{"id":843,"date":"2008-10-25T14:55:14","date_gmt":"2008-10-25T18:55:14","guid":{"rendered":"http:\/\/www.jasetaro.com\/blog\/?p=843"},"modified":"2008-12-29T19:12:39","modified_gmt":"2008-12-30T00:12:39","slug":"fred-smith-washington-is-the-problem","status":"publish","type":"post","link":"https:\/\/www.jasetaro.com\/blog\/2008\/10\/25\/fred-smith-washington-is-the-problem\/","title":{"rendered":"Fred Smith: Washington Is the Problem"},"content":{"rendered":"

There’s a great interview with FedEX CEO Fred Smith in today’s Wall Street Journal. The interview covers a lot of ground, the economy, taxes, free trade and even John McCain… It’s well worth reading.<\/p>\n

Fred Smith is in an agitated state. He’s just returned from a Washington Redskins game — played in FedEx field in Washington — and the team has been upset by the St. Louis Rams. “It was just awful,” he grouses. “My son’s one of the coaches, and he was ready to jump off the ledge of the stadium.”<\/p>\n

There are few better people to ask about our current economic precipice than Mr. Smith — or, as some people call him, “Fred Ex.” His company has $38 billion in sales, employs four football stadiums full of workers, owns 300 jet airplanes, and tens of thousands of trucks and vehicles. FedEx moves an incomprehensible seven million packages each day to every corner of the globe. And the good news is that Fred is optimistic — sort of.<\/p>\n

“Oh, the country is going to get through this and the financial markets will stabilize,” he assures me, but only after we go through a period of “trauma and readjustment.”<\/p>\n

I ask him just what he means by “trauma.” He attributes the financial crisis to “the intersection of four long-term developments.” Reckless mortgage lending policies; high energy prices; mark-to-market accounting rules; and national policies that favor what he calls “the financial sector over the industrial sector.”<\/p>\n

“Rather than in our business where you have to have a dollar of equity for, 10 cents or 15 cents of debt,” he explains, “it’s exactly the opposite in the financial sector where you have one dollar of equity for 10, 25, 50 times risk.” “Things became so flipped upside down,” he explains, that “the assets at these banks became the liabilities and the liabilities became the assets. These people were making these fantastic returns — at places like Fannie Mae and Freddie Mac — but in reality they weren’t adding a lot of value. I have said time and again that there is a fundamental tendency in good times in the financial sector to over-leverage. Our national policies actively encouraged all this debt.”<\/p>\n

How so? “The United States has a completely uncompetitive tax structure in general and it has a particularly onerous tax structure for firms that are asset-intensive. If you run an industrial company like FedEx, which employs 290,000 folks, most of whom are blue-collar people, the way we have to run this business is to equip those workers with billions of dollars of assets that allow them to pick up and deliver millions of things around the world.”<\/p>\n

His theory is that the tax bias against capital explains why so much top U.S. talent got whisked off to become investment bankers. “Not too many young people coming out of school are studying to be production managers at General Motors.” He says that most of FedEx’s first line managers come not from the top flight universities, but out of community colleges and the military. “The top talent has wanted to go to Wall Street.”<\/p>\n

He has come to hold the get-rich-quick Wall Street financiers in more than a little disdain. He views the heroes of the U.S. economy as the companies that actually produce real goods and services. He sees the Wall Street collapse as an inevitable byproduct of investment bankers building multitrillion dollar debt pyramid structures.<\/p>\n

So how do we fix this problem and retool our industrial sector in a pro-competitive fashion? “We’ve got to reduce the taxes on equity. Let companies expense their capital purchases.”<\/p>\n

He uses an example from FedEx. “Look, our capital budget as we went into this year was about $3 billion. We went out to Boeing in July for our board meeting to see the new triple seven, [the Boeing 777] which we have bought. If we had a lower corporate tax rate with the ability to expense capital expenditures, guess what? We’d buy more triple sevens. We absolutely have to cut the corporate tax. Our current tax rate is about 38%. Even Germany has a 25% rate.” Read the rest…<\/a><\/p><\/blockquote>\n

Smith hits the nail on the head reducing the corporate taxe rate will increase capital investiment and create jobs. John McCain has a compelling argument on taxes but he’s not making it… Sure he mentions tax cuts but he doesn’t make the argument and I can’t for the life of me understand why.<\/p>\n","protected":false},"excerpt":{"rendered":"

