1 February 2002
The State of the Union speech and the Democratic response highlighted the differences between President Bush and Dick Gephardt and, by extension, the Republicans and Democrats. The sharpest contrast between the parties is their economic philosophy and the way they choose to market it. This distinction became particularly poignant for me when I found out an hour before the speech that my employer was going out of business. By next week, I'll be unemployed.
In his speech, President Bush reiterated his call to pass the economic stimulus package that he submitted to Congress in October. The package includes three major components: extension of unemployment benefits by 13 weeks to soften the blow of being out of work, lower income tax rates to put more money in everyone's pockets, and incentives that will give businesses a greater ability to hire workers. Although the House of Representatives passed the President's stimulus package, Tom Daschle, the Democrat who heads the Senate, never even allowed it to come up for a vote.
The Democratic response, delivered by House Minority Leader Dick Gephardt, was disappointing in that it reverted to the tired class-warfare rhetoric that so frequently infects the left's discussion of economic policy. Gephardt stated, "Our values call for helping the unemployed - not just large corporations and the most fortunate."
Gephardt is obviously trying to contrast the values of the Democrats with those of some other people, but I have absolutely no idea to whom he's referring. It clearly isn't President Bush or the Republicans. Helping the unemployed? What do you call a 13-week extension in unemployment benefits? Do across-the-board tax cuts help only "the most fortunate"? And what's wrong with helping corporations, large or small? Who do we expect to hire the unemployed? The government?
The President's plan is designed to help everybody. The sad fact is, that' s precisely what angers the Democrats. They're so opposed to "corporations" and the "fortunate" sharing in the benefits that they'd rather let there be no benefits at all. This is the same class-warfare mentality that bred socialism, a philosophy that despises the rich so much that the solution is for everybody to be poor.
Corporations are needed to create jobs. Rich people are useful because they invest. When they invest, that money becomes available to entrepreneurs, the people with the new ideas who start companies and create jobs. Remember the 1990s? Thousands of startups were created because entrepreneurs had easy access to the necessary capital. The jobs those companies created benefited everyone.
It's the Capital, Stupid!
When the capital markets started to collapse in the spring of 2000, jobs started to disappear. In December 1999, my employer at the time, On2 Technologies, enjoyed a stock price above $36/share. The following April, the stock was at $7/share. Round after round of layoffs followed because the declining share price--mirrored by virtually every other company in my industry--scared off investors who could have otherwise covered the company' s path to profitability.
I saw the handwriting on the wall and left On2 that fall. In September, I joined a company called Olliance. Their second round of financing never came through. I was laid off in January 2001, and the company went out of business a few weeks thereafter. In March 2001, I joined MobileMetrics. We scraped, scrambled and begged, but our second round of financing never came through, either. And now, as of this week, we're out of business, too.
This recession will only end when investors feel comfortable putting their money back into the capital markets. Taking the twin engines of the economy--corporations and the wealthy--and turning them into the enemy is not going to make them any more likely to invest. Doing things like cutting personal, corporate and capital gains taxes will.
Democrats believe they have politics on their side, and they may be right. After all, there are many more non-rich than rich. Pandering to the non-rich by attacking the rich is as old as Karl Marx, and it certainly may get the Democrats some votes. But it won't get the economy moving any faster. Injecting more capital into the markets will. And if it just so happens to make the rich a little richer, is that so bad if we all benefit?
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