Don't get me wrong. I'm all in favor of having a healthy environment. But there are always tradeoffs in the decisions we make, as every business owner knows. The desire to achieve one important objective, like having cleaner air, has to be balanced against other important objectives, like keeping the economy strong. That requires planning. At SRC, we make sure in advance that we have enough labor and equipment to reach our goals each year. Otherwise we could run into capacity constraints that would trip us up. Clearly, Congress did not do the same when it passed the legislation clamping down on oil refinery emissions. If you really want to boost oil production, you'll have to force Congress to go back and do it now.
The Raw Materials Shortage and Global Warming
As you know, we face a serious raw materials shortage that's likely to get worse as the economies of countries like India and China continue to grow. In the past year alone, the price of steel has more than tripled, from 15c a pound in October 2003 to 46c a pound in October 2004. Meanwhile, you've taken a lot of flak for refusing to sign the Kyoto Protocol without proposing any alternative plan to reduce emissions of carbon dioxide and other heat-trapping greenhouse gases. You've said you were concerned that such efforts would cost America jobs.
Well, I've got a way for you to kill two birds with one stone: Embrace remanufacturing. Tell business owners they need to come up with ways to recycle whatever they make. The effect will be to reduce pollution, relieve the raw materials shortage, and create jobs all at the same time. The company I work for is living proof of it. As a business, remanufacturing is labor-intensive and environmentally friendly, and it cuts down on our nation's need for raw materials by reusing the materials we have.
I should warn you that other developed nations are ahead of us in this regard. Japanese car manufacturers, for example, already figure out where every tire, rim, and crankshaft will go after their cars die. Last year, the European Union began requiring all automakers to recycle the cars they sell in Europe. Caterpillar is putting increased emphasis on its remanufacturing business because it sees it as a growth industry. The company melts down and reuses the plastic, steel, aluminum, and copper in its old worn-out equipment. Last year, it began offering that service to other companies. Why can't every business owner follow Caterpillar's lead? Considering that the U.S. is unable to meet its domestic demand for steel in any given year, I'd say that this is an urgent matter. Let's push the voluntary, patriotic remanufacturing of everything from cars to computers. Let's challenge U.S. companies to take the initiative and come up with the world's best recycling programs. I have no doubt we can do it.
The Accounting Mess
You've said that you want to streamline tax-reporting requirements for America's small businesses, and I believe you. In one speech, you estimated that 2.6 million small-business owners would save 61 million hours as a result of tax simplification and the resulting reduction in paperwork. Regulations, you noted, put an enormous strain on the small-business sector. Those of us in the sector couldn't agree more.
Unfortunately, our reporting requirements have become more onerous, not less, in the past four years, thanks mainly to passage of the Sarbanes-Oxley Act in 2002. Although it was intended to regulate reporting in publicly held companies, it has had a huge impact on private companies like ours because of what accounting firms have done with it. Sarbanes-Oxley has created a whole new business for them. To comply with the act's rules, they've adopted new audit standards that dramatically increase the price of an audit. Our accounting firm told us recently that our auditing bill would almost double, from $50,000 in 2003 to $90,000 in 2004, because the firm would need 250 more hours to audit our books this year than it needed last year. That shocked our employees, who told me to find another accountant. But I suspect another firm will charge just as much. The new regulations, and the new penalties, have increased demand for accounting services and created an accountant shortage, driving up prices across the board. All of us who did nothing wrong are paying through the nose for the sins of Enron and WorldCom.
It's not too late to reverse some of these regulations, and I hope you'll press Congress to do so. They obviously need some teaching as well. You should remind them that, when they pass laws and makes rules, they need to think more about the effect the changes will have on small entrepreneurial companies. That's where the future lies. We're not going to see any more Microsofts or Wal-Marts being built from the ground up. Big companies aren't where it's at. Young people are instead starting their own small businesses in the communities where they live. Local organizations like the chambers of commerce are helping these upstarts, but the federal government has done little or nothing for them, as far as I can tell. If that's going to change, you'll have to lead the way.
But enough. By now you're undoubtedly asking, "Who are these guys, and what do they really know about the U.S. economy and global economics?" Well, we're just an employee-owned company that loves hearing you talk about creating an ownership society. We realize that at the end of the day, quarter, year, or even the end of a presidential term, change begins at home. The revolution starts with us on the factory floors and in the service bays. It is our responsibility to make sure we are capable of competing and contributing to a better community and a better quality of life here and throughout the world.
We're just asking for a little help in holding down our overhead. I know that you feel strongly about tax issues, and I agree that they're important, but I haven't talked about them here because it's the escalation of invisible costs that's killing us these days. That's where we really need your assistance. We're like the little train that kept saying, "I think I can! I think I can! I think I can!" We think we can too, if you help us make sure our overhead doesn't weigh us down too much.
Oh, and by the way, please don't feel that you have to answer this letter in person. Not that we wouldn't like to see you again. You're always welcome here in Springfield.
Respectfully, Jack Stack
