Weaning Off!

Tax the rich! It’s a constant refrain we hear, that yet somehow never seems to get done. Why not? Don’t they have to follow the law of the land? Can’t we just make a law and have the rich follow it? Sure, we can. Make all the laws you want. The rich will always be able to afford savvy tax attorneys and finance strategists to find the loopholes (because there are always loopholes, because often the congress passing those laws is made up of the same rich) to get them out of paying taxes. 

But for the last few months this has taken a back burner, in a sense. The latest talk around the nation’s water cooler is about programs (especially Big Research) threatened by government cuts. Every day headlines scream about this or that program that’s losing funding. You’d think we were a bunch of teenagers who were suddenly told to get a job and start paying rent.

I do understand the fear. And I do sympathize with the angst of having to find new sources of funding, or risk shutting down. But what will happen, really, if DC draws up its purse strings like Sean Connery’s grandma? Will research grind to a halt? Won’t it? Where’s the money going to come from? Business won’t fund research, that’s why the government had to step in in the first place… right?

I believe that was the case, back when I was young. But now…?

Let’s look at the real impact, in today’s world: Any good business person knows a growing economy is good for business. And how does an economy grow? One very big way is by growing the population. This is actually the easiest, since it doesn’t involve coming up with new inventions, or making current offerings more efficient in their production and distribution.

So how do you grow a population? By increasing the birth rate, or decreasing the mortality rate (or both). Hold that thought for a moment.

When I was a kid, businesses wouldn’t fund research, at least not to the scale we’re conducting it now. Why would they? The population was growing. There was no incentive to put money into research. That’s expensive and risky and businesses hate expenses and risk—just look at what the tariff kerfuffle is doing to the S&P. After World War 2 there were always more people being born (or entering the country) than dying (or leaving) so businesses could just tap the newcomers to grow their markets. Easy peasy. They didn’t even have to put up new billboards.

But things are different now. Birth rates are declining enough to alarm the economists, especially in developed countries that have a taste for sophisticated (read: ‘expensive’) goods. It takes 2.11 births per female to maintain a population, and in the US we’re at 1.6. China is at 1.3. Right now there are about 1.35 billion Chinese, but in two or three generations that could be seven hundred million. That’s down by half. HALF. And China is supposed to be our new darling virgin market.

Why this is happening is interesting in and of itself: as women globally gain more rights, obtain better education and get access to better healthcare, they find they have other options in life besides just breeding. Instead of settling down as a teen and having twelve kids like my great-grandparents they’re starting much later and having very few children, if any. I don’t know about you, but I don’t see this trend reversing anytime soon.

What does this mean in an economic sense? It’s simple: fewer people equals fewer customers which equals less revenue. You don’t need an MBA to do that math. So the option we are left with to grow the population, is to decrease mortality. We need to get folks to hang around longer, and with a quality of life that’s going to enable them to keep making money, keep buying nice things, and keep taking nice vacations. This means we need to improve medical care. And at the heart of that is research.

For the last many years the biggest supporter of research was the government. But they’ve paid for this with taxpayer money, which the rich haven’t had to pay into, because of those great tax attorneys that can get them out of it. (Face it, given the chance we would do the same. Know how I know? Because last year H&R Block  and TurboTax together made $19.91 billion. We hate paying our taxes.)

So these large enterprises have been benefitting from taxpayer-funded research basically for free. Therefore, if the government cuts funding and they still want to find new ways to make people live longer and healthier lives so they can spend more years working and buying products, they will have to step up and fund the research themselves. Doing this won’t really be taxing the rich, but we’d be shifting a burden from the common taxpayer to those who rightfully should support it as they are deriving the most direct benefit. It’s basically the same thing. But here’s the kicker: by doing it this way the rich still aren’t paying their taxes so they think in the end they’re still winning which eases the blow and encourages them to step up.

But they won’t fund certain things, right??? They’ll only fund the things they want.

This is true… but what they want is changing. Before your aneurysm explodes let’s take a look at the other factors at play, that weren’t, until very recently:

First, underrepresented ownership. It used to be all the bigshot CEOs were old white guys. They’re still the majority, but the gap is starting to close and more women and minorities are getting into the game. From 2014 to 2019 minority-owned businesses increased by 35%, vs. 4.5% for non-minority firms over the same period. Out of 33.2 million businesses in the US, 8 million, nearly a quarter, are minority-owned. Receipts are only about 1/14th of the total US economy, but the good ol’ boy network has been feeling the crunch. On a not-entirely-related tangent, two centuries ago Britain ruled Pakistan… and now the Mayor of London is a British Pakistani. Tables are turning. Yes, like a medieval grist mill powered by a water wheel, but they are turning. And momentum is building (those millstones can be pretty massive).

Second, increased social awareness. Businesses are starting to realize there are bigger things to worry about than just making money—a lot of people (from customers to talent to investors) prefer to deal with outfits that have a lick of common decency to them. Public opinion is much more focused on favoring businesses that help, more so than ever before. There is significant PR value in supporting what otherwise might be a less lucrative project and that means more customers, fewer scandals and more revenue. How do I know this? Take a look at the green bandwagon. Granted not everyone on it is legit, but with social media (another factor that wasn’t a player 20 years ago) it’s getting easier and easier to call people out on their BS and make sure they’re not just talking the talk, but walking the walk.

We’ve already seen organizations stepping up to save the work that’s on the chopping block. There are businesses taking the weight (maybe reluctantly, but no one likes getting extra work added to their shoulders that they weren’t expecting). There are even (gasp! Oh my MAGA!) foreign countries pitching in.

And let’s not forget the private charities that are jumping up as well. You know what the nice thing is about this? We can choose to support these guys directly. We get to pick which ones get our money to fund the research we feel is necessary. Not like paying your taxes, where some wonk in DC is deciding where your money is going. We already know he doesn’t agree with your values.

So… it is going to be rough? Yes. Is it going to be painful? Also yes. Transitions always suck because we have to abandon the safe havens we had built for ourselves and strike out into uncharted territory, and that’s terrifying. But it won’t be the end of the world. It’s going to be okay, but it’s also going to be different. And maybe it will be better.