America: The Land of the Dependent

I recently visited Boston, the “cradle of liberty,” with my family. The trip provided a chance to reflect on what our founding fathers faced, fought for, and established for our country. If our founding fathers, like Samuel Adams, Benjamin Franklin, and Thomas Jefferson were here today, would they be proud of what America has become?

“We give you your freedom when you enter our country. Nothing else is free. Everything else you have to work for.” Anonymous Immigration Officer’s remark to my grandfather as he entered into the United States.

My family immigrated from Italy after World War II for an opportunity – a fair chance to make a better life for themselves. They did not immigrate to the United States with hat-in-hand looking for a handout. My parents had limited education: a fifth grade education for my dad and an 11^th grade education for my mom. In fact, my father was brought here when he was only 16 at a time when my grandfather shuttled back and forth between the steel mills in Pittsburgh and his hometown of Capestrello in Italy. On his last trip to the U.S he brought my dad and left him with his aunt and $200. My mom had to quit school to work in the garment district of Cleveland doing piece work. They married at 23 and 18, respectively.

They worked in construction and in a factory, and held down second jobs their entire lives. They dealt with language barriers, discrimination, layoffs, illness, and common challenges many families faced. Except for occasional unemployment benefits following a layoff, they never received any other help or financial support.

My parents paid off their home mortgage quickly at a time when lending requirements were more strict. They paid cash for everything, including cars and, in fact, did not have their first credit card until they were in their late 50s. As a blue-collar family, my parents helped by brother and I attend college and graduate school and, except for a little financial assistance the first year, we could not qualify for financial aid.  My parents were debt free and exceeded the income qualifications. They were not dependent on our government to provide food or a place to live for their family. Instead, they took full advantage of the opportunity America presented to them to make a better life and did not complain.

My parents were far from alone in their tenacity. There are many families of that era with similar stories. More importantly, many of the lessons learned from their frugality and self-sufficiency live on through my generation… When we visited Harvard for my daughter, Nicole, we realized we would most likely not qualify for any financial aid. My wife has worked hard to become a successful engineer/project manager. Fifteen years ago, I started my company and worked 3,000 hours a year for almost 9 years at “McDonald’s” wages before my hard work began to reward me. We are personally debt free and live well within our means in a nice but modest 2,500 sq. foot salt box colonial. Yet our government now considers us affluent or “rich” and feels the need to increase taxes on those who have earned success while continuing to reward those who contribute less to our economy and tax base. I see many of my clients struggling to make sense with this new definition of affluent. Once reserved for the likes of Warren Buffet and Bill Gates, the liberal perspective of affluent now comprises a significant number of dual-income couples and small business owners who might label themselves self-sufficient, but never wealthy or rich.

More disturbing is our country’s pattern of taking away from those who are self-empowered and contribute more to our country’s success, and rewarding those who are happy living off of our success through our government’s redistribution of wealth. Historically, rewarding mediocrity has yet to help businesses grow, create more jobs, or allow us to compete in an increasingly competitive world economy.

I sit back and look at where our country is today, where we are headed, and at the misguided leadership that has sprung from career politicians. What happened to our founding fathers’ beliefs that it was an honor to serve, but for a limited time, and then return to your original livelihood? While I am upset at the situation our financial institutions have created, much of this was a result of enabling on the part of our government.

Several axioms from one of our founding fathers, Thomas Jefferson,

1. “The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”
2. “I predict future happiness for Americans if they can prevent the
   government from wasting the labors of the people under the pretense of taking care of them.”
3. “My reading of history convinces me that most bad government results from too much government.”
4. “To compel a man to subsidize with his taxes the propagation of ideas
   which he disbelieves and abhors is sinful and tyrannical.”

Instead of Economic Darwinism taking hold, our government finds it prudent to further drive our country into debt. Where is the gold standard when we need it? Our government has been highly critical of the leveraged state these institutions have created, yet our government has reacted by leveraging our futures by the trillions. Anyone running a company this way would not remain in business long.

Perhaps we need to rethink how we compensate our national leaders – our President, Senators, and Congresspersons. One school of thought says that if we compensated them similar to presidents, vice presidents, and CEOs at our largest and most successful companies, maybe we would attract a better talent pool. I certainly would not give up my job for a congressman’s salary.

People will say that we are truly represented through our system of government. I say this is a false statement. I have tried for years to talk to the senators of my state and not once have I experienced even a five minute call. At the local level I have written to the Mayor of our city on several occasions. In all the cases, I received a nice thank you letter from an assistant suggesting I contact someone else on their team. Translation: unless you are a big donor or special interest group, we don’t have time for you. I find it hypocritical that our government leaders criticize business, yet it’s those businesses who donate millions through their lobbying efforts who have the ear of our elected representatives.

