightening their belts and getting to work.
Our New Super Heroes?
But, amazingly, Washington seems determined to make it harder for the very small businesspeople who are most effectively taking on our national economic problems.
Government is rewarding those who are currently the least productive while making it more difficult for those who are actively fixing the problems.
Democrats want to raise taxes in order to avoid cutting hyper-regulatory government problems (and because regulating business is popular in this anti-Wall Street environment), while the Republicans are allowing the tax hikes in the name of facing off with the Democrats.
Democrats claim that only by raising taxes on the top 2 percent of earners can we balance budgets. But “…75 percent of the families that would be affected by this tax hike are making between $250,000 and $500,000 a year…A lot of these people are small business owners, and that would hurt job creation.”
By increasing taxes on the very group that creates nearly all growth in America — small business owners — we guarantee that unemployment will tend to rise. And as the two major parties fight in Washington, taxes are now set to increase for everyone.
Some say that a tax increase is required to pay down debts and balance budgets, but in a down economy the real solution is to leave taxes as they are and cut unnecessary government spending. Neither party seems willing to do this, despite paying lots of lip service to the idea.
And month after month, increased regulations from Washington make business growth, hiring and increased economic success more difficult for small businesses.
In the parlance of the Comic-Con generation, it’s like the government trying to shut down Superman when he is protecting us from the end of the world. It makes absolutely no sense.
This is the crisis! Difficulty getting credit, slow growth, high unemployment, low consumer confidence—these are challenges entrepreneurs can overcome with hard work, smart risk and tenacious teamwork. This is precisely what entrepreneurs do!
But in addition to these major difficulties, Washington is now requiring small businesspeople to fight the government too! Why? In what evil parallel universe does building with kryptonite make any sense?
It’s time for a true small business bailout — a drastic reduction in costly red tape and an easing up on the tax rates for those who pull success out of seemingly impossible circumstances.
We need Superman, and entrepreneurs are up to the task. If only the two major parties in Washington would get out of the way.
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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.
He is the co-author of the New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.
Category : Culture &Current Events &Economics &Entrepreneurship &Featured &Government &Leadership &Politics
The Big Crisis is Coming
December 2nd, 2010 // 4:00 am @ Oliver DeMille
Note: If you like this article, you’ll love Oliver’s latest book, FreedomShift: 3 Choices to Reclaim America’s Destiny, which addresses the future of American and what to do about it.
Click Here to Download a PDF of This Article
By 2020, the U.S. will be spending $1 trillion a year just to pay the interest on the national debt. Sometime between now and then the catastrophe will come. It will come with amazing swiftness.” -David Brooks, New York Times Columnist
A big crisis is coming. From the story of the boy who cried, “Wolf!” to the crime of calling “Fire!” in a crowded theater, our society has a pretty low tolerance for alarmists.
They’re irresponsible, sensational, not to be believed.
One sure way to be ejected from the “Inner Ring” is to promote theories of conspiracy, to predict disaster or to in any other way suggest that our Progressivist trajectory is gravely off-course.
But what about when there is a wolf? Well, sure; the idea that there really is a wolf has agitated the fevered minds of crackpots and fringies since–forever.
And their animated efforts to alert the world to the threats that supposedly imperil us, to “wake us up” (regardless of our disinterest or our criticism) is perhaps the best indication that there’s no merit in their warning–or so says popular opinion.
This makes it all the more curious, awkward and, dare we say, disturbing when a chorus of alarms is heard coming from the established intelligentsia, from the acknowledged “experts” and thought leaders–the most credible voices in The Great Conversation.
And this is exactly what is taking place right now.
History is, of course, full of cranks and doomsayers, and the wise learn to talk in moderated tones and look at the evidence with clinical objectivity.
And yet in our time even many of our most objective, credible, detached, understated, methodical and consistently rational thinkers are predicting significant difficulties ahead–often in dramatic and even sensational terms.
Twenty Quotes Every American Should Read Today
For example, consider the following thoughts from some of our most tempered and prudent authorities. I have arranged these in a Top 20 list of great quotes; all 20 are an important commentary on our modern world and the decade ahead.
1. Peggy Noonan, The Wall Street Journal
I think there is an unspoken subtext in our national political culture right now. In fact I think it’s a subtext to our society. I think that a lot of people are carrying around in their heads, unarticulated and even in some cases unnoticed, a sense that the wheels are coming off the trolley and the trolley off the tracks.”
2. William Strauss & Neil Howe, The Fourth Turning
Wherever we’re headed, America is evolving in ways most of us don’t like or understand. Individually focused yet collectively adrift, we wonder if we’re headed toward a waterfall . . . a decisive era of secular upheaval, when the values regime propels the replacement of the old civic order with a new one.”
