Richard M. Scrushy, the former chief executive of HealthSouth Corp. (HLS), remains jailed in federal prison, but that hasn't stopped him from offering his thoughts on the state of the economy, Occupy Wall Street protests and the current political environment.
Convicted of bribing former Alabama governor Don Siegelman and sent to prison in 2007, Scrushy occasionally corresponds with FOX Business Network producer Eric Spinato, and recently weighed in on a host of issues. The following is a transcript of his exclusive e-mail to FOX Business:
SPINATO: Do you believe the wealthy should pay more taxes?
SCRUSHY: No, I don't believe the wealthy should pay more taxes. Certain media hounds, talking heads and politicians constantly mislead the American public by telling them, "We need to tax the rich more to solve our problems." I think that maybe they should even pay less. The right tax incentives would have them using more of their money to help this economy grow by investing in businesses that create jobs. Our current tax structure already has in place incentives that encourage investment in private and public companies as well as tax free municipal bonds. Our lawmakers need to continue their support for a system of taxation that rewards long-term investments through reduced taxes for capital gains.
Reducing the capital gain tax even further would result in the wealthy pouring even more money into the start up of new businesses and the expansion of existing businesses thus creating more jobs and building a more robust economy.
Take a look at how wealthy Americans bring down their tax rate. It is done through investing in tax-free bonds and trading equities for long-term capital gains. The combination of both of these brings down their taxable income substantially. Now, both of these are good for our economy as they provide funds for our municipalities to grow and expand as well as replace outdated bridges, roads and highways, buildings and schools for public education. All major cities, counties and states across this country depend on Wall Street to sell tax exempt bonds in order for them to operate and to provide municipal services for their citizens. Moreover, wealthy Americans in this country invest large amounts of their net worth into the stocks of companies traded on all of our stock exchanges. These funds provide the capital necessary for these companies to grow and to hire employees to work and produce their services or products.
We must not forget or leave out the philanthropy. It is the wealthy that pour large sums of money each year into charities of all kinds. More taxes on the rich will certainly reduce the funding of charities.
People with lots of money have to put it somewhere and wealthy Americans don't put their money in a jar and hide it in their backyards. They spend it and invest it which puts it in the economy where we all benefit. Also it's the money that the wealthy leave in the local banks that the banks use to loan to their customers to buy automobiles and homes and many other items.
My point here is obvious: without the wealthy pouring their funds into stocks and bonds the economy would be worse and the markets and our municipalities would suffer. If our tax structure increased the incentives to the wealthy to do more of the same more money would naturally flow into these areas. If we place more taxes on the wealthy these funds will be taken out of the economy and unemployment will rise and the economy shrinks. The wealthy have the money to make these investments. Those without obviously can't do it. The alternative is the
money goes to the government and it is taken out of the economy. We definitely don't want to take anymore money out of the economy as we are suffering enough now.
Remember, as the wealthy spend their money and hire people in their businesses, it is that money that flows to others.
Finally on this point, there is no doubt that there is a way to mathematically calculate the negative impact to business and job growth that increasing taxes on wealthy Americans will have. Therefore, a reasonable conclusion and an accurate one would be that as you reduce taxes on the wealthy and the reverse or opposite will happen. Our only solution is to reduce the taxes on the middle class, wealthy Americans and businesses and then the money will flow into the markets, banks, new businesses as well as expansion of existing businesses. All of this
creating millions of jobs and this happens naturally without government handouts or stimulus packages. The additional revenues and profits generated by these businesses and the taxes on the capital gains created by money flowing into the equity markets will be substantially more than the taxes taken from the wealthy and it will also be continuous source of funds.
All of this is economics 101, but this is never properly articulated in the news or by our political leaders. I wonder if they understand it.
SPINATO: Do you sympathize with the Occupy Wall Street protesters?
SCRUSHY: I do not sympathize with any of these people, except for the fact that they do not understand how "Wall Street" works and why it is so important to America, its citizens and its communities. If they did they would not be there. They need to clear out and go home. It is the greed of "Wall Street" and the big salaries and bonuses that drive the engines that finance all of our cities, counties, states and businesses that employ all of us. Without Wall Street there would be no major companies in America and no jobs. No trains or airlines, telephone or utility companies, no hospitals or national hospital companies, no drug companies or national drug store chains, no malls or shopping centers, no automobile companies, no Federal Express or UPS, no hotel chains or grocery store chains, and I could list every industry in our country.
I must also mention that none of our cities, counties or states could function, either,.as all
bond issues are financed in some way by "Wall Street."
"Wall Street" includes all of the stock exchanges, investment banks, big commercial banks and brokerage firms that make it possible for American companies and municipalities to finance themselves so they can continue to exist. Of course the brokerage firms make it possible for all of us to invest by purchasing their stocks and the bonds.
