Why are We Still in Recession?
February 10th, 2011 // 4:39 pm @ Oliver DeMille
Why was it that scientists were so excited to discover facts that farmers had known for generations and generations?” —Brandon Sanderson, The Way of Kings
The Wisdom of Crowds or Crowns?
There is a technical definition of economic “recession,” but many Americans don’t know exactly what it is. Nor do they accept the experts’ assurances that the Great Recession is really over.
Indeed, in the view of many, it was the experts who led us into recession while predicting something else.
The same experts promised that stimulus would fix things, and now they continue to confidently promise and predict as if their record should somehow bolter our trust.
In many ways, America’s elites consider regular Americans uninformed and ignorant. But there is another kind of wisdom, not based on expertise and therefore seldom understood by the elite class (most of whom were convinced some time before or during college that erudition is a matter of credentials, titles and peer consensus).
The “other” wisdom is based on an innate or experiential understanding of principles, of knowing things like these: Increased government size and spending is out of control; and like the housing bubble, the big-government bubble will have to burst at some point.
In the governmental model as erected by the American Founders, the wisdom of the masses is a critical and even central feature of republican government.
The American founders so trusted this type of wisdom above that of experts that they put the regular citizens in charge of elections and our direct representatives in charge of the nation’s purse strings.
They also gave the federal government only 20 specific powers and left the rest to the states and people.
Many, especially the upper classes of Europe, argued that such an arrangement could not succeed, that nations must be led by elites and their specialized agents.
History proved the Founders correct in this debate.
A Second Type of Recession
There is also another kind of “recession” not defined by economists but very real nonetheless — a recession where most people feel deep and overwhelming economic anxiety, where few families have as much money now as three years ago but more expenses, and where the majority feels deep down that things will get worse before they get better.
This kind of recession doesn’t move charts or graphs, but it does operate on a real logic: When the experts are wrong over and over, stop following them.
It should be noted that the people who use this type of reasoning generally have great respect for expertise and the experts, but not a blind faith.
Such wisdom holds that if individuals, households and businesses must tighten their belts, live within their means, and rise to a more self-reliant and entrepreneurial approach now that times are hard, the government needs to do the same.
If Washington refuses such common sense, it is deluding itself — and forcing us to pay the bill.
This “other” wisdom realizes that we have lived beyond our means for some time, and that we can only really build a new model if the old system is deeply changed.
The far Right and far Left argue that such progress can only come from the ashes or ruins of our broken system “after it falls,” while more moderate voices believe that a few fundamental shifts in worldview and policy can get us back on track.
We can move from nanny state to free enterprise, according to this view, from big government to smaller and more effective government, from a nation of dependents to a nation of innovators.
Such arguments sometimes sound untrained and unsophisticated to elite ears, partly because the privileged class wants America to look good to the European eye — but mainly because these type of arguments are often untrained and unsophisticated.
But we should not make the mistake of considering them naïve or ineffectual.
Sometimes the simple solution is best — especially when one of the most daunting problems is how complex our government and economy have become.
Expecting any single expert or government official to have a full grasp of it all is truly unrealistic, and depending on large teams of specialized experts doesn’t work without leadership from those who grasp the entire reality and envision something better.
Citizen Leadership
Grassroots wisdom from the people as a mass accomplishes this more effectively than any party, politician or intellectual class. This is the linchpin of freedom. The citizens must truly lead, or freedom does not last.
In times of crisis, wisdom is more important than expertise. Both are essential, but wisdom is most vital.
The American people, however uninformed they may appear to elite tastes, have wisdom in spades. They make mistakes, as Jefferson and later Tocqueville put it, but they always correct them.
In the governmental model as erected by the American Founders, the wisdom of the masses is a critical and even central feature of republican government.
One central reality stands out right now: People are struggling a lot more than the experts admit or the numbers show.
The economy may be in a slow recovery, but the American people are stuck in recession. And they know it.
Families and communities are experiencing more hurt than gets reported, and many people feel that things are getting worse. The middle-class standard of living is collapsing, and the worst of the housing bubble appears to still be ahead. Moreover, the government bubble is real and eventually it will burst.
