"If Only… We Had Government by Businessmen"By Patrick N. Theros - October 22, 2021
Let’s
dispense once and for all with the nonsensical fantasy that if we
elected businessmen they would run government like a business – more
efficient and cheaper. We regularly elect businessmen to public office
whether at the local, state, or federal level. Yet, my diligent search
for a businessman who actually applied the lessons of their MBA or
corporate experience to their government positions yielded zero
examples.
Businessmen running for political office may tell
potential voters that they will run their office like a business and
then, when elected, miraculously transform themselves into politicians,
usually of a lower mental and moral character than most career
politicians and public servants whom they slander. The comparison
between Trump and Biden illustrates this best – although this might not
be the best example. Trump was a lousy businessman. According to
ForbesDaily Cover of October 11, 2021, hardly a bastion of left-wing
politics, Trump would have been “400 million dollars richer if he had
just put his father’s money in the (S&P 500) index.”
The
point is that Trump, like businessmen-turned-politicians before him,
imitated the garden-variety politician by making economic decisions that
would garner votes rather than improve governance. Early in his term,
he passed one of the largest tax cuts in recent history whose benefits
went overwhelmingly to people making big campaign contributions. Trump
at the time claimed that the tax cuts would allow the Uber Wealthy to
make so many investments that the tax cuts would pay for themselves in a
couple of years. Trump’s administration also ran budget deficits not
seen since World War II, increasing national debt by 68% – before the
pandemic struck. He pumped so much money into consumption that, like a
sugar high, employment was artificially juiced. However, despite
campaign promises, he made no investments in infrastructure, the
backbone of the economy, or in anything else.
Taking Trump and
his apologists at their word, that he is a genius without peer, one must
assume that he excelled at his studies at the Wharton School. Thus, he
must fully understand the difference between Operating Expense (OPEX)
and Capital Expense (CAPEX) as taught in CorpFinance 101. One textbook
describes the difference: “An operating expense (OPEX) is an expense
required for the day-to-day functioning of a business. In contrast, a
capital expense (CAPEX) is an expense a business incurs to create a
benefit in the future.”
Trump’s unparallel genius informed him
that OPEX – that is just spending money that flows directly into
consumer pockets – pays off with votes in the next election, while CAPEX
benefits the national economy three or four elections down the road.
Opting for reelection and letting another later President worry about a
rapidly deteriorating national infrastructure was a no-brainer.
Again,
to be fair, Trump did bring business into the White House – his own. He
spent taxpayer money on his hotels and tried to con foreign leaders
into holding meetings at his properties.
Biden, by contrast, is a
professional politician who makes no pretense at business genius.
Again, citing Forbes, his current wealth is about $8 million, including
his house and a beach house. His biggest sources of income before
entering the White House were book deals and speaking engagements as
well as his VP’s pension. Yet he tries to manage the United States
economy and its citizens the same way as a good CEO, looking after the
long-term interests of his company and its stakeholders. In contrast to
Trump’s tax cut, which just shoveled $2.3 trillion to the rich, Biden’s
$1.9 trillion Covid relief bill aimed at protecting American citizens
from economic harm. It protects both tenants and landlords from the
catastrophic costs of evictions, keeps small businesses alive, and
invests in education and childcare, both essential to keeping the
country going. It also provides relief to tens of millions whose jobs
the pandemic killed. The larger $3.5 trillion proposal is even more a
CAPEX rather than an OPEX budget. It includes $726 billion for
education, which always produces the best return on investment to a
country and its stakeholders, i.e., its people. It allocates $135
billion to rebuild after climate-induced catastrophes such as forest
fires and drought, and $332 billion to address the country’s huge
housing deficit, another drag on economic growth. The bill also includes
significant sums to get more people back to work such as a child tax
credit and childcare provisions that will enable working mothers to get
back to their jobs.
Opponents of the bill are like the clowns in a
three-ring circus; they are there to distract the audience while the
acts are changing. The Trumplican Party, allegedly the party that once
followed good business practices, has attacked the total cost of the
bill, demonstrating once again its ignorance of the difference between
CAPEX and OPEX. The Trumplicans rant and rave about fiscal probity but
ignore it when in power. (Trump, after all, often admitted to welching
on debts through bankruptcy.) For a party that claims to bring the best
qualities of a CEO to governance, Trump’s acolytes in Congress have
decided that wrecking America’s credit rating is not too high a price to
pay to get back into power. Now they are terrified that wages for the
bottom 80% are going up as well as the stock market. Would not a good
businessman rejoice at such developments? Or are they really acting like
politicians, preferring to harm the country so long as it gives them
electoral campaign fodder?
It seems odd that professional
politicians, like Biden, understand better how to run a business than
businessmen-turned politician.