First, I used to be a conservative Republican.
Not for reasons that most are conservative Republicans today. (I'm a fiscal conservative, not a social one).
I used to believe that the way to get more jobs created is to cut taxes and give incentives to rich people.
I still believe that today.
However, I can no longer combine my economic beliefs with the conservative social beliefs of most Republicans.
Most Republicans I know see the world in black and white. You know, they listen to Dr. Laura.
Well, the world isn't black and white. Maybe I'll write about that more at some time in the future.
My goal of writing today is to give our politicians a roadmap for getting us out of this stagnant economy. It's labor day tomorrow.
There are a few things we need to do to fix our economy:
1) Get rich people investing in business again. 2) Reduce the difference between what the richest people get paid (CEO's, etc) and the poorest people get paid in a company (janitors, etc).
Why is #2 important? Because paying CEO's hundreds of millions of dollars (ever look at what Steve Jobs has made as CEO of Apple?) takes hundreds of millions out of the company coffers and makes it less likely that that company can build new factories and hire new people.
Question: how much does a factory cost to build? Answer: not as much as you might think.
A certain company I know operated for about two years on a $500,000 investment. That's seven people who were employed for two years (this company had revenues in addition to the investment).
Now, let's say we take the $400,000,000 that Steve Jobs earned over the past few years. Give him a couple of million. Now, let's take the $398,000,000 and put it into new jobs. (Question: how much does a human need to live in Silicon Valley? Answer: not as much as you might think). If that money works as efficiently as it did at the other company I worked for, that would create 5,572 jobs (probably more through the entire economy since those people would create other economic activity).
Little people like me just can't invest any money, but believe me, there's billions of dollars out there just sitting around.
Hey, Microsoft alone has, what, $40 billion in cash?
John Doerr supposedly has $800 million in Woodside. Larry Ellison supposedly has more than that.
There are dozens of billionaires who still have billions in Silicon Valley alone.
The trouble is that they aren't spending their money. Look at the Venture Capital firms. They are refunding billions of dollars to their rich clients.
Here's where George Bush went wrong. He gave the rich a tax cut -- and a big one at that. In economic theory that's good for the economy. The problem is, Bush didn't include incentives for the rich to spend their newfound money on jobs.
This is the trouble with many politicians. They don't think through the unintended consequences of their actions. Remember the democrats who raised taxes on luxury yachts? Yeah, that's right. They put thousands of people out of work in their attempt to "punish the rich."
Now government has less money coming in due to lower tax rates, and they have lost the stick over rich people that they once wielded to get them to spend money on jobs.
The way out of a recession is to get folks investing in our economy again.
Tell me, would you invest in a company that is paying its CEO hundreds of millions of dollars every year? I'm freaked out by that.
My experience at a variety of companies from a camera store to NEC tells me that profit margins are usually razor thin. Apple Computers in the early 1990s and Microsoft today are exceptions to the rule (and if Microsoft doesn't learn this lesson they'll fall hard and fast -- I believe that low-margin days are ahead of Microsoft just as Apple had to get used to living on margins of a few percent instead of 60% margins it once enjoyed).
So, the fact that CEO's are sucking very high salaries out of companies is going to be just the thing that kills many companies.
Where does this corporate greed end?
I wish I knew. I'd hate for government to come in and put a cap on CEO's wages (whenever government gets involved things get screwed up) but I can imagine a day when that'll happen.
The recent baseball strike was a metaphor for the coming labor fights in all of our lives.
We can no longer afford to pay the CEOs their high wages.
And, we need to get those who already made high wages to invest their money back in our economy.
I believe those are the two fundamental challenges facing the Western labor markets today.
Just something to think about on your labor day tomorrow.