The Road to Ruin

Governor Chafee has called his tax and spending plan the “pathway to prosperity,” but it’s actually the “road to ruin” for Rhode Island families and small businesses.  I’ll-conceived and politically motivated, it does nothing to stimulate the economy, create jobs or cut the cost of state government.

We have a spending problem - not a revenue problem. Balancing a structurally flawed budget by raising taxes simply kicks the can down the road and ignores the cost drivers that create excessive spending and dramatic budget growth.

According to the 2010 census, during the past ten years Rhode Island’s population grew by a puny 0.04%, yet during that same period of time our state budget grew by a whopping 62.5%. Where’s the money going?

A recent RIPEC (Rhode Island Public Expenditures Council) report showed that over the past decade our state budget has increased by over $3 billion dollars, primarily due to increased expenditures for public personnel costs and social service entitlements.

When Rhode Island families and small businesses have had to cut back and learn to do more with less, those who serve the public and those who receive from the public must realize that no one is immune from substantial cut backs.

Raising taxes now, in lieu of budget cuts, may appease the public employee unions and the poverty advocates, but it will disproportionally hurt ordinary Rhode Island families and push more small businesses into bankruptcy.

The hard cold truth is that we must reset both government spending and public expectations. One way to start would be to initiate zero-based budgeting. It will force every department to evaluate what they do, why they do it and what’s the return on the investment. Each budget line item must be examined and justified, or eliminated – no exceptions.

Until this budget process is completed, there should be a total spending freeze, including a temporary wage-freeze for all public employees. There must also be an immediate increase in employee contributions to their healthcare coverage with a minimum of 25% for everyone - including members of the general assembly.

We must also reform the public employee pension plans, increase the minimum retirement age, stop the pension spiking schemes, and end automatic COLA.  If we fail to act now, it’s projected that annual taxpayer contributions to the retirement system will skyrocket to over $1 billion by 2030.

There are organizational and operational changes that must be made. If unattainable through collective bargaining, the general assembly must legislatively implement a one-time suspension of seniority-driven bumping procedures so we can reorganize and consolidate many state functions and departments.

Waste, redundancies and inefficiencies add up to millions of dollars in “hidden costs” that could be eliminated through the implementation of best practices and LEAN management techniques. A joint labor-management effort would certainly make sense, but that doesn’t appear likely in this politically charged environment.

On the social services side, we must crack down on welfare fraud and abuse, evaluate eligibility rules and reorganize our human services department into one centralized agency. By eliminating fraud and abuse and implementing better controls and management, we will have ample resources to help those who are truly in need.

And while we are at it, let’s ensure our social service programs are actually helping people and not simply entrapping them in a harmful co-dependency with government entitlements. For example, we must end the incentives for women to have additional children out of wedlock, and place more emphasis on education and skills training as a pathway to self-reliance.

Our cities and towns must cut spending as well.  Granted aid to cities and towns has actually decreased over the past few years, however additional local savings can be realized if we eliminated all unfunded mandates, such as minimum staffing, and give our municipalities the freedom and the tools to better manage their budgets.

And finally, our unemployment benefits are among the highest in the nation. We have to trim back both the amount and the duration of benefits. And let’s tell the federal government they’ll have to wait for us to pay back the $290 million we borrowed for the unemployment insurance trust fund.

Here’s a plan, they can take the high-speed rail money earmarked for RI and pay down the loan. Our small business owners cannot afford an increase in the UI tax and we certainly cannot afford a new train to nowhere.

Let’s not allow this administration to railroad us into believing we can tax our way out of this recession.  If there ever was a time to be engaged in your government, it’s now.  

Governor Chafee’s badly flawed budget proposal is now in the hands of the General Assembly.  Tell them to derail this harmful sales tax scheme, cut spending to the bone and give small businesses a chance.  

Could the Wall Street Occupiers Become the Next Generation of Entrepreneurs?