3. David Brooks, The New York Times
Elections come and go, but the United States is still careening toward bankruptcy. By 2020, the U.S. will be spending $1 trillion a year just to pay the interest on the national debt. Sometime between now and then the catastrophe will come. It will come with amazing swiftness. The bond markets are with you until the second they are against you. When the psychology shifts and the fiscal crisis happens, the shock will be grievous: national humiliation, diminished power in the world, drastic cuts and spreading pain.”
4. Niall Ferguson, Newsweek
This is how empires decline. It begins with a debt explosion.”
5. Roger C. Altman & Richard N. Haas, Foreign Affairs
The U.S. government is incurring debt at a historically unprecedented and ultimately unsustainable rate… As the world’s biggest borrower and the issuer of the world’s reserve currency, the United States will not be allowed to spend ten years leveraging itself to these unprecedented levels. If U.S. leaders do not act to curb this debt addiction, then the global capital markets will do so for them, forcing a sharp and punitive adjustment in fiscal policy. The result will be an age of American austerity. No category of federal spending will be spared, including entitlements and defense. Taxes on individuals and businesses will be raised. Economic growth, both in the United States and around the world, will suffer. There will be profound consequences, not just for Americans’ standard of living but also for U.S. foreign policy and the coming era of international relations.”
6. Joseph S. Nye, Jr., Foreign Affairs
The Congressional Budget Office calculates that total government debt will reach 100 percent of GDP by 2023…”
7. Roger C. Altman & Richard N. Haas, Foreign Affairs
The International Monetary Fund (IMF) staff paper comes closer to the mark by projecting that federal debt could equal total GDP as soon as 2015. These levels approximate the relative indebtedness of Greece and Italy today. Leaving aside the period during and immediately after World War II, the United States has not been so indebted since recordkeeping began, in 1792… State and local governments also owe huge amounts, on the order of $3 trillion.”
8. Don Peck, The Atlantic
The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults… It could cripple marriage as an institution in many communities… Ultimately, it is likely to warp our politics, our culture and the character of our society for years come…The economy now sits in a hole 10 million jobs deep…[and] we need to produce roughly 1.5 million jobs a year–about 125,000 a month–just to keep from sinking deeper. Even if the economy were to immediately begin producing 600,000 jobs a month–more than double the pace of the mid-to-late 1990s, when job growth was strong–it would take roughly two years to dig ourselves out of the hole we’re in… But the U.S. hasn’t seen that pace of sustained employment growth in more than 30 years…”
9. Ken Wilber, A Theory of Everything
We are awaiting the new global founding Fathers and Mothers who will frame an integral system of governance that will call us to our more encompassing future . . .”
10. Andreas Kluth, The Economist
And yet, who would be California’s ‘Founding Fathers’? Thomas Jefferson, absent from Philadelphia as a minister to France, called the 55 delegates chosen by the states ‘demi-gods’. These were men such as James Madison, deeply versed in Aristotle, Cicero, Locke and Montesquieu, who preferred the word ‘republic’ to ‘democracy’ for fear that the latter might evoke the chaos of ancient Athens… But can lay people be expected to assume the responsibilities of a Madison?”
11. Thomas Friedman, The New York Times
We are in a country in debt and in decline–not terminal, not irreversible, but in decline. Our political systems seem incapable of producing long-range answers to big problems or big opportunities.”
12. Larry King, Larry King Live
A recent CNN Opinion Research Poll [asked]: ‘Do you think the federal government has become so large and powerful that it poses a threat to the rights and freedoms of ordinary people?’ Fifty-six percent of Americans said yes.”
13. Joseph S. Nye, Jr., Foreign Affairs
In 2010, a poll by the Pew Research Center found that 61 percent of respondents thought the United States was in decline, and only 19 percent trusted the government to do what is right most of the time. In 1964, by contrast, three-quarters of the American public said they trusted the federal government to do the right thing most of the time.”
14. David Brooks, The New York Times
The essence of America is energy–the vibrancy of the market, the mobility of the people and the disruptive creativity of the entrepreneurs. This vibrancy grew up accidentally, out of a cocktail of religious fervor and material abundance, but it was nurtured by choice. It was nurtured by our founders, who created national capital markets to disrupt the ossifying grip of the agricultural landholders. It was nurtured by 19th-century Republicans to build the railroads and the land-grant colleges to weave free markets across great distances. It was nurtured by Progressives who broke the stultifying grip of the trusts…The task ahead is to save this country from stagnation and fiscal ruin. We know what it will take…The Democratic Party…does not seem to be up to that coming challenge (neither is the Republican Party).”
