The “risk takers/job creators” myth

The “American dream” is that this is a land of opportunity. America is supposed to be the magical place where anyone can work their way up from poverty to the presidency, or at least that’s what we’ve believed.

Recent studies found that our country is now far from that.

Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage.

via Harder for Americans to Rise From Lower Rungs – NYTimes.com.

In a country that prides itself as a “classless society”- we are stratified financially more than ever, and our ruling class now has a stranglehold on Congress (47% are currently millionaires- and it would probably be higher, except we have a big freshman class right now). The gap between the haves and the have nots is growing faster than compound interest and fees on your overdrawn checking account.

Republican candidate for president Mitt Romney still believes the answer is “American business” and that “free enterprise” will take care of the problems:

At an outdoor rally yesterday at Wofford College in Spartanburg, Romney offered a robust defense of American business, warning that “free enterprise is under attack from the right and left.’’…

“This president has got it entirely wrong when he attacks the private sector,’’ Romney said. “Don’t attack the private sector. Don’t attack risk takers. Don’t attack those that are trying to create a brighter future for themselves and their family.’’

“Don’t attack profit,’’ Romney said. “Profit, by the way, is what allows businesses to hire people and grow. Free enterprise is under attack from the right and left.’’

via Ohio Sen. Portman endorses Romney for president.

Fundamentally, Romney is correct, profit is what allows businesses to hire people- the question is what people are we hiring and how the profits are made and shared.

Hiring people in “third world” or “developing nations” is one way to maximize profit- and American corporations have been doing a great job of that. Since the beginning of the economic meltdown, shifting jobs overseas has been easy, despite high unemployment in this country. Many of our biggest corporations have also been hoarding cash. Apple, for instance, is sitting on something around $50 billion. Oddly, the windfalls of success aren’t being shared with the owners of the company- the shareholders through dividends- the only way they can “profit” from ownership is to sell their stock. Yet, the executive team running the company keeps rewarding itself with stock options, multimillion-dollar bonuses (in the tens and hundreds of millions). This isn’t how the system is supposed to work.

Nor was the system working when AIG failed (soon after after the bond-rating agencies gave them an A rating)- and the American public bailed out the banks. The executives at AIG who took the country to the brink of financial destruction all were being paid princely sums and suffered no jail time and most are still making huge money.

A local instance of one of these “job creators” gone bad was MCSi, a high growth sham company that received local taxpayer assistance from the Montgomery County Port Authority in building a new HQ. The company was a house of cards, much like our Wall Street Casino, and when it fell- thousands were out of jobs or forced to write off debts. The CEO, after a protracted court case, was sentenced to a grand total of 7 days in jail. Had he had a few thousand dollars worth of meth in his mansion, he’d be in prison for life.

There is nothing wrong with the American dream, there is a problem with what kind of reward is expected at the top. We laugh when Jihadists dream of being rewarded with 70 virgins after blowing themselves up in the name of Allah, yet we seem to think it’s perfectly OK for companies to pay their executives more in a week than most of their workforce in a year- with zero personal risk involved on their part. Even when the head of Countrywide, Angelo Mozilo, was fired, he took home a huge multimillion-dollar jackpot.

All we have to do is add risk back in to the American business model and also limit the ability to profit wildly without some measurable standard of performance and Mitt can shut up.

Here are three parts of the solution:

  1. The federal government, the largest buyer of goods and services, will no longer purchase from companies that don’t implement a cap on executive pay based on the average U.S. worker’s payroll. In other words, if you are Miami Valley Hospital (Premier Health Partners) or Boeing, and your average U.S.-based payroll is $50K a year, your chief executive can’t make more than 35 times that- or $1,750,000 a year (a caveat might be added that if you operate as a “non-profit” corporation, the ratio drops to 20x- sorry MVH). Note- all hospitals depend on Medicare/Medicaid for their existence, and Boeing wouldn’t be around if not for our Air Force and government contracts.
  2. Shareholders of record, must be paid dividends annually if the company makes a profit. Stocks must be held for a period of at least a year to be eligible and any profit realized from short-term trades is taxed at a 35% tax rate. Dividends would be taxed at 15% to spur investment in private enterprise by the private sector.
  3. Secondary markets- the buying and selling of financial paper and commodity exchanges- would be restricted to either long-term holding of paper, or a requirement to actually take possession of the commodity. It’s time to stop pretending that trading paper is really the same as creating jobs and paying people. Our financial system acts as if “fantasy football” is the real game and the NFL is just a tiny part of the system- when if fact, it’s the other way around- the real people who play the game determine the outcome.

