What should be done about America's debt? It's the $14 trillion question that continues to fuel debate in the halls of Congress and across dinner tables nationwide. To the delight of frustrated supporters and chagrin of emboldened critics, President Obama came out uncharacteristically swinging this week -- announcing in a Rose Garden speech his plan for $3 trillion in savings, which includes new taxes for the wealthy, a so-called millionaires tax and the elimination of loopholes and deductions.
During his speech, the president's newly populist message tried to preempt his critics' inevitable line of attack by declaring, "This is not class warfare. It's math." And sure enough, the party line from the opposition party has been just that: Taxing the rich, they claim, is a socialist tactic that punishes achievement, and taxing anyone in a teetering economy would push us all over the edge.
When trying to underscore the need to rein in the skyrocketing debt, supporters often make the analogy that if families have to balance their checkbooks, then so too should the federal government. But that analogy doesn't really hold up. It's more appropriate to think of the United States as a business -- one that has up years and down years, requiring operational adjustments based on how much money it spends and how much it brings in.
With that in mind, we decided to ignore the politics and politicians and ask a group of people who actually run businesses what they would do about the debt. We just may see some members of our Board of Directors running for office soon.
Director, Texas Venture Labs at the University of Texas
"Anyone who has ever run a business knows you can’t budget your way to prosperity -- if you want to succeed, you need to increase revenues. The same is true of the government. You can trim budgets, but if you want to succeed, you need to commensurately raise revenues. In plain and simple terms, this means if you want to fix the deficit problem, you also need to raise taxes."
Co-Founder and Chief Brand Architect, Method
"Only good things can come from reducing the deficit. There are so many inefficiencies in government that can be cut -- it's the same way that a business finds it can do so much with less money. Whenever you're at the end of a capital cycle and you look at the burn rate, you'll see that you go through it too quickly the first half and slow it down the second half. The fourth quarter tends to be the most efficient quarter of a business because it puts so much scrutiny on delivering the number. And you can always be assured that a lot of inefficiencies or waste tend to get stomped out at the end of the year. Therefore, reducing the deficit will help ensure more efficiencies in the government."
Founder and CEO, Greenleaf Book Group
"The real question here is, 'What stimulates growth better -- government investment or private investment?' If you think the government is the driver, then redistributing wealth is the right plan. On the other hand, if you believe private investment is the way to grow, as I do, then taxing job creators is the exact wrong approach. The Laffer Curve shows us that when we lower tax rates, government tax receipts go up. It's counterintuitive on it's face, but it's been proven over time.
"If I were in charge, I'd slash spending across the board, cut tax rates and loopholes, and get the hell out of the way of private investors."
Rieva LesonskyFounder and CEO, GrowBiz Media
"If I could solve the debt crisis, I would run for office. (I could never win, however.) I really can’t figure out how to say this without sounding partisan, so I’ll let someone else say it for me: In the early 2000s I was at an event where John McCain said it was foolish to cut taxes -- and then go to war. Sounds about right to me."
Founder and CEO, Nfinity
"The answer is super simple but Congress doesn't have the courage to act on it: Move to a consumption tax of all non-essential items. 1) It would be fair. Everyone would have to pay their 'fair share.' Those who make more money would spend more money and be taxed on it. It would also tax all of the people in the United States who get paid in cash. They would still spend and would be taxed. 2) It would allow for less corruption. The more "rules" the more open to corruption. 3) It would be more efficient. Could collect more money from fewer sources with fewer people checking up on tax code. The tax code would be much simpler.
"Will this latest plan impact our business? Who are these supposed 'millionaires' President Obama is talking about? Small-business owners across America, because of the way business entities are taxed. Right now, most small-business income is taxed straight through to the individual, whether it shows up in our bank account as cash or just phantom 'profit.' They want to change that? To encourage small business to keep money in the company? Now that's something I can get behind."
"It's hard to argue with closing loopholes for special interests -- with ExxonMobil's profits up 53 percent, it's clear there's no need for a federal subsidy there, and it would allow for lowering the corporate tax rate. As CEO of a small company, I could only wish for that kind of corporate welfare, but would welcome the lower corporate rate.
"Allowing the Bush-era tax cuts to expire -- and enacting the Buffett Rule, for that matter -- is also a no brainer. Those of us who benefit from the American marketplace shouldn't balk at supporting it.
"The issue is that none of the measures in the plan will affect non-discretionary spending, which is the real challenge, both politically and fiscally."
Investor and Author of Rule #1 And Payback Time
"The debt isn't the issue right now. In spite of our lowered bond rating, nobody is worried about America defaulting. We can fix the debt. What we have to do right now is get the economy moving.
"The problem is that the president thinks he can get it moving by hiring people to do government jobs using my money. I wouldn't object so much if I wasn't using the money already, but I am. I'm an investor. I invest my money in businesses that I think are likely to be successful -- meaning businesses that will grow, hire more people, buy more supplies, rent more real estate and, yes, pay more taxes. The president wants to take the money I'm putting into your business and give it to a construction guy so he can get off unemployment. Does he really think that his construction guy is a better investment than you? Why? The construction guy isn't going to hire anybody else, but you are. Why aren't you, the small-business owner, the guy the President is most worried about, since you as a group are the people who put other people to work? And I'm the guy who gives you the money.
"Wouldn't it make more sense to lower the taxes I'm paying so I can invest in more businesses? Last year, my wife and I paid out over $250,000 in taxes to the Feds. That might not be a lot of money to pay in taxes, but it might have made one heck of a difference invested in the right startup.
"The president wants to take my money and build a bridge. If I thought that would make the economy grow, I'd be all for it, but if government spending projects worked, the Soviet Union and Cuba would be utopias. Instead, they're bankrupt because there is no growth of capital inherent in a bridge. Bridges do not compound their investment capital and expand into more bridges. But if you have a great idea, the skill to pull it off and the capital to grow, your business can expand itself over and over again.
"If the president raises our taxes, you lose. If you lose, we lose. No bridge is going to fix this economy. Only you are. With our money. But only if we have it to risk on you. It's that simple."