(Originally for the Providence Journal 10/08/11)

Steve Jobs, the co-founder of Apple Computer, epitomized the American spirit of self-reliance and entrepreneurship. He was an iconic entrepreneur who had great vision, resourcefulness and perseverance. His passing should give us pause to consider if the American entrepreneurial spirit has died along with him.

While many today are waiting for the government to create jobs, blaming one political party or the other, I wonder what’s happened to our spirit of self-reliance and entrepreneurship? Why are there more people protesting the lack of jobs than there are people trying to create jobs?

What do the protesters really want? Who are they blaming for their lot in life? Is it the suits, the politicians or the lack of social justice? I guess it’s a lot easier to create a sign than it is to create a job. And, it appears easier to blame others than it is to take personal responsibility for one’s own future.

If the Occupy Wall Street protesters spent less time on social engineering and more time on mechanical and electrical engineering, the private sector would be creating millions of exciting new jobs. And if they redirected their anger away from Wall Street and channeled their collective energies to Main Street, perhaps they could launch thousands of new profitable small business ventures.

However, the occupiers believe it’s the government’s responsibility to fix the economy, redistribute wealth and legislate what they demand as “social justice.” I think that’s what Portugal, Italy, Greece and Spain tried. Look at Southern Europe now. Is this what the protesters want?

Maybe the occupiers should consider creating and managing more social enterprises? These profit-making businesses are formed by passionate people who support social causes. The late Paul Newman founded Newman’s Own for just that purpose.

These social ventures could create millions of new jobs for those who are passionate about helping the less fortunate. Nice concept – making profits to help people. Everyone wins, and government isn’t involved. But that’s a lot of hard work and unfortunately it seems more popular today just to blame the rich, call for more taxes and engage in class warfare. 

You also hear the occupiers demanding fairness for the “working class.” I wonder if that includes the millions of small business owners who work long hours, invest their personal life savings and create most of the jobs in America. No pensions, no seniority and no job security, just the pride of owning their own business and experiencing the satisfaction of earned success.

I don’t believe there are many small business owners among the occupiers. They’re too busy working long hours, worrying about making payroll and finding new customers. Most entrepreneurs are not waiting for government to solve their problems; they’d just like government to get out of their way. It might also be helpful if government would stop treating business owners as “revenue generators” and begin treating them as job creators.

America needs a new generation of entrepreneurs. These are the people, like Edison and Jobs, who see opportunity, take action, sometimes succeed and often fail. But they rarely give up. What we don’t need is another round of government bailouts, tax increases or stimulus packages to create false prosperity.

So here’s the plan. Listen up Wall Street occupiers. Why don’t you occupy the vacant store fronts and office buildings with exciting new business ventures? Get in the game, become entrepreneurial and work to create your own wealth. You can give most of it away to worthy causes if you choose. It’s a perfect win-win solution.

With unemployment stuck above 9%, many of the jobs in the future will come from new small businesses. So let’s ramp up the next generation of entrepreneurs. Let’s encourage this generation to learn about how to run a business, to think creatively, to take risks, learn from failure and to be resourceful and resilient. Where the profit goes is up to the stakeholders.

Caution! There will be winners and losers.  Not everyone wins a trophy in the business world.  I’ve heard it said that Edison failed a thousand times before he found the right element for the incandescent light bulb, and Babe Ruth struck out more than most on his way to hit 60 home runs in a season.

Occupying your time with a new business venture seems more productive than occupying space and complaining. For those still determined to occupy the streets, consider this. You can have the best of both worlds.

There are many ventures you could consider operating to support your fellow occupiers. Protesters need porta-potties, food, folding chairs, tents, hats, sun glasses, water stations, signs, banners, bull horns, batteries to power the bull-horns and more. Think of the jobs you can create and the money you can make.

There’s nothing wrong with making a buck while expressing your first amendment rights. I would think both Edison and Jobs would tell you to go for it.