It was well over a year ago that my brother, a retired Spokane small-business owner, began telling me, in support of the Donald Trump phenomenon, “Mike, you don’t understand, the silent majority is roaring.” My response was always, “I hear the roar, but it’s a minority made up of those unsettled by the murky mix of terrorism and immigration policies and angered by their lack of influence, or even contact, with the establishment.”
Then came last week’s Brexit vote, where the English version of folks I described turned out to be the majority, leaving establishment leaders of both major parties in this country to ponder whether what’s at stake is a desire to throw out the system rather than merely overturn particular politicians or policies. And what that means come November.
Or for the future. Thus perhaps an appropriate time to ponder questions as Independence Day approaches
Now a week following the blow to the U.K. comes a decision by the U.S. Supreme Court almost certain to fuel anger at the established order, the court making it harder to prosecute public officials for corruption by basically saying it’s ok for “the system” to include paying elected officials to influence their decisions.
At issue was the case of former Virginia governor Bob McDonnell, who was convicted by a lower court of using his office to help a businessman who had provided McDonnell and his wife with luxury products, loans and vacations worth more than $175,000 when Mr. McDonnell was governor.
Chief Justice John G. Roberts Jr., writing for the court, narrowed the definition of what sort of conduct can serve as the basis of a corruption prosecution. He wrote that “routine political courtesies like arranging meetings or urging underlings to consider a matter generally, even when the people seeking those favors give the public officials gifts or money,” do not represent corruption.
The alternative to the new limits, Roberts wrote, would be to criminalize routine political behavior. “Conscientious public officials arrange meetings for constituents, contact other officials on their behalf and include them in events all the time,” he wrote. All the time! Isn’t that the problem?
By now readers of this column have likely concluded that the usual focus on people, companies and issues that relate the Northwest is being upstaged to Harp about some personal thoughts on an issue that impacts us in this region, but that transcends us.
Fodder for thought following Brexit, for those who care to think, is offered by The Los Angeles Times‘ Vincent Bevins: “Since the 1980s the elites in rich countries have overplayed their hand, taking all the gains for themselves and just covering their ears when anyone else talks, and now they are watching in horror as voters revolt.”
It has to be hoped that the revolt is aimed at reconstructing rather than destructing the Democratic process. But that may not be certain.
A quote from author and MSNBC commentator Chris Hayes is getting attention on social media in the wake of the Brexit vote.
“The mechanism that western citizens are expected to use to express and rectify dissatisfaction – elections – has largely ceased to serve any correction function. When Democracy is preserved only in form, structured to change little to nothing about power distribution, people naturally seek alternatives for the redress of their grievances, particularly when they suffer.”
Coincident with the post-Brexit analysis have come a couple of group emails in which I was included, both suggesting that the idea of change by the ballot isn’t being totally abandoned. Both related to a focus on the 28th amendment to the U.S. constitution and both widely popular but not yet widely promoted.
The first relates to ongoing discussion about an amendment to overturn Citizens United, the U.S. Supreme Court decision that held political expenditures by corporations could not be limited.
Polls show the efforts for a 28th Amendment to overturn Citizens United is supported by more than 75 percent of Republicans, Democrats, and Independents and sixteen states have enacted 28th Amendment resolutions.
The other idea gathering support as a proposed 28th amendment: "Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States."
It strikes me that this idea could generate some positive action from voters by, between now and the November General Election, insisting every member of Congress on the ballot, as well as every state legislator, commit to voting in favor of the constitutional change next year. Or bite the bullet as voters and vote for the opponent, regardless of ideological compatability.
There are examples of the manner in which a fed-up public can bring a positive focus to their anger and bring about beneficial change within the system.
One such example was actually the result of an idea of someone from inside “the system,” then-Washington congressman Brian Baird, who during the last three of his six terms as the representative from the state’s third district sought to gather support in Congress for what he called the “Stock Act.”
Baird sought to prevent members of Congress from doing stock transactions in areas they regulate, in essence, prohibiting their investing in a manner that those in the real world call Insider Trading.
I wrote about it in a November, 2011, column after a program on CBS’ “60 Minutes” brought national attention to Baird’s idea with a program titled “Honest graft.”
For ordinary citizens, reaction to Baird's proposal would be a laughable "well, of course." But in a place whose mantra is "the rules we make for you don't apply to us," seeking to force action by the lawmakers on one small, self-imposed ethical constraint could become a rallying point for a fed-up public.