Unemployment is worse than the numbers show. For example, many of the job losses are in middle- and high-paying jobs while most new jobs are low-paying. With the real unemployment rate (which includes those who have given up even trying to find a job) over 12 percent and the underemployed rate above 18 percent, we are more than halfway to a depression (traditionally defined by 25 percent unemployment).
Yet our leaders spend, borrow, and spend. The Chinese have continued to lend us more, as we figuratively hung ourselves and our posterity with an unyielding cord of debt.
Washington regulates more roadblocks to business growth, and tells us that 10 percent unemployment is the new normal. Then politicians pile on more regulations that hinder global investment in the U.S. and send it to friendlier markets.
American firms go abroad and find lower taxes, reduced regulatory environments, and more plentiful capital.
As unemployment lingers in the wake of these policies, we are assured that more government programs will care for those without jobs.
Most Americans find this more alarming than comforting. Consumers don’t spend. Businesses close. A drive down Main Street, Anywhere, USA is a museum tour of boarded-up windows.
We elect one party’s leaders with high hopes, then we try the other party—back and forth, without lasting success. Things worsen. Inflation may follow, as the Fed prints more money and further devalues our currency.
Many Americans feel the afterglow right after a major election, but the anxiety returns when the bills keep coming and they try to balance their checkbooks and plan for the years ahead. Call this recovery if you want, but the American people aren’t convinced.
Next Steps
The good news is that when pushed the American people take note and take a stand. The great American entrepreneurial spirit is rising, and it is our only real hope.
Elections come and go, but cultivating the values and skills of free enterprise in ourselves and others builds for the long term. It creates a solid foundation that works.
The election of 2010 is over, and the elections of 2012, 2014, 2016 and beyond will not have near as much impact on America’s future as the entrepreneurial spirit (or the lack of it) among the mass of regular citizens.
To the extent that elections help free the economy for growth, they can greatly benefit our prosperity and freedom.
But ultimately America’s success and affluence will depend upon the initiative, innovation, creativity, tenacity, resiliency, ingenuity, enterprise and entrepreneurial spirit of the regular people.
This is the true wisdom of crowds, and only the regular people can make this happen.
China may rise in prominence and even to superpower status in the decades ahead. If so, it will do so by applying these very entrepreneurial traits. The same is true of India, Brazil, Europe, other places, and the United States.
Our future depends on the rise of these entrepreneurial values and characteristics. The adoption of these will signal a true economic Recovery and put a real end to the Great Recession.
Whatever the politicians, parties and experts say, the world of 2020, 2030 and 2040 will be a world of our making, and the nations which rise in prosperity, freedom and power will be those where the entrepreneurial spirit flourishes.
With this in mind, I am convinced of at least two things: Our future is bright, and there is a lot of work ahead for all of us.
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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 : Business &Economics &Entrepreneurship &Featured &Government
A No-Party System
February 10th, 2011 // 4:33 pm @ Oliver DeMille
Paine versus Burke
It is popular to describe the differences between two big divisions of each major political party.
For example, Democrats are sometimes called cluster liberals (who “view politics as a battle between implacable opponents”) versus network liberals (who “believe progress is achieved by leaders savvy enough to build coalitions,” even with the other party).
The two main types of Republicans are usually portrayed as fiscal versus social conservatives.
The divide may actually be more simple, according to a recent article by Yuval Levin (“Burke, Paine and the Great Law of Change” in The Point Magazine).
The roots of the two great American types of liberalism, says Levin, are found in the debates between Edmund Burke and Thomas Paine.
In truth, Americans aren’t really conservatives at all: “Conservative” means to remain the same, and since the American founding (indeed since the Pilgrims and others left the old countries) nearly all Americans have rejected the conservative royal model of Europe’s past. Nearly all Americans believe in progress and in changing government to meet new challenges.
In contrast to the European definition of “conservative,” American conservatism has come to mean holding on to old values, lessons and institutions — which is the Burke side of the 1790s debate. Burke said society was best served by an incremental approach to building on the best lessons of the past.