15. Fareed Zakaria, Newsweek
The world has shifted from anti-Americanism to post-Americanism . . . The distribution of power is shifting, moving away from American dominance.”
16. Philip Bobbitt, The Shield of Achilles
We are entering a period, however, when very small numbers of persons, operating with the enormous power of modern computers, biogenetics, air transport, and even small nuclear weapons, can deal lethal blows to any society. Because the origin of these attacks can be effectively disguised, the fundamental bases of the State will change . . . We are entering a fearful time, a time that will call on all our resources, moral as well as intellectual and material.”
17. Thomas Friedman, The New York Times
I heard a phrase being bandied around here by non-Americans–about the United States–that I can honestly say I’ve never heard before: ‘political instability.’ [This] was a phrase normally reserved for countries like Russia or Iran or Honduras. But now, an American businessman remarked to me, ‘people ask me about political instability in the U.S. We’ve become unpredictable to the world’….We’re making people nervous.”
18. Joe Klein, Time
Many Americans also were confused and frustrated by the constant state of war since the terrorist attacks of 9/11. But for every occasion they raised Afghanistan, they mentioned China 25 times…’The great fear is about American supremacy,’ said Anne Mariucci…’We all believed that if you followed the basic compact, worked hard and played by the rules, that we’d have the highest standard of living in the world. And we were always on the front edge of the next new technology–but we’re not anymore. We seem to be mired in mediocrity while China is steaming ahead.'”
19. Ken Kurson, Esquire
Today’s brutal economy and credit freeze should have most entrepreneurs running for cover, or at last signing up for the 99 weeks of unemployment our Congress has generously provided, courtesy of our kids and grandkids. Instead, many steel-stomached small business people are using this crisis as an opportunity to expand.”
20. Alvin Toffler, The Third Wave
There are powerful reasons for long-rang optimism, even if the transitional years immediately ahead are likely to be stormy and crisis ridden.”
One More Thing: The Rise of China
On the issue of China, Peggy Noonan said in The Wall Street Journal:
People are freshly aware of the real-world implications of a $1.6 trillion deficit, of a $14 trillion debt. It will rob American of its economic power, and eventually even of its ability to defend itself. Militaries cost money. And if other countries own our debt, don’t they in some new way own us? If China holds enough of your paper, does it also own some of your foreign policy? Do we want to find out?”
Also consider these quotes from my book FreedomShift:
Note that China, the second largest economy in the world, has huge savings (unlike the former Soviet Union or the current United States) and is a major buyer of U.S. debt. China has three of the world’s four largest banks, the two largest insurance companies and the second largest stock market. With all this, the Communist Party remains in control; it also remains firmly communistic in philosophy and is, if possible, increasingly totalitarian.”
China has a huge surplus of government and also private savings, and it wants to invest in the United States. Indeed it is our largest creditor now. Other nations may also be persuaded to keep supporting our spending habits. But one has to wonder why our philosophical opponent (communist China) wants to invest so much. Are its motives pure? What if they’re not? Is it a simple profit motive? What if it’s something more?”
And as Thomas Friedman said in the New York Times:
What does it mean when China’s communist business environment is more inviting to U.S. companies, more conducive to their growth, than the United States? When the regulations and taxes in the U.S. make doing business in China attractive? The U.S. now ranks #40 out of forty industrialized nations in appeal to business.”
As noted by Samuel P. Huntington and summarized by Richard K. Betts in Foreign Affairs:
Huntington also presents data showing China as the only major power that has been more violent than Muslim states.”
Columnist for The Atlantic (and 30-year expert living in Asia) James Fallows has argued that America can find ways to work with China so the 21st Century doesn’t become a time of big-power conflict, but few if any experts believe that the U.S. can ultimately keep competing with China unless we make major improvements at home.
It’s Coming
A big crisis is coming, and we need to prepare. I am an optimist, and I am convinced that the best years in America and the world are ahead of us.
I am also an idealist: I believe that we should clarify what we want for the world’s future and get to work creating it–however difficult the task.
As a realist I am convinced that unless certain things change very quickly (and perhaps no matter what we do) we are facing some major challenges ahead. Every generation faces its share of problems and gets to choose whether to be beaten down by them or to turn them into opportunities.
All of this said, my optimism still wins out. Our best is yet to come. And it will almost surely come as we face and overcome the major challenges ahead.
What are these challenges? I have no crystal ball, and my only certainty is that they will surely come–and probably very soon.
Many nations have been at a point with conditions similar to those we now face, and there is a preponderance of historical evidence that certain kinds of problems dominate in such circumstances.
