Tad Dehaven, a budget analyst with the KATO Institute, is interviewed by Mike Siegel to discuss the current adminsitration and what can be done to aid small businesses amid the economic crisis.

Transcript:

Siegel: Folks, welcome back in. Good to have you with us at the BOSS Business Brief. My name is Mike Siegel. As we get into the conversation, as we do advocacy for small business on this program, that is the bottom line. What are the policies? What are the issues? What are the ways in which we can start to reverse the onerous, burdensome, oppressive regulations, policies and taxes that have been placed on small business in America, which keeps it from doing what it is supposed to be doing which is bringing this economy back. Somewhere between 70-85% of all new jobs and the economy are driven by small business. So, you would think there would be some policy in America that would deal with that reality and the policies would reflect that, giving small business the freedom to operate and the relief of tax burdens to be able to be productive and, in fact, in the end increase revenues to the government because we would b e more productive in the private sector, but we have not seen that. Somehow this administration thinks we go the other way. Well, the republicans have won in the House. They are going to be winning at least 32 governorships, perhaps more after all the numbers are tallied, and the bottom line is that we have now an opportunity to change the direction of America. However, as has been pointed out in a piece at the KATO Institute, in fact there is the reality now that fiscal conservatives and smaller government advocates to help small business must start the job now. So, that is where we are. Tad Dehaven is with us. He is a budget analyst for the KATO Institute. Mr. Dehaven, nice to have you with us. How are you today?
Dehaven: It is good to be with you, Mike.
Siegel: Okay, let's get to it. Usually after an election you have got voters and activists going back to their lives. It is like building up this big crescendo to this huge event and then the bubble gets burst after the results are in and everybody goes back to normal. That cannot happen now, if we are going to turn this thing around. What is your sense about what whether there is the commitment to carry through instead of going back to business as usual?
Dehaven: Well, I look a two things. First of all, you have the change in the House, but you did not have the change in the Senate, and the Obama administration is still there for two more years. So, I think what you are going to see is a lot of gridlock. I think the House republicans will make a strong push on issues such as maintaining current tax rates and things of that nature, but I am not sure what they can actually get done. I think you are out of Nevada and I don't expect…
Siegel: Actually, this is a national program, so go ahead.
Dehaven: Oh, okay. Well, the problem is you still have Harry Reid running the show in the Senate.
Siegel: That was pretty astonishing, by the way.
Dehaven: Very disappointing. I think one of the mistakes that a lot of these candidates made from the tea party prospective is that they got away from focusing on the economy and fiscal policy issues and they lost a lot of independents at the end by getting into more social issues; things like Muslims and immigrants and gay marriage, and I think that turned off a lot of voters, particularly independents who really were upset primarily with fiscal policy in Washington. So, I hope that lesson can be learned going forward.
Siegel: Well, let's talk about what the House republicans can do. I realize they cannot do anything on their own, but the one point I would make to you is that the republicans in the Houses can legislation and at the very least force the Senate to vote on it. Number 1, there are more republicans in the Senate, at least 46. It was 51-46 last I saw, three undecided, I don't know how it has gone since then. But with 46 or more, they have got a pretty substantial number there. So, if the House passes some legislation…for example, even the complete overturn of ObamaCare, which would help small business dramatically. We were talking about that on another segment, why not force the Senate to vote on it? You might have some democrats who will say, I am not going down with a sinking ship the way the democrats in the House did to go along with Pelosi and then lost their seats. I am going to be up in two years, I would rather vote with the republicans on this one and get reelecTad. What about that?
Dehaven: I think that is a good point, and I think that is exactly what the republicans will try to do. It will be very interesting to see how democrats handle this in the Senate. I think it is pretty clear that their agenda has been repudiaTad and, with an eye on maintaining their majority in the Senate two years from now, I think they are going to have to be more willing to play ball. I think there is a good chance you will now see all of the tax rates left alone, at least temporarily. The health care issue is a different matter. Remember, anything that does get out of the House and Senate still has to get by the president, and the republicans will not have the numbers to override vetoes. They will not be able to merely repeal the health care law. I think what they will try and do is through the appropriations process try to not allow funding, therefore, inhibiting the administration's ability to actually implement it.
Siegel: Yeah, that is one way, but I would say this- I would like to see Barrack Obama have to veto it. That would make him a one term president for sure, I mean, that is just my view. Force him to veto it.