Paine believed, on the other hand, that every generation should reevaluate the current government and society and use reason to change whatever it thinks might improve things.
Paine view was that we
“…should not be bound by the past, but should choose anew society’s design…Burke thought Paine put too much stock in reason. Do not wise men disagree?”
Burke put his faith in the wisdom and institutions of the past, and warned that ignoring past lessons would cause many problems. He felt that too much faith in man’s reason alone would lead to party conflicts, waste and many failed government projects.
Paine was more concerned that dogmatic attachment to outdated traditions would keep society from progressing.
Modern Americans — liberal and conservative — nearly all want to make changes and see things improve. The interesting thing is that most network liberals and fiscal conservatives are followers of Burke while the majority of cluster liberals support Paine’s view.
This is further confused because many social conservatives are a mixed bag — they adopt Burke on issues like abortion and family values and Paine on issues from immigration to Iraq and Afghanistan.
Sides Versus Fusion
Confused yet? Many people are. But this is more than just an indication of how much the American political landscape has changed since 1989. Independents, the true majority now, are fans of both Burke and Paine.
They believe in keeping the best of the past and also in making commonsense changes when needed.
As long as independents are the majority (and it appears this will be for a long time), the future of conservatism is liberal (meaning a constant push for change in Washington) and the future of liberalism is controlled by independents.
The far left and right can shout as loudly as they want, but the future of America belongs to those who believe in the best of the past (like the U.S. Constitution) and making changes to improve society in each generation. Like it or hate it, this is the reality now.
In a sense, though, this is a return to the American way. George Washington embodied both views: Burke and Paine, attachment to the old lessons and changes to improve things.
After Washington, electors traded back and forth between presidents who emphasized Burke’s views and those who preferred Paine’s ideals. The modern two-party system consistently pits these two worldviews against each other.
Third Party Versus No Party
It remains to be seen what a return to the combination of both views by a majority of the populace — the independents — will bring. Many wonder if a third party is ahead.
But, perhaps, the rise of independents will resurrect support for another model popular in the founding era: A non-party federal government where independent voters elect the best people to office without the circus of political parties.
For those who say this can’t happen, remember how small and impotent independents were just three decades ago. The one constant in political history is change, and the one thing we can count on for sure is that many things will occur which the experts have deemed impossible.
Santayana said that unless we learn from the mistakes of history we are doomed to repeat them, and both Paine and Burke knew that difficult things are possible. America was built on the belief that hard advances are, in fact, likely.
On a technical level, a true third party could create the same thing as a no-party model — at least in presidential politics.
Since the president must be elected by a majority (e.g. 51 percent), not just a plurality (say the highest vote, but only 42 percent) of the electoral college, having three truly popular party candidates (all with their own electoral college representatives) would usually put elections in the hands of independent voters.
At some point, independents may decide that being forced to choose between the two big parties just isn’t getting the job done.
In the meantime, independent support is there for the taking by any president who is willing to re-emphasize the Constitution, fiscal responsibility, social justice and other best lessons of the past along with exerting the leadership to do big things that require change and deeply matter.
America is greatly in need of a truly shared and great purpose, and citizens of all major viewpoints will naturally rally to such leadership when/if it comes.
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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 : Constitution &Current Events &Government &History &Politics
The Declining American Dream
January 31st, 2011 // 9:55 am @ Oliver DeMille
We still hear about the American Dream. But more and more it seems we’re in a Matrix-like dream state where our perceptions are being manipulated. It’s actually a pretty common plot in cinema: The Minority Report, The Sixth Day, Total Recall, Inception, The Adjustment Bureau and others riff on this theme. We’re living in a reality out-of-synch with some truth we’ve lost, and we don’t even realize it. Somehow our collective memory and our assumptions of “normal” are slowly morphing, and our definition of the American Dream at present is so far removed from the original concept as to be a pretty fair Doublespeak[i] idiom.