The cycles and patterns of history indicate four major types of challenges for our situation.
Four Possible Catastrophes
Four possible catastrophes are suggested by historical analysis. Of course, any foray into prediction is based on educated guesses, and the one sure bet is that the future will present a number of surprises.
Along with the inevitable shocks that will no doubt disturb all forecasts, one or more of these great challenges is likely to come again soon.
These scenarios are a good indication of what we should expect during the next decade:
1. Major Economic Problems
The Great Recession does not qualify as a major economic collapse, though nearly all the experts are convinced that it came very close to becoming one. An economic depression of considerably greater magnitude may be ahead.
2. Health Pandemic
Modern nations are extremely concerned about this terrifying possibility. It is a telling foreshadow that insurance companies are taking this threat very seriously and preparing accordingly. Historically, the Black Plague was as devastating as any war–more than most; indeed, it reportedly killed a third of the population in many parts of Europe.
3. An Unexpected Major Crisis
Examples might include a major volcanic event, earthquakes, meteors, drastic environmental shifts or other so-called “acts of God.”
Of course, the unexpected can come at any point in the historical cycles, but in times like ours these randomly occurring disasters are especially devastating because coinciding with one or more of the other three challenges is so likely. In the age of WMDs, such catastrophes could be manmade–in all of history, there is no credible example of weapons being created and remaining unused.
4. Major War that Threatens the Homeland
The experts seem to think that few enemies in the world have the potential to challenge America in this way, but even if this is true the reality is that any of the other major crises would most likely be quickly followed by major warfare.
Things can change very quickly, as history has proven. We are at the point in history (following a major boom in the 90s and then 9/11, the longest war in U.S. history and the Great Recession crash) that we are weary of crisis.
We want the challenges to be over, and we are thus particularly vulnerable. It is at such points that the really big problems come–like Pearl Harbor after a roaring twenties boom ended by the stock market crash in 1929 and then twelve long years of crushing depression.
Turning Crisis to Opportunity
We’ve gotten a little soft after several generations of prosperity and entitlement. It’s time for us to cheer up, man up and turn our coming challenges into opportunities.
America’s biggest successes came in times of challenge: the Constitution came out of a time of war and economic downturn, slavery was ended in another era of war and economic depression, and the Greatest Generation stopped Hitler in a period of world war following the Great Depression.
The patterns of history suggest, and the intelligentsia from across the globe concur, that we are headed for another such time period; in fact, we may well be into it already.
The challenges won’t be identical, of course, but they will likely be similar. Realism says our generation will have as many challenges as any other, and optimism says we can turn the coming challenges into remaking America and the world in the best and most important ways.
Whether we succumb to the challenges ahead or turn them into America’s best years depends on the American people.
If we stand back and wait for our leaders to solve our problems, the crises ahead will almost certainly go very badly for America.
If we just pretend everything is fine (or that our leaders will fix everything without our help) until the crisis is fully upon us, we miss valuable preparation time.
If, on the other hand, we resurrect our identity as a nation of grassroots leaders, entrepreneurial thinkers and citizen-statesmen, we will use the coming difficulties to significantly improve the world we pass on to posterity.
Well, Chicken Little–it turns out that the sky is falling. Will we be prepared?
Category : Current Events &Economics &Featured &Foreign Affairs &Government &Leadership
The Reality Behind the 2010 Election: It’s the Economy
October 29th, 2010 // 4:00 am @ Oliver DeMille
The economy is struggling, and it is driving the election. As so many have said since the Clinton campaign made it popular in the 1990s, “It’s the Economy, Stupid!”
And many Americans believe the economy will continue to decline. If it does, the Obama Administration has very few tools to respond.
The White House has based its entire economic policy on an ideological belief in government spending and intervention, but further economic downturn will require it to take serious action.
What can it do that it hasn’t already tried? How much more can it spend? And at what point will it accept that such spending isn’t delivering fixes to unemployment and the economy as promised?
If the government increases spending, promotes more stimulus, raises taxes or increases regulations (or all of the above — which is what it has done so far), it will run into major difficulty.
So far none of these have fixed the economy. The nation now ranks Democratic leaders at their lowest rating ever compared to Republicans (42 percent to 52 percent).
And the major issues fueling dislike of the Obama agenda are unemployment (now 9.6 percent), the healthcare law and other increased government regulation, and massive government spending.
Some economists, like Paul Krugman, say the problem is that the stimulus should have been much bigger in the first place — since now there is very little support for more government spending.