The spin-doctors continue to blame our discretionary Federal budget for our woes…the Department of Defense, Agriculture, and others. Fifty years ago when they represented 65% of our federal budget, there was room to trim the budget. Now 65% (and growing) of our Federal budget is allocated to entitlement programs. If our government cannot manage Social Security and Medicare, how do we expect them to manage our money on other programs? It becomes even scarier when they talk about nationalizing healthcare. How can a government balance its budget when spending outpaces revenues?

The current House majority’s solution is more taxes. Yet history has proven that higher taxes slow an economy. They do not stimulate the growth needed for a sustained recovery. As long as our businesses have the ability to pick up and move to countries that make it more attractive and economically favorable to do business, we will continue to lose entire industries the same way we lost manufacturing when our Government all but gave it away.

Unsustainable labor union concessions are another leading reason many U.S. companies sought greener pastures outside U.S. borders over the last few decades. In certain cases these pricey Union packages have driven whole industries to flee to less-developed countries with large and inexpensive labor pools.  Thus, many blue-collar Americans are out of work and do not have the education required for professional sector jobs. Consequently, the government feels the need to step in and protect them by providing checks, making them dependent and less motivated to obtain an education or alternate work.

Again, it is the affluent in our society who pay. As we continue to print money at the risk of great inflation, the only course our current government sees to take care of those less fortunate is a redistribution of wealth, i.e. socialization. Admittedly, many will not see dramatic changes in their income tax rates, yet it’s important to recognize that income taxes represent only one method of taxation. What the government does elaborate on are all of the hidden taxes or “stealth taxes” we pay. On top of those, there exists a laundry list of excise taxes imposed on the American public in addition to state and local income and property taxes. Taxes, taxes, taxes and for what purpose? We are now faced with a situation where the next generation may not be better off financially than the previous generation. This would be a first for America.

John Kennedy recognized this as he began to take our tax rate down from 70% to 50%. Then, following a period of four ineffective Presidents, Ronald Reagan furthered Kennedy’s agenda by reducing taxes even more. What ensued was increased prosperity for a larger number of Americans. Think about it. Lower taxes equals increased prosperity for more people. Reagan did not invent this, he was simply smart enough to get it and effectively implement it.

Out of control government spending has created our current national debt, begging the question, “Why can’t government just govern and leave the rest in the hands of able Americans?”

It has become fashionable today to blame others for one’s misfortunes and run to Uncle Sam for a bail-out. When did the Constitution ever have a “mother clause” in it? While we are truly created equal, the Constitution did not state or imply that we are to be given financial rewards equally or that our government would be the provider of financial rewards.

It is my belief that we are all provided equal opportunities for personal success. It is what we choose to do with that opportunity that determines the fruits of our labor. So why does the government feel the need to create financial equality? Is this Constitutional or does it amount to abdicating our responsibilities and accountabilities as American citizens and turning them over to the government? And once we hand over control of our lives is it possible to get it back?

These are questions that remain to be answered, but that all Americans need to consider. We do not live in a true democracy, but a democratic republic marred by career politicians. If the founding fathers were alive today they would be shocked at the socialistic country we have become and the fact that the pendulum keeps moving further this way. If you feel this is an overstatement, consider how many days you have to work toward your tax freedom day.

Many of us do not realize how sophisticated the English economy was just a little over 200 years ago and yet we still found it necessary at that time to part from that controlling government. What was the Boston Tea Party protest all about…taxation without representation. Unfortunately, there are no undiscovered lands to move to today. Our country was founded on capitalism and it is that very capitalism that still renders the U.S. the strongest economic force with one of the highest standards of living in the world.  Yet we see this standard threatened today.

While the role of government is to create a level playing field for the purpose of fostering true capitalism avoiding oligopolies and monopolies by large corporations, it consistently misses the mark. Our tax code is archaic and is ripe with economic manipulation. This goes hand-in-hand with constant legislative pork barrel spending for the benefit of individual politicians’ constituencies.

Competition and philanthropy depend on reasonable tax rates for the wealthy

While becoming a greener country makes sense, the fact that we do not mandate a global buy-in with China, a country which easily emits twice the pollutants of the US, will further place U.S. companies at a disadvantage. Our government is killing capitalism and will continue to do so as it overtaxes our companies and holds them to stricter and costlier standards than their global competitors. While it has become fashionable and convenient to blame large corporations for much of our economic woes, without them, where would America work? It is unrealistic to think that we will return to an agrarian society.

