Letter To Washington

Dear Congressman:

I am a constituent that is a frequent letter writer to your office. Normally, I am writing to you about a particular issue that is in the headlines, today I am not. Instead, I am writing to give you an idea how the decisions you, and the rest of Congress, are making are paralyzing the economy and business.

While I am not writing the letter on behalf of my company, the issues that I am going to outline drastically effect the decisions made by me and the company that employs me. As a direct result of your actions in Washington, you and the other members of Congress are affecting the competitiveness of our nation and the standard of living that all Americans enjoy today.

My job involves trading a commodity by-product of refineries. These are the refineries that produce transportation and heating fuels that make our economy so productive. State of the art technologies at work in these plants give consumers and businesses the lowest cost energy anywhere in the world. This means that consumers can consume more and business can invest in more machinery that leads to our high, relative standard of living. Congress is threatening this industry with regulation and taxes that will hurt the competitiveness of our domestic refining infrastructure. Whether it is over-reaching environmental legislation or cap-and-trade taxes, this kind of burden adds tremendous cost. This cost must be passed on to consumers or the businesses will close. Either one of these consequences is devastating. Higher costs mean less economic growth and a lower standard of living. Instead of consumers consuming more goods and services, they will be pressed into spending more money on energy. If business cannot pass on these new costs, they will close. This means loss of high-paying jobs in the industrial sector the means so much to the country’s prosperity.

The company I work for is dedicated to following the letter of the law. However, there are so many conflicting and overlapping agencies at all levels of government that it is paralyzing our business and many others. When a business does not know the rules and legal expectations, they are very hesitant to make investments. In addition, they are forced to tie up more capital and resources to maintain compliance thus reducing the investment in plants, property and equipment that to are key to economic growth. Government has to become less burdensome and complex so business feels confident they can make investments that will make our economy more productive.

Congress must also stop subsidizing inefficient businesses in this country with legislation. Inefficient business mean a loss of productivity that is the key to economic growth. Two prime examples are agriculture and shipping, but there are hundreds more examples I could choose. A few examples in the agriculture segment are dairy and sugar farming (not to mention feed grains like corn, wheat and rice).

Today there is a glut of milk on the market. Consequently most dairy farmers are now looking at producing milk at a loss. The reason the price of milk is so low is over supply based on current levels of demand. When this happens in any other industry, the highest cost producers go out of business and the market corrects itself with no help from government. This situation leaves only the very best, most efficient producers operating dairies and redirects the other resources to more efficient areas of the economy. No doubt this creates localized pain when a farmer goes out of business, but why should the taxpayers be left with the burden of supporting that farmer? If that farmer were making paper, furniture or computers the government would not support him. The agriculture lobby has gotten strong because there is money in it. Washington needs to get tough and say no to handouts.

The other example I referred to is sugar. Perhaps no other example is so wrapped up in special interest and government interference. Because of import tariffs and production limits on sugar, US consumers pay two to three times the world market price for sugar. Why? To protect a very small industry, primarily in Florida, with tremendous clout and to support the high price of corn syrup in grain growing regions of the country. No doubt this has saved jobs in these industries, but it has cost many more as consumers had to pay more for sugar than they should have. Industries where sugar is a primary ingredient have moved production overseas because they cannot be profitable paying more than market prices for sugar. This particular situation plays out in any industry where government gets involved. No matter the temptation, government has to stop determining winners and losers in business and let markets decide who succeeds and who fails.

As a taxpayer, I am appalled at what the US Government does in the shipbuilding business. Due to the legislation passed in 1920 known as the Jones Act, the US Shipbuilding business has enjoyed a position in the world market for ships that has made it terribly inefficient and driven the cost of vessel freight between US ports to unreasonable levels. In addition, it has driven the cost of Naval vessels for our own defense to ridiculously high costs for the taxpayers.

I recently received a quote for a vessel that would move the commodity that I trade. If I were to build a Jones Act vessel (one that could move between US ports), the price would be over $100 Million. I can have the same vessel made in Korea today for $30 Million. Not only is the price cheaper, but I can also have it a year sooner. Unfortunately, I cannot take that Korean vessel, loaded, between US Ports due to the Jones Act. This is a terrible outcome for businesses that are trying to compete. I cannot buy and sell with my own countrymen at a price that is competitive with foreign traders in foreign flagged vessels that only move product in or out of the US. To make matters worse, I hear the Navy is buying several high-speed ships at a cost of nearly $400 Million each. I can only imagine how much these vessels would cost if the US Shipbuilders had cost structures that forced them to compete with the Asian builders. The US Taxpayer is getting fleeced only to protect a small industry with very good political connections that have been in place for nearly 100 years.

If the citizens of this country are to continually see our standard of living rise and enjoy the fruits of economic growth, then business has to be allowed to thrive. After all, this is where real jobs are created and real wealth built. There is no better way to do this than to reduce, or even eliminate, corporate income tax. No better stimulus could be designed than a program to eliminate the corporate income tax.

Corporations make capital investment based on after-tax returns. When the government takes nearly 40% of all income on investments, it means that business must have incomes that are 40% higher in order for a capital investment to yield a return that warrants the risk. Imagine all the investment that businesses could make if the return threshold was lowered by 40%! This new investment would mean more jobs for everyone since someone would have to build the new machinery, buildings and transportation networks that new investment would require. Consumers might also enjoy lower prices as the cost of taxes is passed on directly to them. If not, companies would either pay more in dividends (that are taxed as income) or have even more money to invest in productive assets starting this entire cycle over again. A zero tax environment would attract scores of foreign investment, as the US would again be the best place to invest.

Growth in the Federal bureaucracy means more human resources and productive capital are in non-producing, government jobs rather than in production of consumer goods and services. These are jobs that play no role whatsoever in economic growth as they do nothing but force more cost on society. More government jobs mean more taxation on an already stressed private sector. Even worse, this bloated government bureaucracy has over-lapping regulatory authority that complicates all compliance matters as it relates to business. Washington must realize that it is impossible to create greater prosperity and a higher standard of living with a bigger government machine.

The US is losing its competitive edge. It is not too late to stop the decline, but Washington has to make it happen. This is not a Republican or Democrat issue, it is a matter of securing the country’s future. I want my kids to enjoy a better quality of life than mine, just like I enjoy a higher quality of life than my parents. Unfortunately, that history of prosperity and economic growth is now at risk due only to decisions made by politicians catering to special interests. What needs to be done is take the incentive out of lobbying the government for money or special protections, stop having the government determine winners and losers in commerce, and eliminate the tax burden on business. These very simple steps are all that are needed to turn the country around.

Congress is truly destroying the goose that lays the golden eggs and that goose is the entrepreneurial spirit that is historically unique to the United States of America.

Respectfully submitted,