After
retiring from politics, George McGovern bought a hotel in Connecticut. It went
bankrupt. McGovern then wrote an article in the New York Times headlined "A Politician’s
Dream is a Businessman’s Nightmare".
In the article McGovern acknowledged that he had never grasped how
hard it was to run a business until he did it himself. He wrote that he wished
"that during the days when I was in public office, I had had this
firsthand experience about the difficulties business people face every day. The
knowledge would have made me a better US senator and a more understanding
presidential contender." He goes on to explain
how needless regulations, Federal, State, and local rules--many that he says he
supported--created impossible conditions for doing business. In the current
debate between an ever expanding federal government and a government that is limited,
this is a compelling letter. McGovern was a huge proponent of bigger
government.
A Politician's Dream
Is a Businessman's Nightmare
(BY GEORGE MCGOVERN)
`Wisdom too often never comes, and so one ought not to reject it
merely because it comes late.'--Justice Felix Frankfurter.
It's been 11 years since I left the U.S. Senate, after serving
24 years in high public office. After leaving a career in politics, I devoted
much of my time to public lectures that took me into every state in the union
and much of Europe, Asia, the Middle East and Latin America.
In 1988, I invested most of the earnings from this lecture
circuit acquiring the leasehold on Connecticut's Stratford Inn. Hotels, inns
and restaurants have always held a special fascination for me. The Stratford
Inn promised the realization of a longtime dream to own a combination hotel,
restaurant and public conference facility--complete with an experienced manager
and staff.
In retrospect, I wish I had known more about the hazards and
difficulties of such a business, especially during a recession of the kind that
hit New England just as I was acquiring the inn's 43-year leasehold. I also
wish that during the years I was in public office, I had had this firsthand
experience about the difficulties business people face every day. That
knowledge would have made me a better U.S. senator and a more understanding
presidential contender.
Today we are much closer to a general acknowledgment that
government must encourage business to expand and grow. Bill Clinton, Paul
Tsongas, Bob Kerrey and others have, I believe, changed the debate of our
party. We intuitively know that to create job opportunities we need
entrepreneurs who will risk their capital against an expected payoff. Too
often, however, public policy does not consider whether we are choking off
those opportunities.
My own business perspective has been limited to that small hotel
and restaurant in Stratford, Conn., with an especially difficult lease and a
severe recession. But my business associates and I also lived with federal,
state and local rules that were all passed with the objective of helping
employees, protecting the environment, raising tax dollars for schools, protecting
our customers from fire hazards, etc. While I never doubted the worthiness of
any of these goals, the concept that most often eludes legislators is: `Can we
make consumers pay the higher prices for the increased operating costs that
accompany public regulation and government reporting requirements with reams of
red tape.' It is a simple concern that is nonetheless often ignored by
legislators.
For example, the papers today are filled with stories about
businesses dropping health coverage for employees. We provided a substantial
package for our staff at the Stratford Inn. However, were we operating today,
those costs would exceed $150,000 a year for health care on top of salaries and
other benefits. There would have been no reasonably way for us to absorb or
pass on these costs.
Some of the escalation in the cost of health care is attributed
to patients suing doctors. While one cannot assess the merit of all these
claims, I've also witnessed firsthand the explosion in blame-shifting and
scapegoating for every negative experience in life.
Today, despite bankruptcy, we are still dealing with litigation
from individuals who fell in or near our restaurant. Despite these injuries,
not every misstep is the fault of someone else. Not every such incident should
be viewed as a lawsuit instead of an unfortunate accident. And while the
business owner may prevail in the end, the endless exposure to frivolous claims
and high legal fees is frightening.
Our Connecticut hotel, along with many others, went bankrupt for
a variety of reasons, the general economy in the Northeast being a significant
cause. But that reason masks the variety of other challenges we faced that
drive operating costs and financing charges beyond what a small business can
handle.
It is clear that some businesses have products that can be
priced at almost any level. The price of raw materials (e.g., steel and glass)
and life-saving drugs and medical care are not easily substituted by consumers.
It is only competition or antitrust that tempers price increases. Consumers may
delay purchases, but they have little choice when faced with higher prices.
In services, however, consumers do have a choice when faced with
higher prices. You may have to stay in a hotel while on vacation, but you can
stay fewer days. You can eat in restaurants fewer times per month, or forgo a
number of services from car washes to shoeshines. Every such decision
eventually results in job losses for someone. And often these are the people
without the skills to help themselves--the people I've spent a lifetime trying
to help.
In short, `one-size-fits-all' rules for business ignore the
reality of the market place. And setting thresholds for regulatory guidelines
at artificial levels--e.g., 50 employees or more, $500,000 in sales--takes no
account of other realities, such as profit margins, labor intensive vs. capital
intensive businesses, and local market economics.
The problem we face as legislators is: Where do we set the bar
so that it is not too high to clear? I don't have the answer. I do know that we
need to start raising these questions more often.