The thrust of the CBS segment was that lawmakers often made stock purchases and trades in the very fields they regulate. While ordinary citizens could be jailed for engaging in the kind of investment shenanigans that those in Congress involve themselves in, there's wasn’t even an ethical concern among lawmakers.
Reporter Steve Croft questioned then-House Speaker John Boehner and former Speaker Nancy Pelosi at their respective news conferences. And the ineptitude with which both Boehner and Pelosi tried to answer Croft's questions about whether their investment practices were at least conflicts of interest, the thought that had to occur was "Who elects these people?" The answer, unfortunately, is people like us elect them. And both have continued to be elected. Shame on us. And so maybe a revolt wouldn’t be that bad.
As a result of the outcry following the program and You Tube pieces on the congressional leaders’ confused responses, the Stock Act was passed overwhelmingly in the spring of 2012 with what observers described as “vulnerable congressmen” at the forefront of supporters. So now Members of Congress and employees of Congress are prohibited from using private information derived from their official positions for personal benefit, and for other purposes.
Baird had already retired by then, having decided not to seek a seventh term, thus exemplifying one of the concerns about the future of the Democracy as currently operating: The Nancy Pelosis remain in office and the Brian Bairds decide to leave.
Just as the races for state and national offices in the November General Election may demonstrate that anger can trump reason, voters in Oregon will be faced with deciding a ballot measure that will test whether anger at big business over things like soaring executive compensation exceeds logic.
At issue is IP28 (Initiative Petition), which targets Oregon's biggest corporations — roughly 1,000 by the state's estimates, or about 4 percent of businesses. Those with $25 million in Oregon sales would pay a minimum $30,000 tax, plus 2.5 percent on anything above that threshold.
In essence, it would be a tax on gross receipts, like Washington’s business & occupation tax, generating an estimated $6 billion in new revenue. Except in Oregon it would be in addition to the tax on personal and corporate income and would boost corporate tax collections more than five-fold.
As my friend Don Brunell put it in his latest column, which alerted me to the fact the measure had been cleared for the November ballot by collecting the required 130,000 signatures, “Washington’s next economic development plan may be written by Oregon voters next November.”
His point was that “Oregon voters need to remember that Washington and California have heavy concentrations of large businesses and stand to benefit from passage of IP28 and that while all parts of Washington would gain, the corridor between Vancouver and Longview could be the biggest winner.”
Brunell, retired president of Association of Washington Business, in his more than a quarter century at the helm of the state’s largest business association saw all the off-the-wall ideas for taxing business. But it’s as a longtime observer that he shakes his head at this proposal, noting the tax scheme “would transform Oregon from one of the nation’s lowest business-tax-burden states to one of the nation’s highest.”
Organizations that purchase products and services from those major businesses would undoubtedly see their costs increase and thus would need to increase their price for items resold to Oregon consumers. In response to this, businesses purchasing goods in Oregon may opt to leave the state or relocate some or all of their facilities to avoid the increased cost of doing business in that state.
IP28 is sponsored by Better Oregon, a labor union coalition led by the Oregon Education Association, and targets “big business”. Proponents claim it would tap a tiny portion of Oregon businesses while bringing a huge revenue boost to cash-strapped public education, health care and senior services.
The non-partisan Legislative Revenue Office, in evaluating similar proposals to IP28, has forecast job losses should a gross receipt tax pass.
Former Washington Gov. Mike Lowry, who despite being perhaps Washington’s most liberal governor carried an understanding of the importance of nurturing big businesses as the creators of better-paying jobs, offered his classic belly laugh when I called him for his thoughts on the initiative.
“We always looked to Oregon for progressive ideas but this would represent the total opposite,” Lowry said. “The gross-receipts tax is about the worst tax there is.”
Amusingly, Lowry understood how to use the tax as a whip. In his first year in office he sought to have the Democrat-controlled legislature extend Washington’s sales tax to service businesses like law and accounting firms, which used their lobbying clout to beat back the effort.
But they paid a price by having the lawmakers impose the highest b&o tax rate on services, a payback in the form of a 2.5 percent rate, which though now reduced to 1.5 percent remains the state’s highest rate, reserved for service businesses and professional gambling.
Most gross receipts tax rates around the country are relatively low when compared with the Oregon proposal’s 2.5 percent rate. In Washington, it ranges from 0.138 percent to the aforementioned 1.5 percent. Thus if the measure were to pass, the tax burden of operating in Oregon would increase dramatically when compared with other states.
