Con: The Estate Tax Promotes Shared Prosperity

by Bill Creighton, United for a Fair Economy

The federal estate tax is our country's most progressive tax and our only tax on wealth. Since 1916, it has helped reduce the concentration of wealth that weakens our democracy.

The estate tax has been cut five times since 2001, with the result that few people, including farmers and small business owners, pay it now. Repealing it would increase the federal deficit by $1.3 trillion dollars over 10 years, according to the Center on Budget & Policy Priorities, and leave the struggling middle class even worse off.

The anti-estate tax campaign has been funded by a few super-wealthy families who own giant companies like Mars Candy, Gallo Wines, and Wal-Mart (WMT). Their lobbyists pushed for the nonsensical law that eliminates the estate tax in 2010, then brings it back in 2011. Cutting the estate tax again would give a huge tax break to the same corporate executives and Wall Street speculators who wrecked the economy.

A married couple can pass on $7 million tax-free--a pretty good head start for the offspring. With that exemption, few small businesses would ever feel the tax at all. Many small business owners and farmers, including the National Farmers Union, support the estate tax. They know a robust estate tax will fund vital public services that rebuild the middle class and create more broadly shared prosperity.

The wealthy share a responsibility to America to pay taxes, and many wealthy people like me support the estate tax because we realize there can be no private wealth without public resources. It's time for Congress to do what's right and establish a strong estate tax starting in 2010.

Con: A False Economy

by Bob Stutman, the Stutman Group

Gee, how about collecting taxes from legalized marijuana as a way of helping to deal with the deficit? Sounds great. Doesn't work.

There are about 170 million users of alcohol in the U.S. and 16 million users of marijuana. This 10-to-1 ratio is because alcohol is legal and marijuana is not. If we legalize marijuana, everyone (even anti-prohibitionists) agrees we will have far more users. Ooooh, just think of all that revenue. Except we already have a working model for a legal intoxicant we collect taxes for. Let's see how well that works:

The latest studies show that the U.S. collects about $8 billion yearly in taxes from alcohol. The problem is, the total cost to the U.S. in 2008 due to alcohol-related problems was $185 billion, and the government pays about 38% of that cost (about $72 billion), all due to consequences of alcohol consumption, according to the National Institute on Alcohol Abuse & Alcholism. For every dollar the government collects in alcohol taxes, it expends about $9 (for such things as Medicare and Medicaid treatment for alcohol-related health troubles, long-term rehabilitation treatment, unemployment costs, and Welfare). Does that seem like a model for emulation?

The legalization of alcohol is grandfathered in, and it is unlikely that major changes will be made. The last thing we should do is replicate this irrational business model. True, even though studies show both drugs are similar, many believe alcohol is worse. But even if we only see half the damages with marijuana, we cannot ignore the math: $4.50 for every $1 we collect is not a good business model.

Con: An Emphasis on Marriage Misses the Point

by Maria Cancian, Russell Sage Foundation and University of Wisconsin

Marriage promotion policies will not solve the poverty problem. While financial incentives or relationship-skills programs may help some couples, there is no evidence that government policies can substantially increase marriage rates. And many single mothers would be poor even if they married the fathers of their children, because both the mother and father have limited economic prospects.

A misplaced focus on marriage promotion threatens to distract us from making the most of some important good news: More single mothers are working and keeping their families out of poverty, and we have many proven policies to support their efforts. The Earned Income Tax Credit and child care and health-care subsidies help make work pay a reasonable return. Unemployment Insurance reforms, paid sick leave, and family leave would make it possible for more mothers to reasonably support their families. Policies that both require and enable nonresident fathers to do their part are also key.

If nothing else had changed, declines in marriage and other changes in family structure would have led to about a two percentage-point increase in poverty between 1969 and 2006, a substantial increase. However, increases in mothers’ work and earnings over the same period reduced poverty, reversing about half the effect of family changes.

If the concern is the number of children living in poverty, the public should know that many will end up living with only one parent no matter what government might do to encourage marriage. Public policies must accept this reality, and focus on proven approaches to improve single-parent families’ economic security by making work pay a reasonable return, encouraging nonresident fathers to do their part, and helping single mothers manage the challenges of being both primary parents and workers.

