Whole Foods CEO John Mackey has an op-ed in the Wall Street Journal in which he proposes an alternative business model for economic growth consisting, essentially, of three components.
Reduce the cost of government:
Most importantly, we need to radically cut the size and cost of government. One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP. In 2010, it was 40%. Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending—money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs. Government debt is growing at such a rapid rate that the Congressional Budget Office projects that in the next 70 years public money spent on interest annually will grow to almost 41.4% of GDP ($27.2 trillion) from 1.4% of GDP ($204 billion) in 2010. Today interest on our debt represents about a third of the cost of Social Security; in only 20 years it is estimated that it will exceed the cost of that program.
In practice that means cutting defense, healthcare, and education spending.
Second, tax reform:
In addition, tax reform is essential to jobs and prosperity. Most tax deductions and loopholes should be eliminated, combined with significant tax rate reductions. A top tax rate of 15% to 20% with no deductions would be fairer, greatly stimulate economic growth and job creation, and would reduce deficits by increasing total taxes paid to the federal government.
[…]
Corporate taxes also need to be reformed. According to the Organization for Economic Cooperation and Development, the U.S.’s combined state and federal corporate tax rate of 39.2% became the highest in the world after Japan cut its rates this April. A reduction to 26% would equal the average corporate tax rate in the 15 largest industrialized countries. That would help our companies to use their capital more productively to grow and create jobs in the U.S
That’s accompanied by a supply side argument that reduced marginal rates would produce increased revenues which I won’t include here. Suffice it to say that I don’t think that we’re currently at the part of the Laffer Curve that Mr. Mackey does.
Third, decrease regulation:
Government regulations definitely need to be reformed. According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. While some regulations create important safeguards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.
A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.
Although I agree with the broad outlines of his proposals, I’m becoming decreasingly hopeful that any of the measures that Mr. Mackey proposes will ever come to pass. For the constituencies that depend on out-size government spending, continuing that spending is a matter of life and death. Those constituencies are too powerful and too entrenched to allow reform without putting up a major fight and the cards are stacked in their favor. Regulation is the mechanism by which a chief executive effects his will in the absence of Congressional support. I strongly suspect we’ll see more regulation rather than less for the foreseeable future.
Additionally, I think there’s a vital need not simply to do less but to accomplish our objectives more prudently. We can provide ample defense of our country and its vital interests for a fraction of what we’re spending. We can aid the elderly, poor, and sick without devoting an unaffordably increasing fraction of the national income to those tasks. We can ensure that workers are treated fairly, our air, water, and soil are not polluted, and that businesses operate honestly without an ever-increasing thicket of regulations.
Unfortunately, politicians are rarely elected to office for prudence and undertaking ever greater risks is likely to remain the order of the day. Stick with the one that brung you.
How was this new? This is standard-issue Republicanism.
We just had a well-received amicus brief from seventy large businesses complaining about the undue burdens of complying with disparate state and federal employment laws. Perhaps there is a growing awareness of the problems of multiple-layered regulation, . . . at least when it involves same sex marriage.
John Mackey is the type of CEO who drives social progressives crazy. Why? Because he follows a free market approach to his business model, but doesn’t fit any of the harsh caricatures libs love to paint on their philosophical rivals.
Ironically Mackey was a Democratic socialist in college, who simply grew up</i, evolving into a free market libertarian. When you read about this guy, there is nothing lock-step about him. His business practices flow from his own humanized, business beliefs, not from some radical playbook or political talking point agenda. Consequently, how has that impacted his business? In 2005 Whole foods was named by Forbes as one of the best companies to work for.
I remember when a Whole Foods store opened near my home, thousands of people flocked for jobs. It was considered a 'plum' company because they treated their employees so well, and yet is a non-union shop. Mackey has strong anti-union views, that apply only to dealing with outside union interference. He does, however, favor what is called 'family unions,' where advocacy is done in-house and is non-adversarial. Hmmm, you mean no involvement of politics? What a concept!
A far as the greed factor, so often endearingly placed on any successful business, that's a difficult aspersion to place on Mackey, as well. As taken directly from wikipedia:
Mackey has instituted caps on executive pay at his company, as well. Wouldn’t that appeal to the OWS movement?
But, people continue to demean him, as he has displayed his free market approach honestly and openly, not only in his own ethical modeling, but in the articles written and the manner in which he operates his business — outside the reaches of government, as much as possible. Liberal friends of mine at first refused to shop at Whole foods because of an earlier piece he wrote deriding Obama’s health care, favoring a more free-market approach to lowering medical costs, instead. However, the store consistently has such good food and organic products, that they have all quietly slunk back to getting their deli favorites etc.