Proponents argue that “IP28 would modestly raise the effective tax rate of large corporations and use the added revenue to fund Oregon's crippled public school system, provide services to seniors, and extend health care coverage to 18,000-plus children.”
Problem is if it comes to be marketed to voters as “the big-business tax,” the result could be that anger overrides common sense for voters, among whom would be many that would face loss of their jobs if the analysis of business reaction proves true.
The ballot proposal comes as raising taxes on wealthy individuals and large corporations is at the forefront of a national debate — especially among Democratic progressives, including much of Oregon's electorate— about how to close the gap of economic disparities between rich and poor in the post-Great Recession era.
And if there is a doubt that anger at big business underlies the measure, and leaves concern about the logic voters will bring when they mark their ballots, supporters point to the current difference between growth in corporate profits vs. growth in family income in Oregon. They say it’s time big business takes on its fair share of the tax burden to help pay for education and social services.
Business people in Southwest Washington are not only looking to gain business if the measure is approved, they are having some amusement thinking about it.
When I talked with longtime Vancouver businessman Michael Worthy about it, he chuckled and offered that the two-state effort to agree on financing a new I-5 bridge across the Columbia could be solved by letting firms that would want to move operations out of Oregon might want to pay for improved transportation they’d need.
And when I asked Brunell why he thinks intelligent voters would go for a tax that would likely impact them, and perhaps their jobs, he replied: “I suspect, knowing Oregon a little better by living down here in Vancouver, there is a reason for the bumper sticker: ‘Keep Portland Weird.’”
Almost four years overdue, federal crowdfunding rules went into effect last week to fulfill a 2012 Congressional mandate to "democratize" the process by which entrepreneurs and small businesses can raise start-up capital from "the crowd" of investors of average means.
Some cynics might view as "Democracy in action" the fact that it took almost four years for the Securities and Exchange Commission to come up with the rules that Congress originally gave it 180 days to enact so the legislation known as the Jumpstarts Our Business Startups (JOBS) Act could go into effect.
But the upside of the years of delay was that almost half of the states, including Washington, were spurred to seize the opportunity to come up with intrastate versions of the crowdfunding concept. As a result entrepreneurs in most states have the choice of federal or state regulations to use in seeking start-up capital from average investors, a choice that would likely not have come to pass without the SEC's foot dragging.
And in fact, the act's regulatory debut of 17 federal filings the first day was characterized as "pretty impressive" by Faith Anderson, the respected Registration and General Counsel Program Manager in the Securities Division of the state Department of Financial Institutions (DFI).
How the individual states have fared in the responses to their crowdfunding legislation has depended on a number of factors. Oregon, for example, because it has a non-profit dedicated to helping entrepreneurs through the process, has had good reviews.
Montana, on the other hand, has an unusual constraint that requires that half of a startups' business must be done in Montana.
"Makes it a pretty small prospective market," quipped Liz Marchi, the Kalispell-based leader of three Montana angel funds.
Before its crowdfunding legislation was approved last year, Montana was already rated the top state in the nation for start-up businesses on the Kauffman Index, the annual state ranking of startups by the Kauffman Foundation, largest entrepreneurship-focused non-profit in the country.
Marchi, who is finding enough entrepreneurs already emerging in the Big Sky Country, is not a big fan of crowdfunding for entrepreneurs, saying "I plan to stay away until all the unintended consequences have been worked out."
Meanwhile, Oregon's non-profit called Hatch Oregon, which travels around the state vetting startups it works with, is getting positive attention from startups there for what amounts to an incubator that seeks to guide entrepreneurs past the financial rocks and shoals of the crowdfunding game.
Hatch, whose platform hosts 10 of the 11 offerings filed in Oregon so far, offers no guarantee to the companies it works with. The incubator also produced a video called "Let's Be Frank" that tries to outline the risks in plain language.
Washington has no such entity to inexpensively help entrepreneurs along the road toward fundraising. But regulators have sought to put in place a program that helps guide startups to produce a document that ensures they are in compliance with securities laws, that investors are protected and entrepreneurs themselves are steered away from possible future liabilities.
The intent is an entrepreneur could be helped through the process without having to necessarily incur the expense of an attorney.
But the fact not all startups want to be so carefully guided is evident by the fact that one of two companies filing under the crowdfunding law got considerable media attention by lamenting that its efforts to get the paperwork done and get to fundraising was being hung up in red tape.
