Driving home from a bridge tournament yesterday I happened to be listening to Rush Limbaugh when a young caller, who said he was about to graduate from college, wanted to know whether there was a future for him in America if rich people sit on their money — the implication being if they won’t agree to be taxed at a higher rate, there would not be enough money circulating in the economy for him to share.
Limbaugh’s answer didn’t seem to get through and at the end of the call he accused the caller of not listening. I felt, however, that his answer failed on two grounds. First he lectured instead of dialogued with the young man, but that’s a reflection of Limbaugh’s personality and style. Second, he failed to articulate succinctly why there is a future for young people.
The first point Limbaugh made, and he took too long to get to the point, was that the rich spend money. At one point he said unemployment would be 100% if they did not…just a wee bit of an exageration. Of course, rich people spend money, but the amount they spend can’t support an entire economy. More productive in terms of economic growth is the fact that rich people invest.
But prior to talking about rich people what I would have said to the young man was that economies grow when individuals start or grow businesses. Economies fail to grow or as is the case for the U.S. in 2011, fail to grow fast enough to match population growth, when people don’t feel optimistic about their chances of success or can’t raise sufficient capital to start or expand a business. That’s part of the problem right now. It’s not that there aren’t thousands if not millions of people in the U.S. right this minute who would like to start a business or expand an existing business. The problem is that the economic weather report is cloudy and the Obama administration and Congress share a large part of the blame for that fact. Their health care legislation discourages companies from hiring; Sarbnnes-Oxley discourages companies from considering “going public” which is how businesses raise money to grow and hire; decisions of the EPA and NLRB discourage expansion and many aspects of our tax code make it wiser to invest overseas than at home.
Having explained that I’d would have tried to explain about the rich and investing. Even wealthy individuals who don’t work keep their money invested. They want it to continue to grow so they can give more away and so at the end of their life they can pass it on to their loved ones. When they invest in a public company that company has cash which it must use in the most profitable way it can. In some cases that means building new plants or opening new stores, but it may also mean investing in technology that increases productivity and reduces their labor force. Managers base those decisions by looking at the economy’s weather report and deciding whether the future looks sunny, cloudy or rainy. Again, right now managers are having a hard time seeing sunny days in the near future.
So, the chances of young people finding work is a reflection of millions of microdecisions by individuals in the business world. It also reflects policies by the federal, state and even local governments that encourage or discourage individuals from taking a risk at starting or growing a company.
That said young people can make their own futures and here Limbaugh did say the right thing because even in poor economic times it is possible to make things happen. Businesses can be started in varying ways and capital can be found from various sources. Obviously if you want to start an electric car company you’ve got different capital needs than if you want to start a software company, but as Limbaugh told the young man figure out what you love to do and do it well and you will be rewarded. I agree. You may not be rewarded monetarily or at least not for a long time, but people who do something well — whether it’s run a business or act on a stage — find a place in the world.
P.S.: The way Limbaugh tried to convince the young man that the rich spend money was to give an example of someone he knows who he says spends 3 hours a week writing checks for his 75 employees. I had to laugh at that. What wealthy indidivual would spend 3 hours a week writing checks when the entire payroll process could be done electronically in minutes?