The White House seems to agree, and it is preparing to raise taxes on big business. The problem with this strategy is that very few small businesses have a lot of extra cash right now. Big business, in contrast, has a lot more extra cash than the whole of government stimulus.
Unfortunately, with the Obama Administration promising to end tax cuts to big business, these companies are unlikely to hire or spend their cash on hand. And if President Obama does raise taxes on big business, they are likely to simply hold their cash or spend it in other countries.
A lot of corporations are seriously considering moving more of their operations abroad to find more favorable environments for profit. Many have already made this move, taking jobs and money with them.
Some countries are aggressively advertising their low tax rates to lure international investors. For example, a full-page ad in The Economist reads:
“Fact: the Gulf’s lowest taxes are in Bahrain. As are the region’s lowest living and operation costs. Which leaves more of the cake for you and your business.”
A lot of nations are using similar campaigns to lure investment, while the U.S. is actively adopting policies which drive capital away.
Why would businesses that can afford to move stay in the U.S. to face more White House attacks and increasing taxes and regulations?
This not only won’t help our economy. It will increase unemployment, make credit harder to obtain for small businesses, and convince consumers to buy less. In short, it will significantly hurt the economy.
The Obama plan claims to help small business, but in fact its proposed policies will do the opposite. One Harvard economist points out that our debt load is now even worse than that of Greece, which has just experienced major economic collapse and is being bailed out by international banks.
Open For Business?
The impact on the elections is obvious. If a lot of Republicans win, they will have more influence to argue for more business-friendly policies. But there is no guarantee they will do so.
After all, the Bush Administration significantly out-spent the Clinton Administration before it. No matter what happens in the election, the Obama team needs to take a different route if they want to reboot the economy.
Two years into Ronald Reagan’s presidency, the economy was struggling and unemployment was above 10 percent. Reagan pushed to cut taxes, reduce government spending, and, perhaps most importantly, sent out the message — over and over — that government needed to be reduced and that private business was the hope of the economy.
In retrospect, spending actually increased under Reagan, but his consistent message of promoting business, support for business growth and free enterprise, and the need to cut government and spending made business feel safe.
He spoke optimistically of business on all levels, and lauded the opportunities provided by free enterprise and free markets.
The result? Businesses hired and entrepreneurs went to work. Commerce soared. Growth quickly soared to 8 percent (the Obama “recovery” was around 1 percent) and unemployment rates came down. The 1980s became an era of economic boom, which grew into the roaring 1990s.
Too often the opposite message is coming from Washington. The White House repeats its “unfriendly to business” message over and over, calling businessmen “fat cats” and telling young people to work for non-profits and not go into business.
It constantly promotes increased government spending and ever-expanded regulations which drastically increase the cost to start and build businesses. It has publicly attacked the Chamber of Commerce, the ultimate small-business advocate, and in general it has sounded angry and dangerous to business.
Now, in the name of “helping small business,” it is increasing taxes on big business and people who succeed in small business — many of those above the $200,000-$250,000 threshold are small entrepreneurs.
And, as I said above, many big businesses which hold a lot of cash are making plans to take it abroad. These realities are a serious problem.
Americans now believe Republicans (49 percent) “would do a better job of dealing with the economy than Democrats (38 percent).” But what exactly is the Republican plan? It is unclear.
Americans seem to believe that at least Republicans will stop increasing taxes and regulations on business, and perhaps be a lot more friendly and welcoming to business.
Whom Do Voters Support?
Perhaps the most significant reality is that Democrats and the Obama Administration now have a 60 percent disapproval rating among independents.
Of course a lot of Republicans support Republican politicians and a lot of Democrats support Democrats. But President Obama was swept into office by independents, and now most of them no longer support his policies.
Independents are mostly for fiscal responsibility, lower taxes and lower levels than the current government intervention in the economy. Indeed, many of them supported Candidate Obama because they disliked the Bush Administration’s high-spending, over-regulating policies.
It seemed to independents that Candidate Obama promised new leadership and a new direction for Washington. Many independents have been shocked and dismayed by the Obama Administration’s move to the left. But they could have supported this surprise if there wasn’t such a lack of new-era leadership.
For example, as an independent, I expected President Obama to be liberal. I closely read The Audacity of Hope (affiliate link) before the election and I was clear that he would govern from the left.
But I also thought he would bring a new brand of leadership — a fresh, charismatic, Generation-X-style emphasis on American growth and vibrancy rather than old-line Washington politics.
Unfortunately for all Americans (left, right and independent), that did not occur.
Many independents feel abandoned by President Obama less for his liberalism than for his return to “Washington politics as usual.” This shift occurred within days of inauguration, and his popularity among independents has consistently fallen ever since.