Dehaven: Sure. Yeah. I mean, a lot of this is going to be politics. I mean, da.. that goes without saying, right? But there is going to be a lot of gamesmanship here. I am interested particularly in what the republicans are going to do about spending. At the end of the day, that is the 800 lb gorilla in the room. To be honest, thus far I am not very enthusiastic. If you look at a lot of the folks who are going to be taking over the House committees, all of them are, you know, defenders of those programs and departments in their areas, whether it is education, defense spending. I heard today that the incoming Chairman of the House Transportation Committee says he wants a more intelligent, high speed rail system. I don't know how you can make something that is so patently stupid and such a waste of money, I don't know how you can make it intelligent or make it better. But, you know, I think sometimes what these folks, when they get in charge of a committee, the temptation to spend other people's money and reap all the political benefits and such, proves to be too tempting. Along those lines, Senator Jim Demint from South Carolina had a very interesting, I believe this was in the Wall Street Journal following the elections. He was basically giving advice to the incoming, more tea party-minded folks, that you have to be very careful. I saw this, I actually worked in the Senate for a couple of years…make no mistake about it, the leadership folks in the republican House and the Senate are primarily concerned with one thing, that is maintaining power and extending power. I think everybody is focused on the battles between the democrats and the republicans and the Obama administration versus the House. I think the biggest battle is going to be played out behind the scenes amongst the republicans themselves, specifically between the leadership factions and these young upstarts.
Siegel: Well ,that is an interesting point, because I agree with you. I don't think t he republican party has folded the tea party concept in as the way it should, but there are three fundamental points to the tea party movement, among others, but there are three central points- free markets, fiscal responsibility and constitutional compliance. So, let's talk about fiscal responsibility. What about spending cuts? In other words, the tea party would say, and those candidates elecTad, the guys like Rand Paul, if Joe Miller wins in Alaska, Marco Rubio in Florida, you don't spend more than you take it. Let's cut the spending and do what we have to do. That, by the way, would be of huge benefit to small business, because it would mean that the government wouldn't be borrowing more money and then having to basically suck up all the money from the private sector to repay the interest. There would be more money available to the private sector, if the government acted fiscally responsibly, as the tea party would suggest. It is a commonsense point, but what about that issue? Will the republican leadership, will John Boehner, sit down as speaker and put together, at least out of the House, a balanced budget that does not have deficits and does not require more spending, or printing?
Dehaven: I do not think you will see a balanced budget proposal. The numbers are just too large for what thus far the House republican leadership and the Senate leadership has been willing to discuss in terms of cuts. In fact, there has been a noticeable absence of specifics when it comes to what they would cut. I saw Eric Canter on election night on t.v. with Wolff Blitzer and Wolff Blitzer asked him three different times, name a program you would cut, and Canter would not do it. He kept just saying that we are going to go back to spending levels in 2008. Well, even that is not even true. What they are actually proposing is to go back to 2008 spending levels for just discretionary, nondefense spending. So, you are only talking about 15% of the entire federal budget. They need to get some specifics. I am not surprised that they weren't because, as much as we recognize that spending cuts are necessary, needed, and would actually be good for the economy, a lot of folks out there in t his country are very dependent, and a lot of these programs are very popular, so republicans have been afraid to come out and say we want to eliminate this department or that department. You have to contrast that with 1994, when the republicans took over and said we are going to try and close down department of commerce, close down department of education. There have been very few people elected or running for election this year on the republican side that has been willing to make such issues.
Siegel: Be that as it may, the tea party candidates demonstrated that that is what the public wanTad. Look, you had people winning in astonishing ways. Just take Kentucky. I mean, Grayson, the guy that was handpicked by Mitch McConnell, the Senate minority leader, the icon of Kentucky, his candidate lost to a tea party candidate, Rand Paul. When you did the exit pole in that election, 64% of the people said that they love Mitch, he is great, but we just don't agree with him on this one. So, the people thought independently knowing that they wanted to go back to some fundamental fiscal responsibility. I think the republicans would blow it completely if they did not come out and at least come close to try and balance this budget. I will give you one way they can do that. It might take some time, but why not pass a law saying that they are requiring, I know the GAO does this anyway, but the Government Accountability Office, have them do performance audits of every agency in government. You could almost guarantee that you would find 10% or more in every department that is overlap or duplication or waste of some kind. Small business has to do these performance audits formally or informally practically every day. Why doesn't the government do that?
Dehaven: Actually, the GAO pumps out tons and tons of reports every year on problems with federal programs. I know this because I utilize these reports, I often blog about them. The problem is that most members of congress really couldn't care less. When I was in the Senate, I worked for Senator Tom Coburn out of Oklahoma…
Siegel: A terrific senator, by the way.
