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Opinion: Entrepreneurs At The Government Trough

  • by: Raphael Sassower
  • (Mon, 08 Aug 2016 20:40:10 Z)

By Raphael Sassower

As the spat between Hilary Clinton and Donald Trump revealed, neither is willing to admit what's really going on when one declares bankruptcy. Clinton and her speech-writers deserve credit for the clever line that Trump's books always end in Chapter Eleven, a nod to the Internal Revenue Service's code that lets both individuals and corporations ask for the legal protection of the courts to reorganize their debts and see to what extent they can repay any of them.

What neither presidential candidates disclose is the tax benefits accrued by bankruptcies or any kind of declaration of losses from legal investments. When regular citizens -- the 99% -- lend money to uncle Vinny's latest get-rich scheme, they are just out of luck (unless all the proper investment documents have been set in place). The best they can hope for is that Vinny will buy them a drink at some point or put a good word for them with the local boss or the friendly neighbor. Besides that, they have no prayer.

But the legitimate investor as an individual or through a Limited Liability Company who puts money in a losing proposition is aided by the government and given full deduction of the amount invested against present and future good and profitable investments (thereby reducing the tax liability). Perhaps this is the way the government would like us to increase our "propensity to invest," take risks, and maybe fund a great innovation; perhaps it's also an indirect a sanction for greedy behavior that may or may not contribute to the growth of the economy.

We value entrepreneurs; we lionize them in books and films as courageous heroes and heroines whose visionary zest makes us all proud to be Americans. It's these brave investors who take advantage of new technological innovations by way of underwriting the ideas of their ingenious inventors. We are led to believe that they are, after all, the engines that feed the entire economy. But should their poor or unfortunate decisions be underwritten by the rest of us, the run of the mill workers and consumers who live paycheck to paycheck?

So, the government isn't only incentivizing entrepreneurs to invest in new or old ideas and industries, make them more efficient or bring their ideas to fruition, but it also gives them all a pass--another incentive--when they simply make mistakes or are just plain foolish. Could this lead to reckless investment behavior? Ae we encouraged to take greater risks because the actual costs (after deductions) is mitigated? Would it do the same for those driving too fast and surviving a dangerous ride?

When American capitalists, like Trump himself and all those millionaires funding Clinton, smugly explain to the rest of the country why they are better than the rest of us, why they deserve a bigger piece of the pie, they forget to acknowledge that they too are the beneficiaries of government largesse, that they have their own privileged welfare safety nets. This is not to say that there is a big difference between the government coming in and bailing out a losing investment (or the large banks a few years ago) and having business protections in place to allow for the orderly unraveling that does not place big creditors above small creditors. Is your investment secured? Will it meet the legal criteria for protection?

Admittedly, these safety nets don't come in the form of food stamps or any such embarrassing forms of financial support, but in point of fact are they that different? If you are rich and can afford to invest in a scheme or a new invention, do it on your own! Why do you expect the government to clean up the mess and allow you to fully deduct your mistake? Some would argue that the mistake merely reduces their net income and taxable base...it is merely a deduction like the cost of steaks for a restaurant, and depending on the tax bracket that is the amount they deduct.

Perhaps it's the same screwed up logic that lets property owners deduct the interest on their mortgages but doesn't allow renters to deduct their rents: owners of private property deserve government subsidies, while those renters, even if they need it more, are left by the tax code to fend for themselves. This is probably why the incredible two-home deduction is in place as well, benefitting the very few who own two homes, probably applicable primarily to congressional representatives who have to live in D.C. part of their time (and write these laws) and all their wealthy donors.

Next time we hear politicians quibble over the size of the government and its role, we should remind the disputants that they should start by eliminating all unfair subsidies that benefit the already rich at the expense of those who remain poor no matter how hard they work. And speaking of work, has either presidential candidate really worked the way their potential constituents have been for years? Receiving $250,000 for a speech to Wall Street is hardly "work" when compared to the minimum annual wage of around $15,000; the same goes for licensing agreements from one's brand in comparison to those who actually clean and serve in all those hotel and resort properties.

Americans are generous in overlooking this duo of free-loaders; maybe they believe they can be like them one day. But the rate and gap of wealth and income inequality is getting bigger, not smaller as time goes by. And the opportunity to climb up the ladder is getting slimmer every year. Inequality.org reminds us that "America's top 10 percent now average nearly nine times as much income as the bottom 90 percent." Similarly, "America's top 1 percent, for instance, holds nearly half the national wealth invested in stocks and mutual funds." This is where Occupy Wall Street (remember them?) and the Tea Party (still in full force in the House of Representatives) are in agreement: between big banks and big government bailing them out, what is left to the average American worker?

So, when the two candidates tell us they hear us, that they care about the plight of the working men and women of this country, let us ask them to describe the hardship of the working poor of America, the Walmart employees who still need food stamps and Medicaid to finish the month. Instead of ignoring them or simply using them as a rhetorical tool, let's ask them to start their speeches by pointing out the hypocrisy of the rich and their callous use of government welfare. Let them begin with a confessional moment before they promise the rest of us a better future.

Raphael Sassower is philosophy chair at the University of Colorado, Colorado Springs. Prof. Sassower's latest books are Compromising the Ideals of Science (2015), The Price of Public Intellectuals (2014), and Sports and Religion in American Culture (2014, with Jeff Scholes). He grew up in Israel and moved to the United States as a young man after serving as an officer in the IDF.

About the author:

sassower.jpgRaphael Sassower is philosophy chair at the University of Colorado, Colorado Springs. Prof. Sassower's latest books are Compromising the Ideals of Science (2015), The Price of Public Intellectuals (2014), and Sports and Religion in American Culture (2014, with Jeff Scholes). He grew up in Israel and moved to the United States as a young man after serving as an officer in the IDF.

Read more about or contact Raphael Sassower

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