There’s a great interview with FedEX CEO Fred Smith in today’s Wall Street Journal. The interview covers a lot of ground, the economy, taxes, free trade and even John McCain… It’s well worth reading. Fred Smith is in an agitated state. He’s just returned from a Washington Redskins game — played in FedEx field in […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26,7],"tags":[1363,256,257,40,1365],"class_list":{"0":"post-843","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-economy","7":"category-politics","8":"tag-economy","9":"tag-fred-smith","10":"tag-free-trade","11":"tag-john-mccain","12":"tag-taxes","13":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pfpI7-dB","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":725,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/10\/08\/100-economists-warn-that-barck-obamas-tax-proposals-could-throw-the-us-economy-into-recession\/","url_meta":{"origin":843,"position":0},"title":"100 Economists Warn That Barack Obama’s Tax Proposals Could Throw the US Economy into Recession","author":"Jeff","date":"October 8, 2008","format":false,"excerpt":"I've been debating whether to post this all day... Yes, it's from the McCain campaign but ultimately I think it would be foolish to dismiss the opinion of a group of experienced economists out of hand. Economists Statement On Barack Obama's Risky Economic Proposals 100 ECONOMISTS WARN THAT WITH CURRENT\u2026","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1068,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/12\/02\/common-sense-fred-thompson-on-the-economy\/","url_meta":{"origin":843,"position":1},"title":"Common Sense: Fred Thompson on the Economy","author":"Jeff","date":"December 2, 2008","format":false,"excerpt":"Fred Thompson delivers dose of common sense on the economy and our government's \"spend yourself to prosperity plan\".","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2448,"url":"https:\/\/www.jasetaro.com\/blog\/2009\/06\/27\/house-passes-cap-and-tax-bill-219-212\/","url_meta":{"origin":843,"position":2},"title":"House Passes Cap and Tax Bill 219-212","author":"Jeff","date":"June 27, 2009","format":false,"excerpt":"The House of Representatives passed President Barack Obama's massive Cap and Trade energy tax bill by a vote 219-212 yesterday... 211 Democrats and eight Republicans voted for the bill. WASHINGTON -- Landmark legislation to curb U.S. greenhouse-gas emissions was approved by the House of Representatives in a close vote late\u2026","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":225,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/08\/29\/mccain-vp-watch-whos-it-going-to-be\/","url_meta":{"origin":843,"position":3},"title":"McCain VP Watch… Who’s It Going To Be?","author":"Jeff","date":"August 29, 2008","format":false,"excerpt":"My top picks in no particular order: Fred Thompson Michael Steele Sarah Palin Carly Fiorina Michelle Malkin has more... Update: Foxnews says it's Palin. Whew... I'm not sure what to say. Personally, I would have preferred Michael Steele or Fred Thompson... That said Palin's a great choice, grass roots conservatives\u2026","rel":"","context":"In "Politics"","block_context":{"text":"Politics","link":"https:\/\/www.jasetaro.com\/blog\/category\/politics\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":332,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/09\/09\/fannie-freddie\/","url_meta":{"origin":843,"position":4},"title":"Fannie & Freddie…","author":"Jeff","date":"September 9, 2008","format":false,"excerpt":"I'm not in a writing mood today but I hate to leave this page silent so I thought I'd share a few must reads on the Fannie Mae & Freddie Mac bailout with you. First is the Op Ed by John McCain in today's Wall Street Journal: We'll Protect Taxpayers\u2026","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/www.jasetaro.com\/blog\/category\/economy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":837,"url":"https:\/\/www.jasetaro.com\/blog\/2008\/10\/24\/krauthammer-thompson\/","url_meta":{"origin":843,"position":5},"title":"Krauthammer & Thompson","author":"Jeff","date":"October 24, 2008","format":false,"excerpt":"Charles Krauthammer like me isn't the happiest of conservatives in this race but like me he understands what's at stake. I'm no fan of John McCain but given the choice between him and Barack Obama it's a no brainer... Barack Obama is not your fathers democrat he is a socialist.\u2026","rel":"","context":"In "Politics"","block_context":{"text":"Politics","link":"https:\/\/www.jasetaro.com\/blog\/category\/politics\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/posts\/843","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/comments?post=843"}],"version-history":[{"count":0,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/posts\/843\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/media?parent=843"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/categories?post=843"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jasetaro.com\/blog\/wp-json\/wp\/v2\/tags?post=843"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}