Con: Enough with the Hype and Guilt

Why is everyone so quick to believe this slight evidence about "third-hand smoke," and what makes smoking any worse than parents' other bad behavior?

"A lot of smokers are happy about this third-hand smoke report, because it shows what ridiculous lengths antismoking people will go to," says Dave Hitt, a smoker who created the opinion site the Hittman Chronicle (www.davehitt.com). "The study was nothing more than a phone survey on what people believe is harmful. The stuff used to kill the Russian spy, the polonium, was a huge dose--you'd have to have a baby licking the floor clean every day for 267 billion years to equal it."

George Koodray sees the third-hand smoke report as just another excuse for selective finger-pointing. "I find it somewhat hard to believe that your body could discern 'third-hand smoke' from all the bad substances you find in carpet and clothing and the air," says Koodray, who serves as New Jersey state coordinator of the Smokers Club. "Back when secondhand smoke was all the rage, I'd see people jogging for their health right next to eight lanes of highway traffic. I think the effect of secondhand smoke pales in comparison to a lot of the things we're exposed to."

Furthermore, smoking in general doesn't qualify as an immediate fatal threat. It takes years or even an entire lifetime to acquire cancer or emphysema from smoking, while one bad fall on an all-terrain vehicle or motorcycle can mean serious injury or death. Why not make it illegal for parents to introduce these sports to their kids? And how about outlawing parental consumption of alcohol while we're at it? Unlike alcohol, cigarettes have never been linked to domestic violence.

It's about time to stop persecuting smokers, period. In October 2008 a state trooper arrested a Long Island woman for the misdemeanor charge of tax evasion after she bought five cartons of cigarettes at the Cayuga Indian Reservation. The cigarettes were for herself; she purchased them at the reservation to save money and bought them in volume to save on gas.

Smokers make an easy target for finger pointing, and parents are always quick to cast stones at other parents, hoping their own foibles will be overlooked amid the rock-throwing.

Con: The Online Experience Is Improving

by Charles Nicholls, SeeWhy

During the dot-com bubble, the Internet was seen as something that was going to change everything, with the traditionalist dinosaurs becoming extinct overnight and the new kids dominating the new economy.

Some years on, much of the hype has turned into dust. But the online revolution is still firmly, if quietly, under way. Since the dot-com crash of 2000, online retail shopping has grown by 210%, at an average annual rate of 21%, and accounted for a $130 billion market in 2008, according to comScore (SCOR). The trend is set to continue: In the fourth quarter of 2008 online sales grew at 41 of the 50 largest U.S. chains, while their in-store sales declined.

The reasons for this inexorable growth can be summed up in one word: convenience.

For a whole category of purchases, it is simply easier and faster to buy online, and prices are often lower. Comparing prices, finding discounts and promotions, having your loyalty rewarded, and not having to travel to get the exact product you want are saving money in the downturn. But above all we love the convenience.

Also, sometimes we don't want to have a salesperson hassling us. We want to do independent research, read reviews, and stay in control of the process.

This shows, too, in our intolerance for anything but good service online. Painful online checkout processes are met by abandoned shopping carts. And we like the freedom to switch at the click of a mouse. It keeps the retailers honest—that's why they offer their best prices online.

Con: You're Trusting Who with My Data?!

by James Staten, Forrester Research

While cloud computing platforms such as Amazon (AMZN) EC2 and Microsoft Windows (MSFT) Azure provide a new and arguably better economic model for hosting modern business applications, the market has a significant amount of maturing to do. In its current incarnation, it's a disconnect for government and the data with which it is entrusted. The biggest disconnect is the fact that these new services are shared, multi-tenant architectures. The clouds place workloads from different organizations on the same physical systems and storage volumes. While every effort is taken to ensure there's no commingling and one customer cannot hack into another, few of us would be comfortable with the idea of a hacker setting up shop on the same system as that of the FDIC, Treasury, or Homeland Security.

Cloud vendors can claims all they want about how secure their architectures are, but there are two real threats here. First, stopping hackers is an endless battle. During 2008, Symantec (SYMC) observed more than 31 million attacks from 808,000 unique domains, many from mainstream Web sites. And a common target: government agencies.