We live in an era where the key to winning elections is to combine support from your base (liberal or conservative) with the support of independents.
This is true nationally and in most locales as well. For Democrats, who will get the bulk of Democratic votes no matter what, the goal right now should be to bring in independents by pushing through many tax breaks and finding ways to deregulate business requirements.
When asked who they will vote for in the 2010 Congressional election, 62 percent of registered independents said they support Republicans; 30 percent plan to vote Democrats.
This is a huge split in American politics, where voting differences are usually 1-3 percentage points and a 6 percent split is a landslide.
As a result, many current Democratic candidates are frequently using the phrase “I’m independent.” As the election season kicked off right after Labor Day, the Obama Administration changed its message —apparently to attract independent voters.
President Obama said in his speech on September 8th that it is American business which drives the economy, and Timothy Geitner said the same day that American businesses are very innovative and able.
This change is a good move for the administration, but President Obama still managed to include disparaging remarks about privatization and Wall Street.
Despite the fact that there may be truth to what he says, it is the tone of anti-business that reverberates. He may get past this bias in the weeks and months ahead, but will it last after the election?
From an independent perspective, it doesn’t seem like it.
Business really does drive the economy, and we need to genuinely embrace and support this.
Independents are tired of the constant attacking between parties. Instead of Republicans attacking President Obama and the White House attacking Republicans, why can’t either just get serious about enacting policies that actually help small business?
It’s the Economy!
Our leaders must find ways to significantly help business.
Proposed tax cuts for small business, payroll tax holidays, and not taxing research and development are good starts with bipartisan support. The Obama Administration deserves praise for these proposals. But a lot more is needed.
If the government is going to spend money regardless of what the voters want, the current push to spend it on infrastructure is probably the best plan.
Still, spending $50 billion of taxpayer money is quite an expense. And nearly all infrastructure contracts will go to big firms, further excluding and in places even hurting many small businesses.
Unless private business is convinced to rebuild the economy, one business at a time, government spending will just make the problem worse.
Harvard economist Niall Ferguson responded to President Obama’s new plan by pointing out that the $50 billion of infrastructure expenditures will do little or nothing to boost the economy since the plan is built on faulty economic reasoning that is good for politics but bad for the economy.
In contrast, Ferguson argues, we should be studying how Reagan and Thatcher successfully battled and overcame major recession in both the U.S. and Britain in the 1980s. Even experts from left agree that the proposed Obama plan won’t do much to help the economy.
President Obama’s speech included numerous jabs against Republicans, which many independents agree with. But it didn’t include much that could really help the economy.
This has many independents frustrated. It feels too much like more politics, not better leadership.
For example, the proposal to put freezes on non-security spending is a good idea, but it rang hollow, sounding more like a political debating point than something the president really cares about.
If he gave it the same support as health care, and kept pushing it with tenacity and refusals to give up on the idea, many independents would be impressed.
Instead, it seemed to come across like the right thing to say in this election season, but prone to be ignored in favor of big government spending after the election.
If that isn’t true, if the Obama Administration really does follow through on this proposed freeze on the non-essentials, many independents will swing back to supporting President Obama.
But I think that most independents will wait until after the election to see if this happens.
The president’s speech was excellent in many ways, and independents should be glad that he is now saying some of the right things. It felt like the return of Candidate Obama.
But therein is the problem. Is it just campaign rhetoric? The contrast between Obama’s campaign persona and his Head Democrat persona is so dazzling that it’s more challenging than usual to hope that Mr. President will lead out.
And why did he say a lot of the right things about fiscal responsibility but only get passionate when he was criticizing Republicans or talking about increased government spending?
It’s the Economy, Really!
The Democratic narrative seems to be that without the stimulus the recession would have been much worse.
But many independents don’t buy it. They didn’t like many of President Bush’s policies, but they are just as frustrated with the current administration’s strategies.
They believe the stimulus was a flop and healthcare and other massive regulations have seriously hurt the economy. They blame both Obama and Bush for the current economic mess.
But since Bush is out of the discussion, their frustration is pointed at President Obama.
American independents aren’t the only ones who feel that the Obama Administration’s stimulus and massive spending/regulating strategy has worsened the economy.
Some international analysts, for example, say: “[The stimulus] has not worked. The whole thing has failed. And that is why America, of the big economies, is the one that is now teetering on the brink.”
Some say, “I think in Europe it’s very clear the direction the Europeans are going down, which is to basically start bringing public debts and deficits under control. Obama is still worried about the polls….Personally, I think the best thing they could do is probably just sit on their hands in the U.S. …”
If the plan is to spend more, tax more and increase regulations, then I agree — let the politicians sit on their hands and do nothing!