There is so much political hypocrisy at play here. If you were to drop all that, and get on with pragmatic solutions to our economic woes, maybe even forming a technocratic government like what is being done in Italy (no politicians in the cabinet under it’s new PM, Mario Monti), we might have a better change at making some positive in-roads towards stimulating an economic recovery and genuinely addressing our own deficits.
It’s an op-ed not a news article. And I think that take is too simplistic. Mackey is an independent not a Republican but he’s an independent who wants to run a business. I think he’s enunciating what he see as the barriers to his doing that: a government that’s too expensive for what we derive from it and, consequently, too demanding of new revenues, an unhinged tax system, and the regulations of thousands of competing jurisdictions, impossible to comply with in aggregate. I don’t agree with everything he has to say but I don’t think he’s an ideologue, a partisan, or nuts, either.
I know this is an OTB cross-reference. But Michael, here is your pristine, eat off the floor Zuccotti Park:
http://www.powerlineblog.com/archives/2011/11/why-zuccotti-park-needed-to-be-cleaned-up.php
“. . . a government that’s too expensive for what we derive from it and, consequently, too demanding of new revenues . . .”
And that’s the great flaw in the argument. If Michael Reynolds were granted status as the sole entity with the right to issue U.S. currency and given a printing press, would we argue that he has to keep writing books to pay his bills?
The Federal government is not revenue constrained. It doesn’t tax so it can spend, it taxes to force people to accept its currency and to control the money supply. Taxation is purely a monetary operation. 99% of us still don’t understand the dollar has no intrinsic value and therefore is not a scarce resource for our government.
“The Federal government is not revenue constrained. It doesn’t tax so it can spend, it taxes to force people to accept its currency and to control the money supply. Taxation is purely a monetary operation. 99% of us still don’t understand the dollar has no intrinsic value and therefore is not a scarce resource for our government.”
I know where you are going, Ben. But this: “it taxes to force people to accept its currency” I do not understand.
.
” One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP.”
One hundred years ago, life expectancy for a white male was 50. For a non-white male, it was 34. Hence, Mr. Mackey is the type of CEO who drives me crazy because he is F**king stupid. If he wants things to be like they were 100 years ago, you gotta take the bad with the good.
http://www.infoplease.com/ipa/A0005140.html
As to the rest, I would eliminate corporate taxes, reduce top rates only if offset by eliminating tax expenditures, which should be done first. On regulations, I am not sure that the SBA is disinterested party in calculating costs. The failure to enforce regulations, and eliminating regs (Bear Stearns rule as an example) cost the world trillions in just this one banking crisis.
Steve
I heard about and posted on a clear failure to enforce existing regulations that lay at the heart of the financial crisis. If agencies with the authority and power to enforce regulations won’t enforce them, it’s unclear to me how additional regulations will cure that.
Do we need regulations? Sure. However, as I mentioned in the post itself and have frequently repeated here we have, literally, tens of thousands of jurisdictions each with its own regulations, some of them conflicting. It seems self-evident to me that there’s considerable room for improvement in unifying regulations to make it easier for businesses to know what the heck they’re supposed to comply with.
I don’t think Mr. Mackey is a standard-issue Republican, but his asinine supply side argument is.
The rest of his article is OK. There are too many regulations, particularly in the fields he focuses on, and it’s obvious that the costs of healthcare and education are driven by rents and need to be forced down. I’m not in favor of cutting taxes until the deficit is eliminated, but I’m all for simplification.
You may have noticed that I didn’t think much of it, either.
Drew:
You realize I was actually there, right? And I referenced what I actually saw with my own actual eyeballs. That’s the only claim I was making.
If Whole Foods sold food that was as regulated as it was 100 years ago it’d be out of business in six weeks. Botulism isn’t nearly as popular as it once was. Mackey benefits from a generally safe — regulated — food supply.
That said, he’s a rich guy selling products to rich people. Don’t kid yourself that WF is some kind of farmer’s market. It’s Tiffany’s for food. I know, I buy my truffle ravioli there.
Mackey has created a successful business model addressing the products he sells, as well as fair benefits and treatment of his employees. It works for all income levels. For instance, I go to a local Venice store frequented by rich, middle class, and lower income people. They then walk from Whole Foods to the 99 cent store right next door.
The comment referring to 100 years ago, was simply a reference point, obvious totally in line with the circumstances of that age. What he is saying, though, is that we can readily cut the costs of government to fit the circumstances of today, which could be a lot lower than the present government costs, seen as a percentage of our GDP.