The Forgotten American Entrepreneur
President Trump is right to shine the spotlight on the flight of American manufacturing jobs. This has been a major theme in his numerous recent meetings with Fortune 500 CEOs. The reality, however, is that reversing this job flight and creating U.S. job growth must be led by the American entrepreneur, not the CEOs of huge companies.
Historically and statistically, over two-thirds of job growth has come from small- to medium-sized businesses run by American entrepreneurs — often funded with their personal or family funds. The president should remember that the Fortune 500 CEOs holding press conferences on the White House lawn have been among the biggest destroyers of American jobs. They are beholden to a “global” vision and to global shareholders. They are not on the front lines taking risks with their own money. Instead, Trump should listen to us entrepreneurs; our hearts are committed to making American manufacturing great again.
What do world-class job magnets such as China, Vietnam and Singapore have in common? And how do we reverse their magnetic pull? The solutions are not very complex and can be implemented quickly with a focused effort. There is a road map to creating sustainable growth for the American entrepreneur, following the playbook of those countries that have attracted American jobs.
1. State involvement. States that participate in creating a job-growth environment and meet certain guidelines listed below will qualify for “Super State Job” status and will be listed in a federal directory with a summary of their job-creation initiatives. This directory could be accessible by job creators looking to locate or grow their manufacturing facilities in America. Achieving listed status would motivate states to create a job-friendly environment, and would give businesses easy access to the best locations for their expansions and start-ups.
2. Taxes. Yes, the corporate tax rate is uncompetitive and must be lowered. But how many entrepreneurs looking to grow their businesses are set up as corporations? Close to none. Most important for entrepreneurs is the tax treatment of LLC, S Corp and other pass through income. Pass through income is taxed at individual rates, which approach 50 percent at the margin. Pass through income must be taxed at the new, lowered corporate rate. Other key policies include having zero capital gains at least for the first five years of a new operation’s life, permanent research and development credits, sales tax exemptions for purchases of new equipment, or the granting of tax credits to offset such investments.
3. Industrial Parks. World-class job magnets have ready-to-go industrial parks with shells that are 60 days from occupancy. They are funded through a mixture of public and private monies. “Build it and they will come” is a manufacturing mantra in other parts of the world. Ready-to-go space is the single biggest need for small to medium manufacturing. A pilot program in which the federal government incentivizes states to develop warehouse parks through public-private partnership (PPP) could be the opening shot of a manufacturing revolution.
4. Single Window Clearance. Entrepreneurs are an impatient species. Every successful world-class industrial park has “single window” clearance for all permits, licenses and infrastructure needs. Some offer build-out financing; all have strict execution deadlines. Our states must incorporate these concepts into their industrial parks and other job initiatives sponsored by the federal government. This is routine for the world’s job magnets.
5. The Right Education. The K–12 education system needs to be fixed. Our high school graduates are woefully unsuited to manufacturing and lack basic workplace skills. World-class job magnets, however, have 1–2 year post high school technical college and workplace skills training programs. This is what American manufacturing needs, too. World-class programs have active PPP funding. The private sector needs good employees; they will step up to help improve our education system if asked.
6. Regulations. The current regulatory environment is a swamp that entrepreneurs cannot easily navigate. This significantly increases business risk. Our competitor nations capitalize on the disorder. However, there are no more than 20 key regulations that, if eliminated or modified, could even the playing field for the entrepreneur. The federal government must stop regulating and turn this duty back to the states. Regulating from D.C. makes the entire country uncompetitive.
7. Unfair Trade. Issues of fair trade are far worse for small businesses than even President Trump claims. For almost two years now, my company has tried to stop the Chinese from selling artificial turf with weights that are 20 percent below advertised weights. We have had no luck. There needs to be an “unfair trade” window at the Department of Commerce for small and medium businesses. Simplifying the process would allow these business to get a trade hearing more easily and help level the playing field against the foreign competition.
8. Tax Reform. The misuse of our legal system has become a deal killer for American entrepreneurs. Frivolous litigation drives up the cost of general liability and product liability insurance. Let us support one simple change: for proven frivolous litigation, the loser pays the legal fees of the defendant.
The United States’ manufacturing base has fled, causing good jobs to disappear by the millions. The so-called “service economy” is a mythical creature whose existence is promoted by economic pundits. American entrepreneurs, running small to medium businesses — often with their own money — are the key to reversing this flight. A concerted, action oriented agenda will do more to solve the problem than policy prescriptions from corporate CEOs, who are often more concerned about not upsetting their global owners than with improving the situation of the American worker.
Rom Reddy is the Managing Partner and CEO of Sprinturf, a national artificial turf company invested in American Manufacturing and American jobs.