National debt. Deficit. Debt ceiling. Jobs. Stimulus. TARP. Raise taxes. Lower spending. Other than the meltdown by movie stars (i.e., Charlie Sheen, Lindsay Lohan, etc.) these are about the only headlines in the news for the past three years.
Unfortunately, they mask the real issue – the question that someone is going to finally have to ask: who is going to pay for all of this? And, where are they going to get the money?
Rather than looking at billions and trillions, let’s look at the individual taxpayer who earns $50,000 a year. (About half of American adults, by the way, pay no income tax.) That taxpayer’s share, for example:
- of the new national debt of about $16 trillion is $73,295.23;
- in additional (that means on top of what is now being paid) Medicare costs is $1,904.80; and,
- of the 2009 Stimulus is $3,783.26.
Now, I understand that there are many who believe that this is a good and proper use of government. Whether it is or not is not the point of this article. The point here is that someone is going to have to pay for all this government. More importantly, there are going to have to be more wealth creators in this country (entrepreneurs, risk takers, innovators, small businessmen and women, etc.) or there won’t be more jobs, there won’t be an expanding economy, and these debt and deficit issues will not be resolved no matter what the people in Washington, D. C. do.
Because creating wealth by the 10 percent who have the means, talent, vision and ability to take risk provides the fuel for the 90 percent who become the workers who take these ideas and turn them into products and services. That’s real job creation. And, there are only three components that combine to create wealth:
- Research and development. The foundation of wealth creation is economic innovation. This is rooted in the principles of research and development of new products and services. And, to be successful, those products or services must be financially profitable, technologically feasible, and socially acceptable. It all starts with research and development.
- Savings and investment. Money. Money saved, not consumed. Money invested, not spent. It takes money to bring a product or service to market. Many times a lot of money. As Shimon Peres, the President of Israel, once remarked in a Knesset debate about an idea someone wanted Israel to adopt, “the wonderful thing about imagination is you don’t have to budget it.” Well, ideas must be budgeted and invested in if they are to be moved from ideas to market.
So, whenever government impedes bringing these products to market by increasing government forms, affidavits, reporting, licenses, hearings, etc. it impedes capital formation and investment. The old phrase “time is money” was never more true than in today’s environment of government over-regulation. What used to take a few days now takes months. That’s months of waiting where money is already invested but non-productive. Turnover of capital is critical to creation.
- Plant and equipment. In the end, ideas once funded must be set in motion — usually with offices, staff, technicians, distribution networks, financial management, etc.
Technology and Innovation
This results in wealth creation and distribution for everyone involved: employers, investors and stockholders, employees, contractors and sub-contractors, suppliers, distributors, and yes, even government. This pays bills, expands the tax base, puts money in the pockets of families, buys homes, educates children and brings well-being to societies.
The eminent political scientist and economist, the late David Apter, divided America into three groups (rather than the typical upper class, middle class, and lower class so common among those interested in class warfare): the technologically competent, the technologically obsolescent and the technologically superfluous.
Technologically Competent
The technologically competent are those individuals who have taken advantage of the education and learning opportunities of the new post-industrial Information Age (i.e., the “digital age”). They represent the future of innovation and economic opportunity. They are the succeeders who have applied themselves to gaining the knowledge and skills, and developed their abilities, to compete in this brave, new digital world.
Technologically Obsolete
The technologically obsolete are those workers who are in dying industries with jobs and skills that are leaving the economy. As Joseph Schumpeter observed, free markets bring about “creative destruction” of old technologies and ways of doing things. And, as painful as this is to obsolete industries, companies and jobs, whenever government props up old industries all it is doing is postponing the inevitable at a huge cost in time and money (read: “our money”) that could better be used to encourage bringing the new innovations to market. Just as cars replaced horses and buggies, so Google News is replacing the local newspaper. And, the workers who can adapt to that change will move on, those who do not, will not. This includes most unionized shops in America.
Technologically Superfluous
These are those workers who have no skills, and no place in the future markets. Here is where a combination of government, private enlightened entrepreneurs, local social programs and charities must step in. If, indeed, we are “our brothers’ keepers,” then it is here that our genius and time in service need to focus in assisting them – not doing it for them – in seeing and understanding the possibilities that are out there for those who are determined to succeed. And, in helping them develop the knowledge and skills to move from superfluous to competent. General Eisenhower called this “enlightened self-interest” on the part of those providing the service.
It has been said that the level of success is directionally proportional to the amount of time the individual is willing to work and wait for the reward. If the teen cannot wait to get out of school and buy a car, then that is the level of the reward. If, on the other hand, that same individual will hold off on the reward by completing a good formal education, accepting less pay in order to get a job with better forward-looking experience, and stay out of debt, the world is his or hers.
Conclusion
All of this leads back to my original thesis. Washington is talking about the wrong things. They are spending (an apt term) their time talking about our wealth that they have already spent. Both parties are guilty. The dialog this country needs is on ways in which government can safely (and I do mean safely) move out of the way, and let entrepreneurial America back into the game of capital formation here at home. If they don’t – and this is a clear warning and is intended as such – then money (like water) will seek the path of least resistance and find its level of best and highest use outside of the boundaries of the USA. And then, both the wealth and the jobs will be lost forever.