Second are attacks that happen from within the data center. Physical equipment can be stolen, administrator credentials breached, or someone could simply walk into the data center and leave with government data. For example, when hard drives fail, clouds are supposed to fully destroy any data on the drives before disposal—or shred the drives. What's to prevent an authorized employee or contractor from diverting this equipment into the hands of a hacker?

A better alternative for sensitive government data today is to build cloud architectures within the secure confines of a government data center. Let the public clouds climb the maturity curve a bit more.

Con: Incomes and Credit Still Spell Bad News

by Linda Yueh, University of Oxford

Although heartened by growth in the second quarter in Germany, Japan, and France (and the past year in China) as well as signs that the U.S. and Britain could be growing this quarter, it is too early to call an end to the "Great Recession" while there is still a credit crunch and deleveraging of the balance sheets of firms and households. Assuming the worst is behind us, global economic growth is not expected this year and is forecast to amount to around 3% in 2010, which would be considered a recession because the world needs to grow by more than that in order for income per head to increase due to population growth.

This is put best by Paul Krugman: We are in economic purgatory even if output stops falling. With a 5% to 8% output gap (between actual and potential output) in major economies, we could be in for several years of being poorer until the level of income recovers. The IMF expects that there won't be a full recovery for another six years, so that means 2015.

And this is the best-case scenario. That is, no "double dip" recession (which can readily happen as industrial output is now falling in the euro zone, and unemployment is rising everywhere) or even worse, the advent of a "recession within a recession," which was the case in the Great Depression following the last systemic banking crisis.

Con: The Act Needs Revision First

by Vernon F. Betkey Jr., Governors Highway Safety Assn. (GHSA)

GHSA does not support the current version of the Alert Drivers Act of 2009--legislation that would require states to adopt laws prohibiting texting while driving or lose 25% of highway funds--as we feel states should be encouraged to pass texting bans with the carrot of financial incentives, not the stick of a sanction. In fact, this is a terrible time to consider reducing highway funding given the economic necessity of these dollars in the states. Additionally, 18 states have already passed these bans, with the majority of them having acted in 2009. We expect at least 30 more states will act in the next two years--all without federal intervention.

There are a number of other things the federal government can do to address texting while driving:

• Fund research to develop effective methods for enforcing texting and cell-phone bans. While a number of states currently have banned texting, enforcing such bans has proven difficult. Additional study of the effectiveness of state bans is needed.

• Sponsor research to determine the nature and scope of the distracted driving problem. It is very difficult to ascertain the entirety of the problem given that the public is unlikely to readily admit guilt in a crash investigation. Special studies are needed using subpoenaed phone records to determine the involvement of phoning or texting in a crash.

• Fund a media campaign to alert the public to the dangers of distracted driving. This effort is needed to help develop a culture that will make the practice socially unacceptable, similar to the way drunk driving has come to be perceived by the vast majority of the public.

Con: Workers Need a Morale Boost

by Gregg Lederman, Brand Integrity

Employee engagement will hit historic lows in the coming years and cost employers billions in lost productivity—and cost consumers in the form of a more frustrating I-don't-really-care-about-you customer experience. Employee engagement is directly related to the experience customers desire.

A 2008 Bain Consulting study revealed that 81% of senior leaders believed their organization delivered superior customer service yet only 8% of their customers agreed. The study refers to the problem as a "Customer Service Gap." Whatever the customer service trouble is called, the root cause is leaders, many of whom have never worked the front lines servicing customers.

This "Great Recession" will widen the gap between the few companies that deliver a consistently good experience and the great majority whose employees are more disengaged than ever and deliver poor service. A Quantum Market Research study revealed that between fall 2007 and fall 2008, nearly one-half of companies surveyed had a decrease in employee engagement scores, measured by an employee's willingness to put in extra discretionary effort for the good of the business, speak positively about the business to others, and stay loyal to the job.

Think about the variables that make people most productive at work
1. Relationship with the boss
2. Appreciation for doing a good job
3. Stability and confidence that they receive a fair wage

All of the above are put to the test when leaders are more focused on protecting their jobs, making layoffs, and restrategizing on ways to survive, while spewing out pithy statements such as "employees are our greatest asset."

Should you worry about employee engagement today? Do the math. What if all employees in your company were engaged and willing to give the company 15 minutes of discretionary effort each week? The ROI would astound you and the improved customer experience just might make the difference between surviving the Great Recession and thriving in it.

