Jonathan Willner - Business Development Outlook 2013


Uploaded by OklahomaHorizonTV on 04.01.2013

Transcript:
ROB MCCLENDON: WELL MUCH OF THE DEBATE AROUND OUR DEFICIT FOCUSES ON TAXES.
ARE THEY TOO MUCH, TOO LITTLE, OR JUST NOT WELL SPENT?
AT THIS YEAR'S ECONOMIC OUTLOOK CONFERENCE, I SAT DOWN WITH THE DEAN OF
OCU'S MEINDERS SCHOOL OF BUSINESS, JONATHAN WILNER, TO TALK ABOUT FREE
ENTERPRISE, OUR TAX CODE, AND WHY PRETTY CAN BE DECEIVING.
JONATHAN WILNER: WE HAVE A COUNTRY THAT'S SORT OF OBSESSED WITH
APPEARANCES NOW.
THE DETAILS OF WHAT IS CONSIDERED A REALLY COOL GIFT FOR YOUR SIXTEEN YEAR
OLD DAUGHTER IN DALLAS DRIVE ME CRAZY.
BUT WE HAVE BECOME A NATION OBSESSED WITH APPEARANCES, SO IT HAS TO
LOOK RIGHT.
WELL THAT'S THE SORT OF THING THAT OUR AUTOMOBILE INDUSTRY DID IN THE 60S,
70S, AND 80S WHEN TOYOTA AND HONDA CAME IN AND WHAT THEY HAD WAS REALLY
RELIABLE CARS.
THINGS THAT WORKED RIGHT, GOT GOOD GAS MILEAGE, AND THEY HELD UP ACROSS TIME.
OUR CAR COMPANIES GOT OBSESSED WITH FIT AND FINISH DOESN'T IT LOOK
NICE?
BY THE 1980S, OUR CAR COMPANIES ARE TOAST.
THEY NEED TO BE PROTECTED BY OUR GOVERNMENT AND FORMED VOLUNTARY EXPORT
RESTRAINTS.
PEOPLE FIGURED OUT THAT THE SUBSTANCE OF THESE CARS WAS VASTLY MORE
IMPORTANT THAN THE COLOR OF THE PAINT ON THE OUTSIDE.
THE SAME THING IS TRUE WITH ECONOMIC DEVELOPMENT.
THE BASE LINE, THE STUFF THAT'S BEHIND THE SCENES, THE UGLY, GRITTY, DIRTY
WORK IS THE NECESSARY CONDITION FOR GROWTH SO YOU CAN HAVE A REALLY
BEAUTIFUL ARENA, BUT IF PEOPLE CAN'T GET THERE, IT DOESN'T MATTER.
IF THE ARENA IS THERE, PEOPLE CAN GET THERE, AND IT'S A HIDEOUS
MONSTROSITY, YOU CAN STILL SELL IT OUT.
I GIVE YOU THE BOSTON RED SOX AND FENWAY PARK.
THEY KEEP SELLING IT OUT AND THIS THING IS A DINOSAUR.
THERE ARE SEATS THAT ARE BEHIND A VERTICAL IRON PILLAR, AND I WILL PAY 60
DOLLARS TO GET THAT SEAT, BECAUSE I WANT TO WATCH THE RED SOX EVEN IF IT IS
AN OLD STADIUM.
IT'S THE PEOPLE THAT MATTER; IT'S THE NITTY GRITTY THAT GETS YOU
ECONOMIC DEVELOPMENT.
ROB: I'VE HEARD YOU SAY THAT AMERICANS NEED TO GET REAL ABOUT WHAT FREE
MARKETS CAN AND WHAT THEY CANNOT DO.
WHAT DO YOU MEAN BY THAT?
WILNER: FREE MARKETS IS GENERAL, ALL THE MODELS THAT PEOPLE TALK ABOUT,
WHAT THEY MEAN WHEN THEY SAY FREE MARKETS IS ACTUALLY PERFECTLY
COMPETITIVE MARKETS.
IT'S QUITE A BIT DIFFERENT, SO, A MONOPOLY, A LOCAL MONOPOLY SAY, IN A
CITY WITH POWER IS NOT NECESSARILY A PERFECTLY COMPETITIVE MARKET, THOUGH
IT WELL COULD BE A FREE MARKET.