The sense is that what the filing firm viewed as "red tape" was insistence by state regulators that all the requirements be met, and one of the challenges for startup hopefuls is that not all attorneys understand the law and its regulatory requirements at this point.
One nagging aspect of the SEC rules in place that govern the crowdfunding laws of all the states is something known as Rule 147, referred to as the "intrastate offering" exemption, which has strict requirements that intrastate offerings be contained within the boundaries of a single state. In other words, an entrepreneur filing under the Washington State law not only can't take money from the resident of another state, but the resident of another state isn't even to see the offering.
So far, the SEC has been firm in the view that if someone in another state sees the information on the offering, it is no longer intrastate, which would basically nullify the fund-raising effort.
Anderson, chair of the Small Business/Limited Offerings Project Group of the National Securities Administrators Association, produced a report some months ago for the securities departments of all 50 states that was critical of Rule 147 and its impact on entrepreneurs.
The SEC has apparently gotten enough push back from the states on that constraint that, as Michelle Webster, financial legal examiner for DFI, explained, the SEC has several proposals, which are currently merely proposals it will consider that would amend the JOBS Act rules. One that would address that almost universal Rule 147 irritant would allow intrastate visibility for an offering as long as only residents of the filing company's state were permitted to invest.
But the fact is there is no timeline for the SEC to actually act on proposed amendments to rule 147. And some suggest the agency might never act since they do not have a Congressional push to do so.
Joe Wallin, a Seattle attorney with Carney Badley Spellman, who basically wrote the state legislation that created the crowdfunding law in this state, has been critical of the fact that those assisting entrepreneurs to raise funds cannot legally charge a fee representing a percentage of dollars raised unless licensed as a broker-dealer.
That's a federal restriction and Wallin is convinced an easing of that rule would find a lot of individuals and groups stepping forward to provide fee-based assistance based on a percentage of the dollars raised rather high hourly fees.
Washington' Securities Administrator, Bill Beatty, suggested that from now forward, with both federal and state options open to would-be crowdfunders, to be determined is: "will the federal model, which requires the use of licensed portals, or the typical state model, which allows issuers to conduct the offering, be more attractive?"
The sense has been that the cost of using a licensed portal could be a substantial slice of the $1 million that a crowdfunding startup would be permitted to raise the first year. But Beatty said he has gotten the sense of more reasonable pricing from some portal operators.
"If the costs prove to be reasonable, I think federal crowdfunding has a much better chance of gaining traction and being a useful tool for some small businesses," he said.
|Rep. Jeff Morris|
But despite that expectation, in the 15 months since DFI enacted the rules and the law went into effect, only two businesses have filed to raise money in this state via crowdfunding. In fact, according to DFI Director Scott Jarvis, only 100 companies around the country have used intrastate crowdfunding to raise capital.
Thus there seems to be optimism that what Congress launched with the right intent, but watched while the SEC dithered for almost four years, may still produce an opportunity for entrepreneurs to create jobs rather than being jobbed by thoughtless regulations.
The Seattle banker who became one of the world's most influential women in banking, the man who set Alaska Airlines on the road to national leadership in its industry and Seattle's clown king of fish and chips have been selected as 2016 laureates of the Puget Sound Business Hall of Fame.
It also served as a reminder of earlier days for those in other industries who once used teletype machines for transmission of information, including one who recalled the occasional flawed keystrokes that occurred when creation of the art followed holiday parties.
Since each year brings new names to the list of those receiving Flynn's Harp, there are some who haven't previously seen the art. For that reason, and because fond memories are served by repetition, here is a the annual sharing of this Christmas art.
|Steve Paul, 'Elf Bernie'|
|Alaska pilot Eric Hrivnak|
If Global Entrepreneurship Week, the annual worldwide celebration of innovators and job creators, had been a competition among nations, states and regions, Washington State could have laid claim to being the hands-down winner. And that would be appropriate recognition for the man who has guided much of this state's effort to advance entrepreneurship, particularly in rural areas and particularly with young people, for 25 years.
Maury Forman, senior manager for the Washington State Department of Commerce, is proud of the fact that in this state, GEW 2015 was actually Global Entrepreneurship Month and extended to every corner of the state with activities in all 39 counties. Four years ago, when Forman plugged the state into GEW activities, three counties participated.Forman says "we are changing the way communities look at economic development." That's an outgrowth of his effort, over much of his quarter century overseeing key economic-development sectors, to develop a culture of entrepreneurism in rural areas.