While a few bad eggs grab the financial press, there are countless stories of small and mid-sized companies that supply 70% of our new jobs’ growth as well as large companies that are doing things right. However, it has become unfashionable to be successful or compete for top talent. If you do better than someone else, we need to penalize you more. Even if we went to a level sales tax or even a national sales tax with a rate equal for all, a person who earns more money or spends more money (normally an “affluent” person) will continue to contribute more dollars. Despite that, many in this country live here at an extremely low cost because they pay so little in income taxes. Our government’s appetite for penalizing the rich cannot be easily satisfied. The top 5% of our population pays 60% of all income taxes. When it comes time to count voters, does it really matter what the politicians think is fair?

Many of the successful business owners I know donate both money and time to meaningful causes to help those less fortunate. Private philanthropy keeps many non-profit organizations viable as they serve members of our community through their worthwhile labors. Yet this significant contribution is largely underappreciated by our government. Without private donor dollars, many of these organizations that people of all walks of life depend upon daily, including the Red Cross and cancer research would have to depend fully on the government for funding, thus further increasing the nations deficit. While small donations from individuals add up, it is the large fundraising efforts from philanthropic individuals and foundations that keep them viable. By cutting too deeply into the pockets of the more affluent among us, the government puts these organizations and the people they serve at risk.

One year after the meltdown on Wall Street the mortgage crisis and stock market continue to plague us. The late 1990’s was a period of prosperity where common sense seemed to give way to greed. Mortgage lenders became increasingly lenient allowing irresponsible or financially unfit people to obtain loans. Often, these loans were made without employment or income verifications. Others were simply given bad advice by sales-driven real estate agents and mortgage loan officers, encouraging them to obtain interest-only and adjustable rate mortgages because the market “would continue to go up for the foreseeable future.”

When the economy contracted, many were left unable to pay their mortgages and thus, lost their homes. Again, people turned to Uncle Sam to bail them out. While banks are partly to blame, the irresponsibility and lack of planning on the part of many Americans was also to blame. Yet our government “rewards” this behavior by bailing them out. As a responsible homeowner who has made sacrifices to obtain a home and pay your mortgage on time, how do you feel about bailing your neighbors out of debt? If individuals are allowed to fail, I firmly believe that they will genuinely try harder to be more responsible in planning ahead and making more prudent decisions in the future.  The lack of holding one another accountable for our actions results in a society dependent upon the government to feed, clothe, and care for it. Our country has become weaker as a result of this entitlement attitude where people and companies expect a helping hand whether they need one or not.

In four years we will celebrate the 100 year anniversary of the federal income tax. This did not exist when our founding fathers ran our country. While much has changed, big government was not a goal of the Federalist Party. I can almost feel our founding fathers turning in their graves.

What is more frightening is the state of our foreign policy. Maybe we are implementing some ancient Chinese Art of War by keeping our friends close and our enemies closer. Yet we spend so much time trying to embrace ideologies of countries where their fundamental beliefs are completely opposite of the beliefs our country was founded upon and we hold dear as a nation.

We have become dependent on foreign nations for energy and fuel. This is because we have never had a true national energy policy dedicated to moving away from our dependence on foreign countries, many of whom put our very freedom and lives at risk.

In summary, what we have is what our founding fathers feared the most: a large intrusive government. Now they are watching as our government has morphed away from the greatest government document written – our Constitution. Will the citizens of our country rise up and take our country back or will we be slaves to our spoils by giving our freedom away in exchange for government care and feeding? Slowly the bureaucracy that is our government is draining the American spirit and work ethic that our country was founded on and breeding generations of dependent citizens.

Solutions to the problems we face may not be simple, but they do exist. First, the economy must improve before we can solve other issues. To do so, businesses need to be relieved, not overburdened by taxes and federal regulations to the point that they become like a dog on a leash. The government needs to create a level playing field globally by cutting taxes so businesses can grow and hire more workers. We also need to rewrite our tax laws so they are simpler, truly fair to all Americans, and do not favor any class of people, business or industry.

We must put sensible, fair practices and policies in place once again in regard to home loans to protect the people buying them as well as the companies loaning money. And finally, we must protect future generations with a realistic budget plan by developing a measurable energy policy which will lesson our dependence on foreign countries.  Maybe then we can go back to a country resembling what our forefathers intended; one that is not dependent on its government, but can depend on its own wherewithal.