It is true that leadership on Wall Street is over-the-top greedy. But it is that greed and desire to make money that motivates them to take risk that most Americans would never take. If you take the big salaries and bonuses away then expect the drive and the willingness to take risk to go away as well. If this had been done in the past many of the great companies in America today that employ millions of people wouldn't exist. Wall Street keeps the American dream alive and available to all of those who strive to achieve it. Each and every entrepreneur in America has a chance to build a business and fulfill their dreams because of the investment banking firms and the equity markets and the financing function of the stock exchanges.
Our financial markets are one of the reasons America is a great country and a financial leader in the world. I know this is true because I had the opportunity to personally experience it. I founded a company with only five employees using my personal funds, and later I raised venture capital for more funding and as the company grew we went to "Wall Street" and raised additional funds through a public offering.
Thanks to "Wall Street" we were able to raise all the funds necessary to build the company into a multi- billion dollar company employing more than 50,000 people. This model works.
It is true that the mortgage crisis and the sale of worthless derivatives created a disaster and things got totally out of control. I remember the mortgage companies trying to find bodies to make loans to. Credit forms were falsely completed and people were given credit that should never have qualified. This problem was driven by government backed mortgages and was not totally the creation of "Wall Street." There were lots of greedy individuals involved in causing the crisis. I do not believe we will see this type of problem anytime again in our lifetime. The damage it caused was a wake up call to "Wall Street" and all of its credit committees.
It is true that the management executives of investment banking firms that make billions of dollars by financing American companies will get big bonuses. But, if their companies can make the billions, that means they are doing what we need them to do and that is to finance the growth of American businesses and municipalities. Furthermore, these executives bring billions of dollars into America from around the world and that money is placed into our markets, which helps our economy.
Those jobs on Wall Street where the big bucks are made are available to all of us and our children. The only way to permanently change our depressed economy and high unemployment situation is to naturally grow out of where we are today. This can only be done through the organic process of building and expanding the growth of businesses by creating jobs and producing products or services that make profits that in turn pay taxes into our government.
Our government giving its money away in hopes of a return is not the way. Our government trying to play venture capitalist is not the way. Our government is not set up for this and it shouldn't be. The risk takers that manage venture capital funds put their own money at risk along with their investors and they receive large bonuses if the companies they invest in are successful and they are able to liquidate their position either through the sale of their stock in the company or through the sale of the company.
Government workers don't do this type of work, never have and shouldn't.
Therefore, the answer to growing the economy and producing jobs falls in the areas of taxes and regulations. Create the incentives to bring businesses that left our country back to America so we have those jobs and they pay their taxes here. We must create incentives for the people with money to pour it into building companies that create jobs and pay taxes. All of this will naturally produce a vibrant economy that will keep America the greatest country in the world and a light for the rest of the world.
Moving to a country with more government controls, more regulations and more taxes will result in reduced investments in businesses and both the equity markets and bond markets and it will reduce economic growth. All this means fewer jobs and opportunities for all Americans
SPINATO: Is "Wall Street" to blame for our fiscal woes?
SCRUSHY: No -- not "Wall Street", but a few people that work on "Wall Street" played a part in allowing this horrible derivative crises to happen. There will always be a few bad apples in businesses and government. Unfortunately they allowed this to get too big and many lost their fortunes. We are slowly pulling out of this crisis now and we need, as mentioned before, natural stimulation of our economy which only comes through investment and the building of businesses which creates jobs.
Wall Street is not only absolutely necessary to the continued viability of America but it is one of the attributes that made us the land of opportunity. Wall Street financed the industrial revolution and it has financed the age of technology which we are experiencing right now.
Let me end with this. Those occupying Wall Street are demonstrating their lack of knowledge and understanding of what part "Wall Street" plays in our economy and how it works. It is absolutely necessary and essential to bring this country out of our current economic crisis. I have watched the news and listened to many of the interviews of those occupying "Wall Street". It seems there are people there that would go to any gathering where they could "just protest".
One interview I heard on the radio was a lady walking around topless, and when asked why she was there she said it is her right to go topless if she wanted to and she wants the right to do so.
So what does this have to do with "Wall Street" or the greed of the leaders that run our financial markets and financial firms ? This reminds me of the "love ins" of the '60's and the early '70's. This party should stop and these people should go home. This protesting hurts our image to the world and portrays our economic financing mechanism as broken. This is not the case. It even seems they may be protesting against the American dream and they don't really understand it.
If America is to be a world leader it must be a financial leader first. "Wall Street" is the economic engine that keeps American businesses and our municipalities financed and running. What should we really be doing? "Wall Street" needs to put 100% of its energy, time and focus on financing America's needs.