Global Entrepreneurship week was founded in 2008 by the Kauffman Foundation, the Kansas City-based 501c3 that is the nation's pre-eminent entrepreneur-focused organization, to create an annual celebration of innovators and job creators who launch the start-ups that drive economic growth.
Forman, who joined what was then the Department of Trade and Economic Development in 1991 in a career transition from healthcare at the age of 40, says "No other state can claim that every part of the state had at least one event that celebrated entrepreneurship."
"One of the exciting aspects of this year's celebration of entrepreneurship was the number of high school programs being held throughout the state," Forman said. "In many cases, college isn't the natural next step it was once for high school students so these programs expose them to the idea of starting their own business once they graduate. Or if they do go on to college, they can focus their education on skills that will allow them to start a business in the years to come."
Forman says he has kept his primary focus on rural economies because "they need the assistance much more than urban communities," as well as because he has become convinced that the strategies for growth of many rural areas that has been focused on recruiting companies from out of state is outdated.
"That has to change if rural communities are to survive," Forman said. "Communities have to be shingle ready and not just shovel ready."
In a recent article in Governing, a national magazine covering state and local government news, Forman wrote about Washington's three-year-old program called Startup Washington that focuses on building local economies "organically" by serving the needs of local startups and entrepreneurs.
Forman is likely among the national leaders in the conviction that programs to enhance local economic development "must nurture the belief that young people who grow up in rural communities can be guided to start businesses in their own community rather than moving to urban centers."
"Just as young people are looking at new ways to enter the work force other than working for someone else, so too are communities looking for ways other than recruitment of businesses from elsewhere to grow their economies," Forman said.
One of the ways he is seeking to do that "is by matching those students that are serious about being entrepreneurs with mentors, especially in rural communities."
Indeed matching students who hope to be entrepreneurs with mentors is becoming the model for successful communities, particularly rural ones, to pursue.
Some communities have long been employing that model, as chronicled in the oft-quoted book written by Jack Schultz, founder and CEO of Agracel, a firm based in Effingham, IL, that specializes in industrial development in small towns.
It was in pondering why some small towns succeed where others fail that Schultz set out on the backroads to rural America to find out as he became the nation's guru of rural economic development and wrote of his travels in Boomtown USA: the 7 ½ keys to Big Success in Small Towns.
I emailed Schultz about entrepreneurism's role in small town success and a possibly emerging role for mentor programs.
"Embracing entrepreneurism in communities has been a key factor that differentiated great communities from also-rans," he emailed back. "Increasingly, we are seeing those great communities taking it a step up by tying their local entrepreneurs up with their young people, educating them on both entrepreneurship and also the great things happening in the private sector of their towns."
Schultz' successes in believing in small-town entrepreneurs and small-business lending is partly responsible for the fact the Effingham-based bank he helped found and now chairs the board, has grown eight fold to $2.9 billion in assets and gone public.
"At Midland States Bank, we have very much focused on small business lending and it has been a major factor in our growth over the last several years," Schultz said.
In an unusual and innovative commitment to the dozens of communities it serves, the bank has funded a not-for-profit institute to expand an entrepreneurship class that was started in Effingham eight years ago and has now expanded to 27 other towns.
Forman seemed intrigued by the details Schultz provided: The class meets each day during the school year from 7:30 to 9 am; meets in local businesses; is totally funded by local businesses with a maximum contribution of $1,000 per business or individual. Each class has a business and each student must also start a business.
Meanwhile, Forman approaches his 25th anniversary with the department on January 1 having collected numerous regional and national awards for his work and successes. Those include last year winning the international Economic Development Leadership Award and recognitionby the Teens in Public Service Foundation with the Unsung Hero Award for his work with at risk kids.
He has authored 14 books related to economic development, and has also designed and developed creative "game show' learning tools, including Economic Development Jeopardy, Economic Development Feud and two board games for the profession.
Forman credits the directors who have guided the department over his time there for allowing him "to be intrapreneurial," meaning behaving like an entrepreneur while working in a large organization, noting "not many government agencies allow the freedom to take risks in an effort to solve a given problem."
The final round of the men's World Squash Championship Sunday offered more than enough competitive drama as Frenchman Gregory Gaultier's long frustration at this event ended with a championship trophy. But the human drama and emotion that involved both Gaultier and his finals opponent, Egyptian Omar Mosaad, was equally compelling.