Dehaven: He is pretty good, and he was big into utilizing the GAO and asking them to look into this and look into that. The GAO folks loved us because they are basically used to being ignored. You know, all that being said, if you hear a politician say that we can just get everything in order by eliminating waste, fraud and abuse, my experience is hold onto your wallet because they are not serious. You know, waste, fraud and abuse in federal programs, like Jesus said, the poor are always going to be with us; well, waste, fraud and abuse are always going to be with us. I think it is more important to focus attention on what is the role of government. That is where the republicans need to be having the debate. What should the government be doing? What doesn't it need to do? Sure, there is duplication, waste and things of that nature, but by just combing two programs that shouldn't exist into one program that shouldn't exist isn't going to get us to the fiscal promised land, especially with the mass of deficits and debt, as well as all the problems that come because of the booming entitlement programs.
Siegel: Yeah, I am not suggesting that that would be the panacea, I am suggesting it is a place to start. It is less controversial, for example, than eliminating departments. I would agree with you. There are departments that shouldn't even exist, but the fact is to get those eliminated, because of the bureaucracy and the political patronage and the jobs that exist in those departments, it is a lot tougher than an independent accounting agency, and the GAO I think does a good job though you have more experience with it than I have, is to let them sit down and say, here is where you can save 10 billion or 20 billion or 30 billion from these agencies of government, at least showing some good faith. If you don't even do that, than why is the republican party going to be any different than the democratic party, and what is going to be the impact on small business in the end, if they don't do substantial change to try to become more fiscally responsible in order to make more money available to the private sector, which is where this economy has to come back from anyway. It is a fraud on the American people to have put out a stimulus program of 862 billion and pretend that that is going to turn it around, which we have seen it has not done. The reason is, the government cannot create a productive private sector. It is not possible.
Dehaven: You know, Mike, there is a side issue here with what the republicans can do. A lot of what you are talking about in terms of oversight and going through the programs and stuff, that is up to the committees. Unfortunately, it appears it is going to be business as usual with the committees. What I mean by that is folks that have been there the longest, who have the senior member, blah, blah, blah, is going to become the Chairman now. What I would have liked to have seen, which would have really sent a strong message that they are actually serious about reigning in spending, is put people on these…shake up these committees. Get folks off of them and put new blood on there. The senior folks don't automatically get to become the Chairman. Unfortunately, they have not done that and most of the committee chairman that I have heard from speak are all protecting their turf already and basically are showing little to no inclination to go after these programs. I look at the Speaker of the House, John Boehner, there is a guy that helped write No Child Left Behind with Senator Tad Kennedy. So, is it any surprise then that instead of talking about eliminating the department of education they are talking about reforming No Child Behind. So, committee structure… one thing I really got to see first hand in the Senate is how important the committee structures are and how important the staffers are. Jim Demint made a great point that I bet mentioned is that, you know, these folks that come in – do not hire staffers that Mitch McConnell and John Boehner recommend. Get people from the outside. Get people from the think tanks. Get people that aren't part of the system, because at the end of the day we always talk about members of congress not reading bills – well, they don't just not read them, they don't write them. They often written with staffers and lobbyists.
Siegel: Tad Dehaven is with us. He is a budget analyst at the KATO Institute. Alright, let's talk about a couple of things that might help small business. We talk about balancing the budget, maybe that is not going to happen but we ought to be moving in that direction. Don't spend more than you take in being the ultimate goal, and that would certainly help small business. So would the issue of taxation. The Bush tax cuts are expiring December 31st as of now. How important is it to continue the Bush tax cuts as they are for everyone in terms of the impact on small business?
Dehaven: Well, I think it is very important. Obviously, I think 50% of small business income runs through the personal income tax, particularly the top brackets. So, yeah, failure to extend the rates on the top rate would absolutely hurt small businesses. You know, I continue to point out that when we get into this discussion about taxing the rich or leaving the middle class alone, all that, at the end of the day the question is do we want to take resources away from the private sector, whether it is rich, poor, middle class, and divert that to Washington so that they can spend it on various special interests and all kind of other politicized causes. The issue we shouldn't be focusing on is whether rich folks keep more money or not. We should be focusing on the fact that it is important for everybody, particularly the rich perhaps because they are the jobs and wealth creators… and I say rich, which is not even rich – folks over $200,000. We should be wanting them to keep t heir money. Every dollar we can keep in the private sector and not send to Washington is going to be a dollar better spent.
Siegel: Well, what I don't understand about even this administrations own self-interest in terms of policy is going back to the Reagan years. When Ronald Reagan was huge on entrepreneurship, on the small business person having an idea and implementing it, executing it, and starting a small business and making it work. That was a big part of what Ronald Reagan believed in, is giving those people the opportunity. Guess what, as he cut spending and as the, I realize he had deficits and that was his big disappointment, but Ronald Reagan during those years created more income and revenue to the federal government precisely because of the productivity of the private sector by harnessing the small business environment. Why wouldn't they even in their own self-interest understand that in this administration?
