The question facing America is: who will lead us out of this economic crisis?
George Washington answered this question for us in a letter to Benjamin Harrison in 1784. He wrote: “A people... who are possessed of the spirit of commerce, who see and who will pursue their advantages may achieve almost anything.”
Unfortunately, today, many elected officials, the media, and even big business have lost confidence in “the spirit of commerce” – in the American free enterprise system - and are looking to government for the answer. A recent Newsweek cover declared “We are all Socialists now” and Congress and President Obama just passed a stunningly partisan $787 billion “stimulus” bill. From the TARP to special loans to GM and Chrysler to a new $275 billion mortgage entitlement program, bailout nation is in full swing.
Yet if more government spending could spark sustained economic growth, we'd be in a boom right now from the reckless expansion of spending over the last six years. President Bush nearly doubled the national debt during his two terms, and President Obama is thinking much bigger, proposing $1.4 trillion in new spending programs in just his first month in office. It is possible that the U.S. government's deficit in fiscal year 2010 will be larger than the entire federal budget in 2000.
What's more, the big spending approach to the economy has another nasty side effect that worsens the downturn: uncertainty. The unpredictable and constantly changing rules, political interventions, and vague new government programs only adds to the chaos. The possibility of government bailouts freezes the market, slowing badly needed corrections and adjustments. For example, why should banks sell distressed assets today when Uncle Sam may come in and buy them in the future? And it is never helpful to the confidence of the nation when the President and Treasury Secretary are using words like “economic collapse” and “catastrophe” to scare Congress into passing bailout after bailout.
Even while he embraces this fear-mongering, Washington-first approach, President Obama admits that the current spending binge is not sustainable. That is why it must stop, now. It is time for America to return to its roots and look to entrepreneurs in the private sector to lead us back to prosperity.
Instead of borrowing trillions and sticking the bill to the next generation, America needs to pull itself up by its bootstraps. We need to free businesses from high taxes, runaway lawsuits, and unnecessary regulations so that they can produce more of the goods and services that the world wants to consume. We need to expand our banking sector and develop new forms of lending to replace the gap left by the collapse of securitized lending. We need families to save more of their income to invest in the next generation of American enterprise, and we need a tax code that doesn't punish that savings and investment.
While any downturn is painful and difficult, these economic storm clouds have a benefit. They purge the rot from the system and encourage new ways of doing things. Various frauds are collapsing. Weak businesses in overbuilt sectors of the economy are closing down, leaving more market share for the survivors and freeing up labor and capital to shift to new growth sectors. Lean times drive innovation; necessity, after all, is the mother of invention. The economist Joseph Schumpeter called this process “creative destruction” and this cycle, while difficult, is dynamic and results in an efficient national economy that is poised for growth and a new period of wealth creation. Iconic American companies like Microsoft and Apple were founded during the severe downturn in the 1970s and no doubt new world class firms are being formed at this moment. We just need to get government out of the way and let the entrepreneurs lead.
Capturing this spirit exactly is Robert Johnson, the billionaire founder of Black Entertainment Television (and ironically, an Obama supporter), who recently explained the opportunity he senses in the current downturn:
"When you are a serial entrepreneur, you get a lot of ideas. And you want to move on them. If you can get there first, with the right resources, you can create tremendous upside value when other people are sitting on the sidelines. The entrepreneur philosophy is that there's always opportunities out there if you can identify it at the right time, bring in the right strategic resources, whether it's capital or partners, and build a team that knows how to create value.”
Eighty percent of the new jobs in America are created by small businesses doing exactly that: working harder and smarter to create value. America needs to look to its entrepreneurs and innovators, not its politicians and bureaucrats, to solve this crisis. To shift the nation's focus is one reason why FreedomWorks, the non-profit organization I chair, is launching a new online video and essay contest to celebrate America's entrepreneurs. We need to take an overdue look at the ways entrepreneurs in all sectors of our society are improving the quality of our nation's life.
Please join us is this effort to look beyond Washington, D.C., to solve our problems and help America embrace the entrepreneur's moment.