The Macro View

3 Government Actions that Will Actually Stimulate Economic Growth

By Andrew N. Smith, CAIA

1. Redefine Charity to include venture and R&D investments, in companies whose proprietors earn, or are from a family that earns, less than the median household income.
Most charities & foundations are nothing more than tax free investment schemes as is, used by the wealthy to avoid costly income and capital gains tax. Typically these foundations and charities pay the founder and every member of their family a substantial income, and constitutionally call for multigenerational wealth preservation as the primary goal. An Investor who takes the risk of investing in start-up and early stage companies that are not well funded by the proprietor, typically buy into a story value and have some level of emotional tie, believing the business will truly change the way the society currently does something. Average returns for venture investors are negative from the period 2000 - 2013 according to the Preqin Quarterly Index (-2.5%), and investors assume tremendous

amount of risk for investing in venture and research and development projects. Those that succeed generate a tremendous financial return; however they also generate tremendous social benefits, such as careers. Yes many people want a job, but a job at an entrepreneurial firm that succeeds typically launches long-term successful careers for all of the early and mid-stage employees of the company. Other benefits include the Wealth that is created both through the jobs, as well as phenomenal incentive packages that typically include ownership in the company. New innovative products and services that raise the standard of living for the majority of society benefit lower and middle class families the most. Further, when companies succeed they always give back to their country and local communities either directly through charitable funds for causes such as education, chronic illnesses, poverty, and many more. When a company succeeds and the investors exit, they are taxed then for their capital gains, this allows the government to invest

in infrastructure. Typically the founders start community foundations, host community events and much more. Finally, the hot issue of the wage gap between the wealthy and the poor would be solved by this simple solution. Encouraging lower and middle class entrepreneurs to organize and prepare to pursue their dreams knowing that there are wealthy individuals looking to make investments in lower and middle class entrepreneurs for the tax break. If Washington was truly concerned with growing the economy they would provide venture and research and development investors with the same tax breaks provided to those who donate to charity, for all industries, not just those that politicians feel are important.

2. Provide companies a tax-efficient way to repatriate their offshore cash, as long as they reinvested into growth projects.
With many US corporations sitting on hundreds of billions of dollars

The Macro View

3 Government Actions that Will Actually Stimulate Economic Growth
By Andrew N. Smith, CAIA
offshore, waiting for a more taxfriendly US government, why give them a reason to wait. Washington could, in 1 day, pass a bipartisan bill to allow companies sitting on cash offshore, to bring that cash into the US and reinvest it in projects that grow the economy, create jobs, and increase the efficiency of the market. Unfortunately, without getting what they believe is their fair share the politicians in Washington would rather leave that cash sitting offshore than ever see it reinvested into the US Economy. It is time that Washington wake up and realize that the corporations sitting on the cash could invest it more efficiently than Washington ever will, and allow them to do what they do best, grow their companies and the economy alongside it. This capital would come to the US and go to work immediately training and putting people to work, innovating new products and services, solving the nations largest problems, and adding to the global power and competitiveness of the US economy.

3. Streamline Liquid Natural Gas (LNG) Export Terminals, Build Keystone XL Pipeline, and lift the ban on exporting US oil.
Our obsession with being pro-trade for some goods and anti-trade for others has to end. If companies or governments from another country are willing to pay a better price for our goods, that money comes back to the US and is reinvested here, creating high-paying jobs, and often entire new industries in port cities across the US. Vice versa is true as well, if we are able to buy goods of equal quality for a lower price from companies (or governments in some countries) abroad, that is money saved here in the US, allowing the consumer more money to spend on other goods. The argument against trade is typically related to lost jobs and outsourcing overseas, the truth is, there are still experts needed at home, and while there may be some lost jobs, those who adjust will likely earn a higher wage before as their position becomes a specialty domestically. Efficiency and a lack of waste is

always good for the economy, and disproportionately benefits the lower and middle class. If Washington was truly concerned with growing the economy, they would pass guidance or laws if needed to streamline the permitting process for LNG and end the ban on exporting US oil. Here in the US, thanks to technological innovation in the fossil fuel extraction methods, and the natural gas combustion methods, we are seeing a minirenaissance in the oil and gas industry, however outdated, misguided laws and regulations are preventing the economy, and further the American people from reaping the benefits. Everything from the exploration of land for oil or gas, to the transportation process, refining the raw commodity into the various derivatives to the sale process is ripe with opportunities for the federal government to put enormous barricades in your way using the various federal, state and local energy bureaucracies. Everybody in the US has publicly witnessed the convoluted process for getting anything done in the energy

The Macro View

3 Government Actions that Will Actually Stimulate Economic Growth
By Andrew N. Smith, CAIA
business, if you have watched the mess with the Keystone XL Pipeline. Growing the US economy, tens of thousands of high paying jobs in areas where they are needed desperately, put on hold for ideology, even when all of the data from every legitimate report says there are virtually no safety concerns. Reform the energy bureaucracy and streamline the permitting process for energy companies, particularly for LNG export terminals, eliminate the ban on exporting oil, and approve the Keystone XL Pipeline, and watch the economy, and particularly the middle and lower class, prosper. Anyone who believes that the imperial bureaucracy state we find ourselves in is a good thing, is either a sinister person that doesnt want you to succeed, or misinformed, uneducated and ignorant to the facts of history. Free Market Capitalism provides monetary incentives to innovate, solve problems, fix inefficiencies, etc. in turn creates the highest standard of living for the poorest individuals in society. In the US, thanks to the economic incentives provided to innovate and solve problems, poor people are often obese, an epidemic they rd call it here in the US. In 3 world countries people starve, daily. There is not even enough food. The US capitalist system has created such an abundance of goods that poor people in America often have a higher standard of living than rd wealthy in 3 world countries, when you include measures such as safety, medical care, and property laws. Until those in Washington wake up and realize that we all, including them, benefit from a free, open economy that encourages innovation and trade, we will likely continue to see a slow growth economy heavily reliant on an inflationary monetary policy to generate upside in the economy, a dangerous game played many times by many nations, often leading to their demise.

Authors Opinion
While all my points may seem like no-brainer, common-sense solutions, the ivory tower intellectual elitists that politicians, often elitist lawyers, surround themselves with know that the more convoluted and confusing their solution the more power they have over the people, allowing them to use their position to grant favors and privileges to their cronies while placing their political opponents at a regulatory disadvantage.