Economy & Budget

Financial services: Coming to the aid of small business

When Sen. Maria Cantwell recently wondered aloud to the New York Times, "Why aren't the banks lending? Where's the money for small business?" she echoed a misconception that has crept into our national economic discussion. The fact is financial institutions are lending, and have pledged to lend enormous sums to small businesses for years to come.

As America continues its economic recovery, small businesses must be an integral part of fueling job creation.  A vibrant small-business community drives our economy, job creation and, quite simply, our nation's vitality. Our 27 million small businesses generate nearly two of every three new jobs.

America's financial services industry understands this - it serves small businesses in communities all across the nation. Our financial institutions are dedicated to helping these companies and their owners succeed, and offering the tools to do so. They also are taking historic steps to improve small businesses' credit, deliver other key services and provide huge pools of funds for borrowing.


THERE ARE NO CUTS! – The fallacy of baseline budgeting

I almost have to laugh at the old car commercials with the loud salesmen and the blinking graphics, “Come in today and save $5,000!!”  You have to know that this type of advertising works because it is still being used.  Ergo, there must still be idiots out there that think they are really saving $5,000 by spending $25,000 on a car that has a $30,000 price tag on it.  So it is with baseline budgeting and “Washington” speak.
The ignorant on both side of the aisle are decrying the failure of the “Stuper-Committee” (NO, I didn’t spell that wrong) as the next man-caused disaster.  With weeping and gnashing of teeth, they rent their garments and wail at the moon, giving a performance that only Chicken Little could appreciate.  Now, because 12 of the most partisan people on the hill couldn’t come to an agreement as to what to order for lunch, let alone the deficit, the debt ceiling legislation passed in August will kick in “draconian” cuts to both domestic and defense spending.  Only, there’s one little problem….


For DoD, worry less about cuts, find creative use of existing resources

With the Super Committee and appropriators looking to make cuts in many places, including some critical defense programs, too little attention is being spent on how to make the dollars the federal government spends mean more for the American people.
In the last Administration we made great use of authorities which provided the room to be creative and generate just a bit more for America out of the same tax dollar. The Embrey Dam Removal in Fredericksburg, Virginia, which used a combination of Congressionally directed appropriations in conjunction with resources and expertise from the active duty Army and Air Force Reserves to bring down a derelict dam on the Rapahannock River, was a great example of how creative use of existing resources can be a win-win for both the military and the civilian community.


Restructuring defense spending for today’s budget reality: Five principles to cutting the defense budget without harming national security

The U.S. Department of Defense budget has already been trimmed by $450 billion over the next 10 years and larger cuts are on the way.  Failure of the “Super Committee” to deliver a plan by Thanksgiving that would slash the federal budget by $1.2 trillion over the next decade will trigger sequestration of an additional $600 billion in defense spending cuts.  Even without sequestration, we can reasonably expect significant reductions. Any organization facing such spending cuts requires transformational changes, not incremental ones.
The question of whether to cut the defense budget has long passed. The question now is where and how.  The Department of Defense is not a corporate entity. However, the experience and lessons learned from transformational restructuring and turn-arounds of large commercial organizations can inform the defense-spending debate.   Consequently, our objective is not to recommend precisely where cuts are best made, but rather to offer five guiding principles that may prove useful to Washington policymakers.


Au revoir to noblesse oblige

Noblesse oblige isn’t exactly a household term in America. The literal translation from French means “nobility obligates.” That definition may resonate in nations that perpetuate the bizarre idea of a noble class, but this is America; we don’t classify people according to bloodlines.

Fortunately, the concept of noblesse oblige has a broader meaning in everyday life for everyday people in any country. Simply stated, noblesse oblige means this: those who have should help those who have not. People who have been blessed – and not just the privileged rich, powerful or highly educated – have a responsibility to care for those who are less fortunate.

While the term has also been applied to countries and corporations, the concept of noblesse oblige belongs first and foremost to men and women, for neither a nation nor a company is inherently noble. Acts of generosity, kindness and benevolence are ultimately determined by the humans who lead them.


