A little background about myself. I have started and run several electronic manufacturing companies during the past 40 years. During that period I have seen the decline of America’s manufacturing industrial base. My current company is Xetawave, based in Louisville.
Living in the 7th Congressional District, I looked at all the candidates for the U.S. House, and I initially contributed to the campaigns of Tim Reichert and Erik Aadland, both running for the Republican nomination. Reichert has published his economic plan on his website. This is my take on it.
Tim Reichert made his money being an expert about taxes, regulations, and corporate valuations. He is an example of the type of person us small-business guys have to hire to wade through the vast government regulatory and administrative state. He is a member of the highly educated elite. His proposed solutions show that he does not understand the problems of over-regulation. Here are the problems that he doesn’t get:
We have become a vast regulated administrative society. Reichert claims he gets this, but then he invariably proposes more regulations to repair the damage. He should know that the right solutions will cut regulations and will reduce the need for his expertise.
Government subsidies create more harm than good. Reichert’s solutions for higher education do not mention the elephant in the room: a trillion dollars of non-recourse (to the schools) student loans, which created the huge boondoggle of rich universities peddling degrees instead of knowledge. Reichert’s proposal to waive capital-gains taxes when an owner sells his or her business to employees will not work. It will only create another class of experts offering ways to qualify for the tax break. The very smart investment bankers who bought my previous businesses will figure out how to structure all buyouts to get this tax break.
Our country suffers from a lack of wealth-creating expertise. This expertise does not just come from the universities but also from trade schools, apprentice programs, and is especially dependent upon a strong basic-skills high school education. Reichert seems to subscribe to the wrong belief that success in life only can happen if everyone goes to college. In my business, employees that have both a solid high school education and a good work ethic earn more than typical college graduates.
Government set-asides do much more harm than good. Reichert does not get this when he wants to force the federal government to buy 15% from small businesses. This only raises government costs and it creates a huge industry of rent seekers using regulation experts to qualify. The solution is to have government purchases be based solely on value and not the sellers’ size, ethnicity, race, or sexual orientation. And then the procurement process, regulations and paperwork must be drastically reduced for all, as these are the barriers to entry for small businesses.
Price controls are always a disaster. Yet Reichert wants to use price controls for his Fair Trade solution. He wants to force all retailers to sell goods at the same price! The effect of this will enrich the Walmarts of the world and make the poor and working class pay more.
Big corporations are not harmful simply because of their size. Reichert is using a Democrat talking point. Reduce the regulatory burden for all, and us small businesses can compete with the big guys. Instead, he wants to spread the wealth by creating small businesses out of large companies, using antitrust regulations. What Reichert doesn’t get is that big businesses buy from small businesses and they simply pass down the huge regulatory burden of government. We sell to large companies. Last week, one of them sent us a 300-page agreement to sign. Most of it is the government rules and regulations they have to meet.
Raising the costs of any segment of our society invariably impacts the poor and middle class. All of Reichert’s proposals mostly raise costs. None lowers costs.
There is no such thing as a free lunch. Note that Reichert says nada about the huge government subsidy and entitlement programs that are driving the federal deficit. You cannot rein in the deficit unless you first stop government spending. This is fundamental. Why doesn’t a smart guy like Reichert say so?
Jonathan Sawyer lives in Littleton.
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