Con: Just Another Unneeded Infringement

by William F. Shughart II, Independent Institute

Fat cats apparently are not the only Americans who may see their tax bills go up.

To finance President Barack Obama's proposed health-care reform initiative, which may cost as much as $1.5 trillion over 10 years, Washington is considering a tax on sugary soft drinks that supposedly contribute to the modern sin of obesity.

This would not be a first. Federal excise taxes were levied on soft drinks during World War I and briefly at the start of the New Deal. Several states have tried it on their own as well, but soft drink taxes have been abolished in all but two: Arkansas and West Virginia.

Saying soda is "one of the most harmful products in the food supply," as one health activist recently put it, casts the proposed tax as one with a positive effect: nudging consumers toward healthier lifestyles.

But soft drink sales have been declining for the past nine years without such a tax. And obesity rates in the two states that do tax soft drinks are among the nation's highest.

Singling out the consumers of some products to finance a health-care plan the President says will benefit all Americans is fiscal discrimination at its most brazen. The closer the U.S. moves toward a single-payer health system, the more pressure there will be to tax any product that anyone, anywhere, plausibly can argue is detrimental to one's health. Today it may be soda. Tomorrow it could be ethnic food, coffee, bacon and eggs, hot dogs, and red meat.

Con: The Cost Can Make You Sick

by Brian Klepper, Healthcare Performance Inc.

The U.S. is half a decade into its experiment with High Deductible Health Plans (HDHPs) and health savings accounts (HSAs). Promoters promised these structures would be cheaper for employers by making consumers more careful buyers, with more skin in the health-care game. That is, they offload more financial risk onto patients.

So what's happened? HDHPs are on a fast growth path--almost one-quarter of covered families now have them--though their affordability is likely responsible for that. As an employee-benefits survey by Towers-Perrin discovered, though, user satisfaction is low. Patients' costs are high and they generally don't get information for better decisions.

There are other problems. People with chronic diseases, who need regular care, may exhaust their HSA money nearly as fast as they deposit it, never building a surplus. (Many smaller employers don't even offer HSAs in the first place). And a recent study by the non-partisan Kaiser Foundation found that only about 9% of uninsured households can cope with the onerous financial requirements of HDHPs.

HDHPs and HSAs have proven an acceptable solution for the healthy and the financially stable. If patients have access to inexpensive, comprehensive primary care, like on-site clinics, they could be much better solutions. But unless reforms include meaningful system restructuring, they will remain a heavy financial burden on the American people.

Con: Done Right, They Work

by Bob Rogers, Development Dimensions International

Performance reviews are a waste of time only if they are merely an annual event instead of a formal year-long performance management process. The companies that excel in this economy will be those that: 1) create clear accountabilities in their performance management system linked to their key business drivers, 2) communicate effectively and involve their associates in managing their own performance, and 3) focus as much time on developing people as they do evaluating them.

Need proof? Just ask the leaders of Lockheed Martin (LMT), Merck (MRK), GE (GE), P&G (PG), Kellogg (K), and many others that have an effective performance management process. Or read Corporate Culture and Performance (Free Press, 1992) by John Cotter and James Heskett, an 11-year research study highlighting initiatives that contribute to high-performance cultures—and just about every one was linked to a component of an effective performance management program. I don't deny the problems with performance reviews in a lot of companies where the goals seem arbitrary or the manager isn't effective in coaching or providing feedback or conducting the review. It is too much about evaluation and compensation instead of achievements and development.

Now, in tough economic times, employees need honest feedback and a sense that they add value and are part of the future success of the company. Now is not the time to skip these critical discussions. Every senior executive who witnesses the power of an effective performance management process agrees with the CEO who once told me “I'd never manage any other way. I wouldn't know how to drive business results without it.”

Con: GM Has Eaten Its Young

by Robert D. Winsor, Loyola Marymount University

Like homeowners who repeatedly refinanced their houses to extract cash for their overindulgent life styles, GM has "leveraged" its most valuable assets—its once revered marques—by gradually cannibalizing brand equity.