With these three changes, the American dream may come back. We would reward innovators and business founders with the opportunity to make huge money by owning their own companies- while, posers who waltz in after the fact, would have to earn their stock the old-fashioned way.

Romney is so far disconnected from the everyday financial situation of most Americans that he is a perfect example of how our country has lost touch with what a fair income distribution looks like:

He (Romney) also characterized as “not very much” the $374,327 he reported earning in speaking fees last year, though that sum would, by itself, very nearly catapult most American families into the top 1 percent of the country’s earners.

via Romney Says His Tax Rate Is Around 15 Percent – NYTimes.com.

We don’t hear real solutions to the economic stratification of this country without someone yelling “socialism” – but, the reality is that it is socialism when the taxpayers of this country bail out the wizards of Wall Street with our tax dollars or continue to do business with companies that pay their executives princely sums while pretending to be saving our country money.

On March 6, 2012, you can pick from 6 Democratic candidates to run for Congress against Mike Turner in OH-10. I ask you: Are there any that can write a post with solutions to the crisis- and cite their previous writings since 2005? Can you research their positions- or even question them easily? If you want a new kind of representative, please consider donating to my campaign. I refuse all corporate, PAC and Special Interest money- if it’s not coming from an individual taxpayer, I’m not taking it.

I’m doing what I can to end the myth of the million-dollar congressional campaign as well. Your money will be used in the most efficient way possible. You can help by sharing this message with as many friends as you have. Thank you.

 

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11 Responses

  1. Gary January 19, 2012 / 4:15 pm
    I’m thinking that in some mysterious way, Obama has stopped the west pipeline to show not only that this oil is filthy dirty, but that the backers behind the project are dirty, too.  I have faith that Obama can turn this economy around, and challenge the super rich, and it will make him an old man!  He has seen poverty!  It is time things change–change we must–or the earth is going to melt!
    The day has cometh … :-)  The gap in my wallet is getting bigger … And Mitt has a gap in his brain!
    Go Ron Paul!
    Go David Esrati!

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  2. Bubba Jones January 19, 2012 / 4:44 pm
    I’m thinking that this is about the most ridiculous thing you’ve said on this website, Gary!!  Obama stopped that pipeline project to pander to the “environmentalists” that will support him in the upcoming election.  When it was announced that he wasn’t going to support the project, he said something about there not being enough time to study the project and that it was a shame that Republicans were putting some sort of deadline on it.  What he didn’t mention is that the project has been under review by the State Department since 2008. I guess 3 or 4 years is kind of pushing it.  From what I’ve read, the State Department has also done their own environmental impact studies which have found no adverse environmental issues.

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  3. Ice Bandit January 20, 2012 / 12:20 am
     
    I have faith that Obama can turn this economy around…(Gary)
     
    …and the Old Bandito believes in UFOs and Bigfoot. Not to mention the validity of dowsing for water and the science of alchemy and phrenology. And just got back from a seance where the medium moderated a debate between Jim Morrison and Genghis Khan. But Obama turning the economy around? The Old Bandito ain’t that damn gullible…

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  4. Bubba Jones January 20, 2012 / 9:39 am
    Hey Gary! Have you ever heard of Crony Capitalism?  Maybe it’s not the backers of the pipeline that are filthy dirty, but those that oppose it.  Here’s a short article for you to read showing who might profit from the pipeline not being built.  You keep saying that you’re here to learn.  Now’s your chance!