AND THE OUTCOMES THAT PEOPLE PROJECT FOR PERFECTLY COMPETITIVE
MARKETS ARE THE SORTS OF THINGS THAT I WANT, GREAT EFFICIENCY, HIGHER INCOME
GROWTH.
THAT'S ALL PERFECTLY COMPETITIVE MARKETS.
BUT MOST OF THE TIME WHAT WE HAVE IN THIS COUNTRY IS QUASI-FREE MARKETS THAT
ARE NOT PERFECTLY COMPETITIVE.
THE CONSEQUENCE OF THAT IS WE DON'T GET THE OUTCOMES OF THE PERFECTLY
COMPETITIVE MARKET THOUGH WE PRETEND AS IF THAT'S GOING TO HAPPEN.
IT'S SIMPLY NOT THE APPROPRIATE ONE.
AIRLINES ARE A PERFECT EXAMPLE.
THIS IS AN OLIGOPOLY.
THE PRICES ARE NOT WHAT THEY WOULD BE IF THEY WERE PERFECTLY COMPETITIVE.
AND WE HAVE HUGE AMOUNTS OF EVIDENCE THAT SUGGEST THE MERGERS THAT HAVE
TAKEN PLACE WITH THESE AIRLINES HAS ACTUALLY RAISED THE PRICES TO THE
CONSUMER.
IT'S REDUCED THE NUMBER OF FLIGHTS.
AND THAT'S LED TO ECONOMIC INEFFICIENCY.
ARE THESE AIRLINES PROFITABLE NOW?
SORT OF; THEY BLAME THE UNIONS.
THE UNIONS BLAME SOMEBODY ELSE.
AND SOUTHWEST IS MAKING A KILLING SO THAT SUGGESTS THAT WHAT'S HAPPENED WITH
THESE SO CALLED MAJOR AIRLINES IS NOT PERFECT COMPETITION.
IF IT WAS PERFECT COMPETITION, THEY'D BE ACTING LIKE SOUTHWEST.
THEY'D HAVE HAPPY WELL PAID EMPLOYEES.
THEY WOULD HIT THEIR OWN TIME AND THEIR CUSTOMERS WOULD LIKE IT.
INSTEAD WHAT WE HAVE IS A FEW MAJORS WHO KEEP MERGING AND KEEP BEING
INEFFICIENT.
AND THAT TELLS YOU RIGHT THERE, THAT WHOLE INDUSTRY IS NOT PERFECTLY
COMPETITIVE.
THE FEEDER TO THEM IS AIRPLANES; THERE'S REALLY ONLY TWO COMPANIES, BOEING
AND AIRBUS; THERE'S A FEW SMALLER ONES C-R-J AND EMBRAER COMING IN, BUT
THAT'S AN OLIGOPOLY THERE AS WELL.
THESE ARE NOT PERFECTLY COMPETITIVE MARKETS.
WE NEED TO START DESIGNING POLICY THAT ADDRESSES THE FACT THAT THESE AREN'T
PERFECTLY COMPETITIVE MARKETS; THEY'RE IMPERFECTLY COMPETITIVE
MARKETS, THEREFORE OUR POLICIES SHOULD DEAL WITH REALITY, NOT SOME SORT OF
IDEAL.
ROB: LET'S TALK ABOUT TAXES IF WE CAN.
COULD HIGHER TAXES ON OUR NATION'S HIGHEST EARNERS, COULD IT SLOW DOWN OUR
ECONOMY?
WILNER: IT MIGHT, BUT PROBABLY NOT VERY MUCH.
SOME OF THE ARGUMENTS THAT PEOPLE USE IS BASICALLY WHAT'S CALLED THE LAFFER
CURVE, IS THAT IF YOU RAISE THE TAX RATES ON THE VERY RICH, THEN THEY WILL
DO ONE OF TWO THINGS.
ONE, THEY WILL WORK LESS, AND TWO, THEY WILL INVEST LESS IN THEIR BUSINESS.
AND WHEN ECONOMISTS THINK OF INVESTMENT, THEY THINK OF REAL INVESTMENT, THIS
IS NOT PLAYING ON THE STOCK MARKET, THIS IS ACTUALLY BUYING NEW PLANT
AND EQUIPMENT, NOT BUYING AN EXISTING ONE.