Back when the Cleavers[ii] and even the Bradys[iii] were the icons of American families, what was the definition of “The American Dream”? What did it mean to be “middle class”? There are some features of it that were fairly well accepted once upon a time:
1. Home Ownership I
Perhaps the most traditional measure of middle class and the American Dream is the ability for every man to be the king of his own castle. In this the U.S. was a beacon to the world, and other countries even began to adopt the value that every person might aspire to own his own dwelling. The historical and sociological significance of home ownership includes the moral and political empowerment of being “landed,” and affiliation with the natural aristocracy. Homeowners were believed to have a deeper sense of responsibility to invest in their property improvement, an elevated pride in and loyalty to their neighborhoods and communities, and a higher commitment to the good of society in general.
2. Home Ownership II
Now we have to dig a little deeper into our genetic memory. Home ownership a generation or three ago meant not only that you weren’t renting from somebody else, but after a maximum of thirty years in your home you weren’t renting it from the bank, either. A 30-year mortgage left the likes of Ward and June Cleaver without a house payment right about when the grandkids started showing up, and they were able to be a boon to their young married children as they were starting out. If the idea of Home Ownership I as a definition of “The American Dream” is still generally accepted (and I believe it is), the Home Ownership II definition has been deleted from our collective memory. Not only do we have a 30-year mortgage that gets refinanced ad infinitum, but we have seconds on our vanishing equity—and our seniors are living on the funds derived from reverse mortgages.
3. One Income
For the Cleavers and the Bradys, Home Ownership I and II were accomplished on one income. Dad had evenings and weekends for leisure; mom could volunteer with the PTA and community service organizations. Both could participate in book clubs, bowling leagues, gardening and other vocations. The Women’s Lib movement sent the modern woman into the workforce by choice; now Home Ownership II is entirely out of reach for the middle class, and Home Ownership I requires a minimum of two incomes—and often multiple jobs for an individual worker—in order to be a reality.
4. Two Cars
The family had a car—and later two. They were American made with pride, and they were built to last. Paid with cash from savings, or with a little help from the local bank, they were paid off long before they were sent to the salvage yard. Some families even scandalized the neighbors by giving each of their teens a car as soon as they were legal to drive.
5. College for Kids
Part of the understanding for middle class families was that they would be able to pay for their kids to get a college education. Now all that’s left of that understanding is the guilt for failing to live up to it. No one seriously expects one-income families to be able to pay off the house and cars and simultaneously send several kids to the University. Scholarships, loans, grants and lingering debt into the career years are now the means for those who want a college education.
6. Discretionary Income
With all of the above, it was still an expectation that a married couple could live within their means and have savings, investment, yearly vacations with the whole family at some destination spot, and still have a few dimes to rub together at the end of the month.
7. Retirement
Ah, and after all this came the golden years. The Cleavers could now spend their expanded leisure time, afforded by an empty nest and the retirement from the company (complete with gold watch honors), in community service and nurturing the rising generation. They had savings, investments and retirement income to fall back on, a house and car paid free and clear, and the greatest resource: Leisure Time. They were elders in their community, and relied upon for wisdom.
The percentage of families enjoying these luxuries shrinks every year. Where did our American Dream go? Somehow, point by point, it has slipped away from us, and taken with it our definition of “middle class.” Would that we could wake up and reclaim the best of that dream; instead, we’ve awakened to a reality where our elusive American Dream is just out of reach; and these seven points that were once considered the legacy of any hard-working family are being deleted from our list of aspirations. If they are middle class expectations, the majority of America is no longer middle class.
[For a follow-up article on the how and why the middle class is shrinking, and how to reverse the trend, read Oliver’s article, “The Rule of Leisure,” featured in the February 2011 monthly newsletter for The Center for Social Leadership.
[i] See Orwell, Nineteen Eighty-four.
[ii] From the 1950 – 60s classic sitcom about the traditional nuclear family of Ward and June Cleaver, “Leave it to Beaver”.
[iii] From the classic 1970s sitcom about the non-traditional nuclear family of Mike and Carol Brady, “The Brady Bunch”.
Category : Blog &Community &Culture &Economics &Entrepreneurship &Family &Generations &Politics &Postmodernism &Producers &Prosperity
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.
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