But what if, instead, they cut taxes, deregulated small business, changed the healthcare law to incentivize business investment, and extended an olive branch of friendship and thanks (yes, genuine gratitude) to entrepreneurs and business for their vital contributions to our prosperity?
Doing nothing, as good as it may sound to Tea Partiers and some independents, is not enough. Washington needs to reverse the bad-for-business policies accumulated since 1987 — or at least during the Bush/Obama growth of anti-business policy since 2001.
If this sounds impossible, we may be in for a very long period of economic struggles.
In Conclusion: It’s the Economy!
The future of the economy depends on the willingness of small business to take risks and the willingness of big business to hire, spend and invest.
Until our national leaders are willing to cut government spending, lower taxes, reduce government interventions in almost every sector of business, and show more genuine friendliness to business, our economic problems will continue.
Whatever the results of the 2010 election, Washington has got to make friends with business. We simply must make those who spend their lives in business feel safe and excited about building, hiring, investing, growing and spending. Otherwise, deepening economic troubles are ahead.
We desperately need real leadership in Washington, leadership which will actually incentivize, promote and reboot the economy.
The best-case scenario would be for the Obama Administration to lead out in this direction. After all, they’ll be in the White House for at least the next two years.
This pro-business outline (cut taxes, significantly reduce regulation on business, get government spending under control, and make friends with business) should be the guiding principle to every voter in every election across the nation this year.
We need to pay little or no attention to political party and instead elect leaders who will help kick-start, encourage, and stimulate the economy.
This is a true mandate, and our national future depends on it.
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Oliver DeMille is the founder of the Center for Social Leadership, and a co-creator of TJEd.
He is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.
Category : Business &Current Events &Economics &Government &Prosperity
O Canada: Lessons From Our Northern Neighbor
October 28th, 2010 // 4:00 am @ Oliver DeMille
Two words that haven’t shown up together very much since the 2008 economic meltdown are “austerity” and “Canada.”
That’s quite an accomplishment for our neighbor to the North. Austerity has been paired with Greece, Portugal, Spain, Great Britain and France in just the past 18 months.
Austerity means having your economy controlled and run by international regulators, and right now the idea of austerity for the United States is growing.
Not only is the federal government in financial trouble, but so are many of the individual states. In addition to struggles in 2008, 2009 and 2010, 31 states project major budgetary shortfalls in 2011.
Prospects are getting worse in many states, rather than improving.
Unemployment numbers are knocking on double digits (which is to say that in some places they already exceed 10 percent), and the U.S. deficit and debt promise to be major issues in the 2010 election — to say nothing of their impact on America’s future for years and perhaps decades to come.
Canada’s Example
But Canada faces a much smaller challenge.
Ironically, for decades U.S. conservatives have pointed to Canada’s health care system as the example of what not to do — often referring to it as a failed icon of “socialized medicine.”
Many liberals have idealized the nations of Western Europe, looking past Canada and preferring Britain, France and Germany as examples.
The Great Recession has changed all this — mainly because Canada avoided the worst of the global financial meltdown.
As Ken Kurson put it:
“When the worldwide system collapsed…Canada didn’t have a single bank poisoned by toxic assets and not a penny of public money was used to bail out its financial institutions.”
Of course, many businesses and individuals suffered, but it would have been much worse if Canadian banks followed more European-U.S. policies.
Israel, India and China all fared pretty well in the meltdown — as did Canada — while the U.S. and Britain were hit very hard. Canada’s traditional liberalism and conservatism helped shield it from the worse financial collapse other nations faced.
Modern liberalism and conservatism are mostly focused on winning office and promoting partisan agendas, whereas the traditional strains of both conservatism and liberalism are more interested in ideas, values and ideals.
Traditional liberals in Canada used government to put caps and controls on the nation’s financial institutions, keeping them from simultaneously posing as both lending institutions and speculators in the Japanese style that most European and U.S. banks have adopted.
And traditional conservatism kept banks and business from leveraging their resources at the high levels which brought down so many institutions in other nations.
One can argue with either the underlying Canadian liberalism or conservatism, but the results were a traditional kind of system that is too often seen in many advanced (and broke) nations as outmoded, quaint and passé.
For example, most U.S. mortgages were intended for sale while nearly all mortgages in Canada are still held by the banks where they originated.
In other words, Canadian bankers only made loans to people they intended to have as long-term customers; the happy result is that when the housing bubble burst such banks remained solvent.
Of course, all nations were hurt by the global economic downturn. Certainly, Canada, Israel, and other nations have their share of problems, but simple financial frugality and common sense are never old-fashioned.