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  5. Gary January 20, 2012 / 9:39 am
    Well Bubba, Maybe it’s time we do protect our environment; from what I saw on the news, this oil they want to produce is dirty, ashy, polluting oil. Some job that would be! Do you want Newt to be our president, and find him cheating and lying to the American people?
    Do you want big business man Mitt in there who doesn’t care about us middle class?
    Maybe I rant a lot here, but who really knows the facts, and can prove all that they talk about and maintain here?

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  6. Gary January 20, 2012 / 10:03 am
    The Burlington Northern/Santa Fe railroad serves North Dakota (along with Canadian Pacific), and guess who has a majority stake in BNSF these days? Ah yes, stock tycoon Warren Buffet, who wants millionaires to pay more capital gains taxes, that should help the middle class fare well.
    Now if only the government would stop spending that tax revenue recklessly!

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  7. John Ise January 20, 2012 / 10:12 am
    It’s not only that Romney’s Bain fired tens of thousands of workers in restructuring companies, a quarter of which subsequently went bankrupt; it’s that he made a unimaginable fuckin’ fortune in doing it, specifically a quarter of a billion dollars! Bain’s goal first and foremost is to enrich Bain, not to promote growth and efficiency.  Bain, like many financial equity firms, is little more than corporate chop-shop, where executives like Romney profit enormously irrespective of the long-term success of their business clients or the welfare of the workforce.    It is the source of the roiling populist discontent against society’s top 1% that Romney has come to symbolize. 
     

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  8. Dan January 20, 2012 / 1:07 pm
    That’s what we need… a potential oil spill right in the middle of Oklahoma. Thousands can be put to work cleaning it up! I’ve heard the Alberta tar sands described as nothing short of an environmental bomb… and another example of us exploiting the wealth of others at their own expense… read up on the vocal opposition taking place in Canada toward the pipeline… it’s pretty loud. The Keystone pipeline will not reduce our dependence on foreign oil, since they plan on shipping it out anyhow (the United States no. 1 export is the refined fuels made of imported oil fyi… see something wrong here?), so besides enriching the already stinking rich oil industry, and creating 20,000 temporary jobs, what exactly is the benefit? Why do you trust these oil barons who’ve done nothing to earn it and all sorts of things that should make you very skeptical?
     
     
     
     
     
    Why aren’t you (Bubba and Ice) environmentalists? You find the planet our children have to inherit that worthless that you’re willing to ruin it’s long term health for an economic bandaid felt by very very few? You seek the morally wrong type of green. In fact I don’t think I’ll ever understand the morality of those that choose to support and defend the oil industry period… oil men have only proven to be very greedy and quite disgusting. I’d rather see those 20,000 people employed developing the energy technology and infrastructure of tomorrow… not taking part in this continuous movement backwards.
     
     
    Any way you look at it (except through cloudy rose red lenses) Keystone is just bad bad bad.
     
     
     

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  9. Mark January 21, 2012 / 1:51 pm
    Per David Esrati’s changes to restore the American Dream:
    –He proposes that decisions on how to use cash generated by public companies (re-invest it in the company, use it for capital purchases, buy back stock, or pay dividends) be taken out of the hands of the management and owners of the company and put in the hands of government.
    –He proposes that buyers and sellers in “secondary markets” – I think this means options and futures trading, which has been acknowledged to improve market transparency, price efficiency, and lower risks – be required by the government to hold long-term, or take possession of the underlying assets.
    –He proposes that the federal government add yet another set of regulations and bureaucracy to its purchasing apparatus, this time to limit vendors based on how they set their compensation policies.

    These proposals to expand big government are not my idea of restoring the American Dream.

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  10. David Esrati January 21, 2012 / 2:05 pm

    @Mark-

    No I don’t propose that the government step in on public companies decisions- other than we don’t do business with companies that don’t place limits on payroll. You don’t like it- take the company private, or don’t do business with the government.

    Secondary markets- uh- you are on drugs. Speculators on jet fuel have destroyed the market. If you don’t actually make purchases- you can’t play in that market. It’s no different than other anti-monopoly legislation.

    And if you’ve tried to do business with the federal government- you have no clue what the processes are like. The bureaucracy is already deathly.

    And- if you think our economy will survive continuing with business as usual- your American dream will quickly turn into a nightmare..

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