Newt Gingrich on Corporations
Former Republican Representative (GA-6) and Speaker of the House
GINGRICH: As a business, you don't get to stay in business unless you wake up every day thinking about how to keep customers. If you don't earn your pay in business, a business won't pay you. We need to apply Lean Six Sigma principles to government. In every aspect of the private sector someone is doing something brilliant that could be applied to government to reduce costs, but the Left and the media block this. If you found Best Practices across the country, you would be amazed at how quickly you could balance the budget and resolve the deficit. When I left office as Speaker, there was a swing of 5 TRILLION dollars and we had a balanced budget. CEOs set big goals with tight deadlines, delegate smartly, and don't let any so-called experts in the room.
In return, the federal government disregarded bankruptcy law & the unions were made the primary beneficiaries of the Chrysler bankruptcy. The Obama Treasury Department strong-armed Chrysler's creditors into a deal in which the UAW was given 55% ownership of the company.
As rotten as it was, the Chrysler bankruptcy was just a prelude to the General Motors bankruptcy, again brokered by the Obama administration. And once again, the big losers were the bondholders.
According to a Barrons's magazine analysis, while the bondholders will be lucky to recover 15 cents on the dollar, the UAW can expect to recover up to 6-70 cents on the dollar--four to five times what the bondholders will receive. As the magazine noted, "Never has an American union done so well at the expense of shareholders and creditors."
The Left's message to business is simple: support our regulatory schemes or get crushed. And they know that big business--the only ones that can afford a seat at the table--will pay whatever it takes to join them.
This is nothing new. As the regulatory state has grown, big business has learned to use big government to protect itself from small business rivals. The Left can often easily pass new regulations when they get big business on board, and these laws help both parties: the Left create the illusions they're standing up for the little guy, and big business gets laws that damage their small competitors.
First, we should cut corporate taxes. American suffers from the second highest business tax rate in the industrialized world, with a federal rate of 35 percent, and states pushing it close to 40 percent. Much of the rest of the world, ironically, has learned the lessons of Reaganomics. Ireland has a corporate tax rate of 12.4 percent, which has caused per capita income to soar from the second lowest in the EU twenty years ago to the second highest today.
We should restore America's competitiveness in the world by reducing the federal business tax rate to match Ireland's rate of 12.5 percent.
The 2002 Sarbanes-Oxley Act, which added massive new reams of accounting red tape for businesses, has driven IPOs out of the US. Furthermore, the legislation is leading public companies to delist from the stock market in order to avoid red tape (and potential criminal penalties). The Sarbanes-Oxley Act effectively drives businesses to be LESS accountable than they were before and has done vastly more damage to the American economy than the corporate accounting scandals it was supposed to reform. It has had a substantial effect on New York as a financial center and has been a big asset for London. It is a wound inflicted by Congress on the American economy.
Gingrich pinpoints 5 enemies of entrepreneurship: bureaucracy, credentialing, taxation, litigation, and regulation. Any efforts to save the cities must start there. The bureaucracies stop welfare recipients from earning extra money. They stop enterprise by demanding credentials, and they create red tape that daunts most people. Individuals must be free to manage themselves.
It is here that Gingrich's arguments are the weakest, for many inner-city children aren't near the kinds of businesses that can provide even an entry to the work force. There is hope but no proof that reining in bureaucrats, reforming tax code, and cutting through red tape will be enough to spur development.
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