Dehaven: Because they have no experience with business or creating jobs. The president has never worked a day in the private sector in his life. Joe Biden has spent his entire career in government. Biden said a couple of weeks ago, one of his particularly idiotic statements, something to the effect that if you go back over the last 2-3 centuries every good idea that has come out of America from the private sector originated with the government.
Siegel: That is unbelievable.
Dehaven: Yeah, it is, but that is the mentality. Joe Biden, bless his heart, he is an affable fellow, but I don't think he has the first clue about economics, business, and wealth growth creation, and that is the problem. They are tone deaf. They have no experience and quite honestly Washington D.C. is an echo chamber and they hear from the same folks over and over again, folks who are telling them to spend, folks that are asking them for money, and they are very, very out of touch with what is needed and what is required to get the engine of the economy up and running again.
Siegel: Let me ask this question, just on another area that would affect small business, what if the, and the House could do this on its own actually, supposing there was something like the Grace Commission which Ronald Reagan created, and Mr. Grace of Grace Shipping Lines, shared that commission. They found billions of dollars of waste, and in those days billions was a lot I guess, and the president actually implemented cuts based on what the Grace Commission found and saved the tax payer money. Supposing we created that kind of commission on business regulation at the federal level? I say that in part, for example, Senator George McGovern in an interview I once did with him, said that he regretted the fact that he did not know when he was a Senator what he knew when he started his bed and breakfast in Connecticut, which had so many regulations and so many problems he went bankrupt. Because he did not realize the onerous, burdensome nature of business regulation. What about creating a blue ribbon commission, give them even a year, to review the federal laws regarding business regulation and make recommendations on eliminating those that are irrelevant, modifying those that are too onerous, and creating a much better, more effective business environment for small business in America.
Dehaven: I think that is a fine idea for at the very least you are shining the spotlight on the issue. There is an economist, I cannot think of his name, but he produces an estimate I think every year or few years on how much the economy loses due to regulatory costs and it is in the trillions. I think that is an issue that is not tapped enough. I think it is an issue that the regular American is not aware of and I think some sort of commission… you know, in my experience commissions come and go and things very rarely change, but I think at the very least shining a spotlight, or bigger spotlight, on the regulatory burden would be quite helpful. You know, even to point out that you often hear that the current recession was result of a lack of regulation, that the Bush years were lax on regulation, well the regulations got bigger, regulatory budgets got bigger during the Bush years. There has not been any lack of regulation. In fact, it has been the complete opposite. With these new financial regulations, the Dodd Frank Bill and things like that, I am hoping the republicans, and they do seem to be indicating that they will, will go back and open those things up, like the health care bill, try to take a couple of chinks out of the armor.
Siegel: Well, I hope that something like that, something innovative like that, happens. I mean, the House could do that, in other words be proactive, not be just the party in power trying to maintain its power, but being proactive in doing the things… look, I think we would both agree that small business drives the American economy, 70-85% of it anyway and that is most of it, so why not do the things that will help bring us back, propose them, and be very proactive about it. If the Senate wants to reject it with a democrat majority, let them do it, but at least you have on record that you tried in the House to get the things done, which makes a better case for your candidates for the Senate in two years.
Dehaven: Absolutely. I agree. I would point out that one of the problems with congress conducting oversight and doing the things that they should be doing is that when you have a 4 trillion dollar budget, and that is just the spending, we are not even getting into all the regulations and everything else, there is a lot of ground to cover. Look, I am a budget analyst by profession. I don't know all that is in the budget. It is impossible. Nobody on the planet minus a supercomputer could possibly know what all is in that budget. I used to conduct oversight for Senator Coburn and, you know, sitting around talking to your fellow staffers and trying to come up with targets, there are a gazillion targets. Unfortunately, there is only 24 hours in a day and I think all that points to the need to downsize government so that these guys and gals can actually focus on what the government is doing, and the few things that it should be doing like national defense, it can pay a little more attention to that.
Siegel: Well, the KATO Institute always has fresh ideas and we appreciate that. Tad, nice to talk to you today. I am sure we will have you back on the program. I think the point of trying to get small business moving forward through legislation that makes sense is the way to do it, and we have talked about that. So, for that, I appreciate your time and thank you for being on the program.
Dehaven: Thanks Mike for having me on.
Siegel: Have a great day. That is Tad Dehaven. He is a budget analyst for the KATO Institute, and that is the BOSS Business Brief. My name is Mike Siegel. Remember to be good to your self and the world and the world will be good to you.