Let’s Get Small

We should have listened to Steve Martin forty years ago.

The biggest, most powerful lobby in Washington, D.C. is the lobby for Big Business.  True, no one is registered as a lobbyisst for BIG, Inc., but there are still a lot of lobbyists working to help the big guys and crush the little guys.

In fact, almost every lobbyist is working for a big company, a big union, or a big trade organization.  Small is distinctly unrepresented.  Small is not a source of campaign contributions and future income for politicians so even if small had their own lobbyist, that lobbyist would have a hard time getting in front of the people that make decisions.

Our politicians say over and over again that most of the jobs in this country are created by small businesses, yet again and again they give out billions of tax dollars to big business.  The midwest is not the rust belt because of small businesses; it is the rust belt because big businesses have failed.  We didn’t have a systemic melt down because small businesses posed a systemic risk; we had a systemic melt-down because big business and their lobbyists were able to convince the government to throw out the regulations that had protected the system since the Great Depression.

Not to belabor the obvious, but small business is not too big to fail.  AIG was not a small business, GM was not a small business, and CitiBank is not a small business.  The first two have already failed, and all three have been among the many very large corporations that needed lots of help from the government.

By the way, if too big to fail is a problem that poses systemic risk, why are we not only allowing unrestrained growth but actually fostering it.  The solution to the failure of a huge bank like WAMU is to sell it to an even bigger bank.  The failure of a huge brokerage like Merrill=Lynch is to combine it with a huge bank. Why is it that nobody has much to say about that?  (Actually, Matt Taiibi has pointed that out in his excellent Rolling Stone article on the crisis.

GM just recently asked for thirty billion dollars to help get it through the bankruptcy process.   It looks like we are going to give it them even though I think we have already given them at least that much.  In fact, I think if you count GMAC, GM and Chrysler have already gotten nearly $100 Billion dollars.

Let’s say that it is important enough to the USA to have serveral domestic automobile manufacturers.  If we took that $100 Billion dollars, how many automobile companies could we create?  I’ll bet there are a lot of guys who could make a successful automobile with $100 million dollars.  We could fund a thousand of them with that bankroll.  If five percent of them made it, we would have fifty car companies.

I’m not sure that we want fifty car companies, but having three huge mega-companies has not been a good idea either.  The point is that the money goes a lot further in the hands of small businesses than in the hands of mega-companies.

Four thousand dollars doesn’t get you very far these days, but there are lots of successful businesses that have been started with less.  Every adult in the United States could get four thousand dollars to start their own business if you broke up a hundred billion that way.  Forty thousand is a great start for a lot of small business enterprises, and one hundred billion funds two and a half million of these.

Like most problems, we should have been working on the solution long before it got to a cirisis.  We could have done something other than blandly buying into “What’s good for GM is good for America.”  This was a crackpot idea back in Eisenhower’s time.  Ike even took time to notice that the problem went far beyond GM to the whole military-industrial complex, but he couldn’t do anything about it.  Neither, apprently, could anybody else.

Here’s an idea.  Let’s put a systemic risk tax on Big.  Once you get to a certain size, you should have to pay increased taxes or divest.  The bigger you get, the stiffer the tax would get.  If they do get “too big to fail” and fail anyway, we could use the Big tax to cover the costs of breaking them up.

The advantages of this are many.  Instead of crushing small businesses in the mode of today’s Big, successfull companies would maximize their profits by fostering lots of partnerships and spin-offs.  No company would allow itself to grow so large that they would face a crushing tax burden.  Small businesses that actually create jobs and competition would spring up all over the place.

I think this is a good idea, but I realize it doesn’t have a chance.  Big owns the world.  They own the Democrats and they own the Republicans.  If we get a new party, Big will own them too.


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