There’s only one way the Super Committee can fail (and it’s not what you think)

The hand-wringing has begun. The 12 members of the Joint Select Committee on Deficit Reduction – also known as the Super Committee – appear to be deadlocked, and many in Washington are looking to the sky to see if it will fall. They shouldn’t worry. In terms of deficit reduction, there’s only one way that the Super Committee can actually fail, and not coming up with a deal isn’t it.
Certainly, if the six Democrats and six Republicans on the committee don’t come to a bipartisan agreement that finds at least $1.2 trillion in deficit reduction, some will call that a failure. But in terms of actual deficit reduction, it won’t matter. If they don’t reach agreement, a set of spending cuts will automatically kick in to reduce the deficit over the next ten years by the full amount.
Either way, the Super Committee process will result in at least $1.2 trillion in deficit reduction. That comes on top of nearly $1 trillion in spending cuts already enacted as part of the debt limit deal. Together, the total effect will be to reduce the federal budget deficit over the next ten years by about one percentage point of GDP. That may not sound like a lot, but it is almost the same size as the deficit reduction packages of 1990 and 1993. Those pivotal pieces of legislation combined with strong economic growth to produce the first balanced budgets in decades.


Government insurance is a bad investment

It seems everyone is getting on the smaller-government bandwagon these days. Republican presidential candidates Rick Perry and Ron Paul say they want to eliminate the departments of Energy and Education. Michelle Bachman has promised to cut the Environmental Protection Agency’s regulatory authority. Even the Obama administration—which has done everything to continue the growth of government begun under George W. Bush—has proposed some cutbacks and regulatory reforms.
For all this talk of cutting government, however, there’s been little attention paid to one enormous part of government: its role as an insurer. This is a shame because government-run insurance doesn’t work very well and ought to be a significant target of those wanting to cut government’s size and scope.
The point of insurance is to provide relief against negative events that are difficult or impossible to foresee. Products that protect people and businesses from the risks of auto accidents, house fires, flooding, crop losses, loan defaults, and environmental liability (the latter four are run by the federal government) all qualify as insurance.


Bad investment advice: Cutting federal funds to HBCUs

An investment adviser who told his clients to take their money out of a company that had shown a solid return on investment year after year would soon find his customers taking their advice from someone else. 

Yet that is exactly the advice that some in Congress are giving to the deficit-cutting Super Committee and congressional appropriators in regard to federal support for historically black colleges and universities (HBCUs).  These institutions produce 47,000 college graduates a year, graduates who go on to become the teachers, scientists, engineers and business executives that employers need and the country relies on to keep us competitive in the global economy.

Yet House appropriators want to cut federal support for HBCUs under Title IIIB of the Higher Education Act by $85 million, more than 36% of what these institutions receive today. HBCUs may be on the Super Committee chopping block as well.


Pouring more money into the military is not a solution

Defense Secretary Leon Panetta’s Chicken Little protestations that the sky will fall if there are further cuts to the Pentagon’s $700 billion budget are fantastically disappointing. His remarks that cuts will endanger troops and invite foreign aggression are fear mongering of the worst kind.
Multiple military leaders have themselves acknowledged that the current national security budget, even accounting for recent promises of cuts and “efficiencies,” includes a wish list of extravagant and overpriced weapons and services.
Over 10 years, replacing two of three variants of the F-35 Joint Strike Fighter with the less expensive and proven F/A-18 E/F’s could save $44 billion; not renewing the procurement contract for the troubled V-22 Osprey could save $12 billion. And those are just two cuts that could save taxpayers billions without putting American lives at risk.


How immigrant investors can help end the housing crisis

We all know the depressing statistics - housing prices have fallen 33 percent since the housing bubble burst in 2008. This is an even greater decline than the drop in market value during the height of the Great Depression. And while house prices continue their slide, four out of five new mortgages require a down payment of at least 20 percent, putting home ownership out of the reach of most Americans. Almost five million households are either in foreclosure proceedings or are perilously close.

To address this problem, United States Senators Chuck Schumer, Democrat of New York, and Mike Lee, Republican of Utah, recently proposed legislation (S.1746) that is a step in the right direction. But it doesn’t go far enough, and the benefits are much too limited to attract the volume of foreign investors needed to make a real dent in the crisis.

The problem is that the Schumer-Lee bill fails to award what foreign national investors want: permanent residence status. Instead, their proposal would bestow a special three-year, renewable, temporary visa permitting the investor and his immediate family to reside in the United States so long as he purchases a residential property for at least $500,000 in cash and agrees to live in it for at least 180 days each year.