Like everyone else, I watched with horror the “fiscal cliff” drama unfold last week. Beyond the obvious inability or unwillingness of our present elected government to deal with our long-term profligate spending, the one new thing I noticed from the fiscal debate is that Big Business is not necessarily the friend of Small Business. It appears that Big Business is increasingly thick as thieves with a growing and innately inefficient governmental regulatory apparatus that redounds heavily against the interests of the small business community.
This trend became especially notable in 2007-8 as the government bailed out GM. AIG, and the big banks. Then I saw that Big Business seemed to have no particular problem with the burgeoning bureaucracy being laid on top of Obamacare—a true danger to the business health and creative freedom of entrepreneurs. The backslapping cronyism of Jeffrey Immelt, George Kaiser, Larry Page, Lloyd Goldfein, Ken Chenault, and other corporate oligarchs was both unseemly and counter-intuitive to healthy enterprise based on freedom and fair competition in the marketplace. It had the effect of institutionalizing deep systemic failures, rather than allowing the cleansing process of capitalism to work.
Nassim Taleb, in his new book Antifragile, does a great service in making the compelling case that Big Business has much more in common with Big Government than either do with entrepreneurship. In an op-ed in the New York Times over the holidays, Taleb said the following:
“It’s a myth that centralization and size bring ‘efficiency.’ Centralized states are deficit-prone precisely because they tend to be gamed by lobbyists and large corporations, which increase their size in order to get the protection of bailouts. No large company should ever be bailed out; it creates a moral hazard.
Consider the difference between Silicon valley entrepreneurs who are taught to ‘fail early and often,’ and large corporations that leech off governments and demand bailouts when they’re in trouble on the pretext that they are too big to fail. Entrepreneurs don’t ask for bailouts, and their failures do not destabilize the economy as a whole.”
Also note the recent collusion of The Business Roundtable (a lobbying group for Big Business) with the current anti-entrepreneurial federal government. On December 11, 2 The Business Roundtable circulated a letter signed by 150 titans of business supporting income tax hikes in exchange for lowering corporate tax rates from 35% to 28%. While I fully support the reduction of American corporate business rates (currently the highest in the world), this proposal shifts the full cost of the Big Business tax reduction onto Small Business. As Kimberly Strassel puts it in an op-ed in the WSJ on December 20. “[Big Business] saw an opportunity to make the one million small American business owners who pay individual income taxes shoulder a big rate hike (up to 39.6% from 35% while radically lightening the tax load for the Roundtable’s own corporate behemoths.”
We certainly need to radically reform the tax code and reduce our debt. However, it would be a disaster for the economy if it was done on the back of Small Business. Three out of four new jobs come out of Small Business. With the disincentives to growth already enshrined in Obamacare this new law could surely be a double whammy for national economic and job recovery.
Or, as former Arizona Senator Bruce Babbitt puts it, “The notion that big business and big labor and big government can sit down around a table somewhere and work out the direction of the American economy is at variance with where the American economy is headed. I mean, it’s like dinosaurs gathering to talk about the evolution of a new generation of mammals.” Yup. Thanks, Bruce.