THAT'S WHAT MAKES AN ECONOMY GROW REAL INVESTMENT, NEW PLANT AND
EQUIPMENT.
THAT'S WHAT WE NEED.
WELL IF YOU RAISE THEIR TAX RATES, MOST OF THE NON TRUST BABY TYPES DON'T
WORK ANY LESS, IF YOU LOWER THEM THEY WON'T WORK ANY MORE.
QUITE SIMPLY THEY LOVE WORKING.
THEY WORK 80 HOURS A WEEK PRETTY MUCH REGARDLESS OF A CHANGE IN A COUPLE OF
THOUSAND, 20 THOUSAND, 100 THOUSAND DOLLARS A YEAR FOR THESE PEOPLE.
THEY'RE GOING TO KEEP WORKING THAT WAY BECAUSE THAT'S THE TYPE OF PEOPLE
THEY ARE.
A FEW MIGHT BACK OFF, BUT NOT MUCH.
IN TERMS OF INVESTMENT, WELL QUITE FRANKLY THEY'RE JUST NOT DOING A HECK OF A
LOT OF IT RIGHT NOW ANYWAY.
YOU CAN SEE ALL THAT MONEY SITTING ON THE SIDELINES WATCHING.
WELL IT'S NOT DOING ANYTHING.
IT IS A SCARY PROPOSITION FROM AN ECONOMIST, BECAUSE ALL THAT MONEY, ABOUT ONE
POINT SIX TRILLION DOLLARS WORTH OF IT IS SITTING IN BANKS WAITING TO FLOOD THE
ECONOMY.
SO HOPEFULLY WE'VE GOT A DAM BUILT UP AND WE WON'T HAVE A SPIKE OF INFLATION
AS A RESULT OF THE SUDDEN INCREASE IN INVESTMENT IN THE FUTURE.
ROB: IN THE DEBATE OVER THE TAXES, ARE WE ACTUALLY MISSING THE BOAT WHEN WE
DON'T TALK ABOUT WHAT WE'RE DOING WITH THOSE TAXES?
WILNER: OH ABSOLUTELY, THE WHOLE IDEA OF ANY BUSINESS IN ANY GOVERNMENT WHEN IT
COMES TO THE FINANCE IS TO LOOK AT BOTH SIDES OF THE EQUATION.
THE SPENDING, WELL, WHAT ARE WE GOING TO BUY THE COST OF IT IS, WHAT DO WE
HAVE TO PAY TO GET IT?
AND WHAT YOU WANT TO DO IN BUSINESS AND HOPEFULLY IN GOVERNMENT, BUT NO
GUARANTEE, IS TO BE THOUGHTFUL IN WHAT YOU'RE DOING SO YOU HAVE A NET
POSITIVE.
THAT'S WHY THIS FISCAL CLIFF'S BOTHER PEOPLE IS THAT THEY RECOGNIZE A TEN
PERCENT ACROSS THE BOARD CUT TO EVERYTHING IS PROBABLY NOT THE BEST
SOLUTION.
SOME PLACES MAYBE YOU CAN CUT 20 PERCENT, OTHERS YOU DON'T EVEN WANT TO CUT.
AND YOU WANT TO BALANCE THAT.
THEN YOU WANT TO BALANCE THAT AGAINST THE COSTS.
OKAY HOW ARE WE GOING TO RAISE SOME MONEY TO HELP OFFSET THAT?
WHAT'S THE MOST EFFICIENT WAY TO DO IT, RECOGNIZING THAT IF WE CUT
EXPENDITURES AND WE CUT TAXES, THEN THINGS ARE GOING TO CHANGE.
WHAT'S GOING TO GIVE US THE BEST RESULT?
WHAT COMBINATION OF THEM IS GOING TO GIVE THE BEST RESULT?
AND WHAT DEFINES THE BEST RESULT IS PART OF WHAT THE ARGUMENT IS ABOUT.
WHERE ARE WE TRYING TO GO AS A COUNTRY?
WHAT ARE WE TRYING TO ACHIEVE?
THERE ISN'T UNIFORM AGREEMENT ON THAT ROB: THANK YOU DR WILLNER.
WILLNER: THANK YOU.