The Hummer, Saab, and Saturn brands have been sold for residual value. Pontiac, like Oldsmobile before it, is being discarded like an empty fish tin, despite strong enthusiasm from many segments. And, in a strategy that's both perfectly consistent with this "vision" and also a sure sign of desperation to buyers, cars bearing the names of its remaining brands are being sold on America's online yard sale--eBay (EBAY).

So, in a breathtakingly elegant new plan, the "leaner" GM claims to be focusing on the "core brands" of Chevrolet, Buick, GMC, and Cadillac. Why this quartet? Well, it's mostly a matter of dumb luck rather than insightful brand conservatorship.

Cadillac got lucky because beginning in 2000, rappers such as Ludacris prominently featured Escalades in music videos, and athletes flaunted them on MTV (VIA) Cribs. Suddenly, Escalades were "in" with the coveted young male demographic. GM executives admitted that this fortuitous turnaround took them by surprise. Unfortunately, celebrities have now moved on to other symbols of automotive status (who'd have guessed?), resulting in an Escalade (and overall Cadillac) decline after a mid-decade peak. But wait, you say, the newest 6,000-pound Escalade is a hybrid! Yes, Cadillac has now moved from Ludacris to ludicrous.

Buick, despite rapid sales declines in the U.S. since 2002, is considered a prestigious brand in China (the last emperor had two). In fact, more Buicks are being sold (and made) in China than in the U.S. Yet European brands are rapidly eclipsing Buick as status symbols in China. What happens when notoriously trendy Chinese consumers drop Buick like last season's fashions? Say hello to the even leaner GM, a.k.a. Chevrolet.

Con: VC Is a Nurturer for Businesses

by Mark Hoffman, Enquisite

As with many things in life, one size certainly doesn't fit all. A company's funding strategy needs to take into account many things, including its stage of development, target market, customer adoption, balance sheet, and cash flow, among others. For startups, especially technology companies focused on innovation, venture capital funding is the way to go.

Venture Capitals make money by investing in companies poised for growth and striving to fill unmet needs with innovative products and solutions. They often start working with an entrepreneur at the business plan stage, nurturing along promising technology or ideas and putting the right management team in place to scale the business. VCs continue to invest in promising companies and manage their risk by making additional funding contingent on specific milestones. This also is highly motivating and provides discipline to the management team.

Private equity firms, by contrast, make money through financial engineering and generally participate at a much more mature stage of a company's development cycle. Investment is often accompanied by leverage to increase returns and provide strict discipline for the management team.

In times of economic trouble, lending slows, thus contracting private equity firms' ability to invest; good VCs invest throughout the cycles. Further, companies with excessive leverage can't fund growth as much because they tend to hoard cash to service debt—this doesn't serve the needs of a growth-oriented entrepreneur.

Many tremendous success stories started with VC funding—including Google (GOOG), Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN)—and many started in down economic cycles. Sybase and CommerceOne, two successful companies I had the privilege to lead, both started and thrived with VC funding. No private equity firm would consider investing in such risky propositions. Smart investment from VC partners during those early, critical stages makes it all possible.

Con: Matrix Impedes Progress

by Guido Quelle, Mandat GmbH

If you want to slow down your enterprise, all you have to do is introduce a matrix organization.

Leadership is the key driver to the success of a company. To ensure that leadership is more effective, you need organizational clarity, i.e., short decision paths, a smaller number of committees, and above all, an unequivocal allocation of responsibilities.

Matrix organizations feature exactly the opposite characteristics, which results in a high degree of complexity, unclear decision paths, unproductive agreement processes, and most worrisome, nontransparent responsibilities. Conflicts of competence are pre-programmed, and it is not clear who is responsible for successes and failures.

Matrix organizations blur responsibilities. Executives need to make decisions and accept responsibility. Matrix organizations, however, often suffer from fear of making mistakes in the face of the growing size of an organization.

In the past, companies such as ABB (ABB) and Unilever (UN) have shown that matrix organizations can do more bad than good. It was the matrix that nearly ruined ABB, and Unilever has been oscillating between different organizational designs since 1996.

An organization must serve the customer first. Having a matrix, you are not doing the customer a favor because decision processes are slowed. What kind of customer wants to talk to a sales representative who has no authority to decide on major aspects of the business relationship?

The last thing a company needs is an organization mainly driven by occupation with itself. Nearly all supposed advantages of a matrix organization can also be achieved by an intelligent line organization.