What We Can Learn
There are at least two important lessons America should learn from this.
First, the traditional models of either liberalism or conservatism seem better for America than the modern, partisan styles of liberals and conservatives.
The commonsensical use of government combined with a free and flourishing private sector is vital to the future of freedom and prosperity. And the ideal is found in earlier American history rather than modern Canada, India or China.
Still, when China incentives free enterprise more effectively than the United States, the results are predictable. Freedom works, and when America ignores its own legacy it loses its strength and economic resiliency.
Second, technology doesn’t trump wisdom.
We live in a world where checks can be deposited through cell phone cameras, current events are taught better on QRANK than the nightly news, and mobile phone applications like Avoidr “allow Foursquare users to select the ‘friends’ they want to avoid” (and their phones keep them abreast of where their friends are at any given moment).
Amazon sells more books on Kindle than in hardback, and online media is causing many newspapers and now book publishers to disappear.
On a macro level, nanotechnology makes surveillance, theoretically, ubiquitous — it is becoming ever-present, everywhere, always.
As Graeme Wood wrote in The Atlantic:
“If the past several years in the shadow of a war against terrorism have taught us anything, it is that, once available, surveillance technologies rarely go unused, or un-abused.”
And governments are pursuing increasingly deeper rings of secrecy even though technology makes transparency possible.
All of these are ultimately the tools of human values and decisions. Indeed, the more powerful the technology, the greater the need for wisdom, limits, checks and balances.
It matters whether we learn these lessons or not. When the global economy broke down in 2008-2009, many businesses, industries and even states were bailed out by the federal government.
But the next round of major decline could easily force Washington to follow the majority of non-industrialized nations and even European countries like Greece, Spain, Portugal, and France in turning to international lenders for bailouts.
If this comes before 2012 or even 2020, as it certainly could, we will have to borrow from those who have money to lend — meaning banks in nations such as China, Israel or Canada.
Of all the possible candidates, we will most likely go hat in hand to Canada.
Revisionist History
The other option is simply to adopt fiscal responsibility on our own. A little common sense — both the conservative and liberal kinds — can go a long way.
Unfortunately, the opposite seems to be gaining momentum. After the end of the Cold War in 1989, the common wisdom seemed to be that capitalistic nations had overcome their communistic rivals.
But for many, the Great Recession has revised this conclusion. Now the theme seems to be that Soviet-style communism and Americanized capitalism are just the age-old battle between power and greed.
The emerging winner appears to be government-run industry, what The Economist called “Leviathan Inc.: The State Goes Back Into Business.” Indeed, these are the models followed by nations like China, Israel, Brazil, India and Canada that fared better than most in the recession.
Some leaders in Washington are taking note:
“[F]rom Berlin to Brussels, demand for industrial policy is back. Japan’s new government is responding to what it sees as the increasingly aggressive policies of foreign competitors by deepening the links between business and the state.
In America Barack Obama, the effective owner of General Motors and a chunk of Wall Street, has turned his back on the laissez-faire approach of the past: a strategic-industries initiative is under way.”
Unfortunately, the politicians are ignoring the rest of this report:
“Yet the overwhelming reason for China’s miracle is that the state released its stifling grip and opened the country to private enterprise and to the world…
India’s wildly successful software and business-process-outsourcing industries blossomed not because of help from the government, but precisely because its [government] did not understand these nascent fields well enough to choke them off…
In the rich world, meanwhile, the record shows, again and again, that industrial policy doesn’t work.”
The Real Need
I’ll take traditional liberalism or conservatism – either one – over the current modern Democratic or Republican models.
Commonsensical uses of government spurring a free economy, or a truly free-enterprise system with a limited government effectively taking care of the basics—either would be much better than the current reality.
Canada, Greece, Israel, China, Britain, France, Portugal, Spain, Germany, many other nations, and the United States — all could use a free-enterprise upgrade.
A constitutional, free enterprising, federal democratic republic which believes in freedom and applies its principles sounds like a utopian dream.
Or, it could just be a nation run by a truly educated, wise and active citizenry.
Without citizens who are effective overseers of the government, freedom doesn’t last anywhere. Because of this, even those nations which were less hurt by the Great Recession face difficult futures.
It remains to be seen what nation (or will it be a tribe, or something else?) in the world will become the new standard of freedom.
Such leadership will naturally flow to the society whose common citizens become a new generation of great citizens—like the American founding generations.
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Oliver DeMille is the founder of the Center for Social Leadership, and a co-creator of TJEd..
He is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.
Category : Current Events &Economics &Foreign Affairs &Government &Leadership &Politics &Technology
