Every Sunday I look forward to reading the "Five Myths" column in the Washington Post. Some are provocative and some are yawners, but last week's entry makes me want to blog. In "Five Myths about Free Enterprise", Arthur Brooks – president of the American Enterprise Institute – is sometimes overwrought and over the top. But a few points from Mr. Brooks really hit home.
"Find me an opportunistic politician chumming the waters with tax loopholes, and I’ll show you a corporate shark." Ever wonder why the tax code is so convoluted and biased? Because Congress knuckles under to companies and individuals with influence looking for a competitive and economic edge. Instead Congress must turn a deaf ear to those pleas, serving the broader interests of consumers and the free market by eschewing favoritism and showing some backbone.
"We need more free enterprise, not less — free enterprise where entrepreneurs put their money on the line and earn a profit or suffer a loss." It is not government's place to promote a specific type of business or industry. Similarly, it's not government role to guarantee a profit on any endeavor.
"For a majority of Americans, fairness means not redistribution, but rewarding merit — and that is what free enterprise does." At the same time, it's not the government's place to deter or restrain free enterprises that some politicians may deem unworthy or frivolous. Government must ensure that the marketplace is competitive and that competitors bear the full cost of their economic activities.
Here are my suggestions for maintaining a strong and fair business environment:
- Free companies from government subsidy or hindrance. The World Bank ranks U.S. #4 in ease of doing business but #72 in ease of paying taxes. My income tax proposal removes the burden of tax from companies and places it where it belongs: fully on the shoulders of owners and shareholders.
- Get government out of running and influencing companies – whether at the national, state, or local level. Virginia ABC, Sallie Mae, Freddie Mac, and Fannie Mae all subject taxpayers to the risks of free enterprise while barring the private sector from participating. The same goes for government charters and noncompetitive agreements: just stop it.
- Refocus government on provision of public services that may not have an immediate profit or return on investment. These public goods make us all more prosperous by encouraging interstate and international commerce.
- Stop subsidizing or hindering individual pursuits and purchases. Housing – for example – is subsidized through the mortgage interest deduction and other preferences, distorting consumer choice between owning and renting, increasing the cost of housing, and increasing the possibility of a bursting asset bubble.
Risk isn't free: sometimes you gain by taking a chance, sometimes you don't. Taking a chance in business may yield a profit or a loss. Those that merit success – through knowledge, hard work, and perhaps luck – will profit. Those that don't, lose. But it's not the government's place to subsidize a profit or cushion the blow of a loss. That is the essence of a democratic economy.