The Fabulist

Bush’s absurd obsession with small business.

Illustration by Robert Neubecker

President Bush, of course, is not a junior reporter for the New York Times. So maybe it doesn’t matter if he makes up stories and puts them in the newspaper. After Ronald Reagan, it’s almost a presidential tradition.

Bush was in New Mexico on Monday with a new answer to critics who complain that his tax cut proposal favors the rich. In two words: small business. “Most new jobs in America are created by small businesses.” Therefore tax cuts “must focus on the entrepreneur.” And thence to more familiar bromides: It’s not “the government’s money,” it’s “your money”; “our greatest strength” is “our individual citizens”; criticism is “just typical Washington, D.C., political rhetoric, is what it is.”

The myth of small business is one of the more ridiculous bipartisan superstitions that influence government policy. Small businesses, by their nature, come and go. They create more jobs than big businesses and wipe out more jobs, too. Any small-business owner burdened by high taxes is, by definition, more affluent than the typical big-business owner, who is an ordinary working American with an interest in a retirement fund. Small businesses are swell. But special favors for small business make no sense in terms of either fairness or prosperity.

Bush gave his speech Monday at a company in Albuquerque called MCT Industries. “We’re standing in the midst of what we call the American dream,” he said. MCT is privately owned by the family of Ted Martinez, who founded it on a shoestring in 1973 and is now a wealthy VIP who hangs around with politicians. “The Martinez family is living that dream,” Bush said.

Before we even get to the fantasy element, there is a logical problem here, isn’t there? A successful “small” business makes an odd poster child for the proposition that the government is getting in the way of small business success. How did the Martinez family manage to achieve the American dream during a period when high taxes were supposedly thwarting that dream? If MCT Industries is so successful under current arrangements, why does it need a tax cut?

You don’t need overdeveloped smell detectors to suspect that this story may be a bit more complicated. And the most casual stroll through the Internet and media databases enriches the narrative a lot. MCT Industries seems to be a weird collection of unrelated businesses whose only unifying theme is selling to government agencies or needing the approval of politicians. The Martinez family is wealthy because of tax revenues, not despite them.

No surprise, MCT is a member of the Rio Grande Minority Purchasing Council, a trade association for businesses looking to benefit from reverse discrimination. Racial favoritism for “disadvantaged” wealthy business owners is the most ridiculous and unjustifiable form of affirmative action and generally the only kind Republicans are enthusiastic about. Martinez is a GOP activist, but his company does not discriminate. At a 1997 conference of Hispanic CEOs, Clinton Energy Secretary Federico Pena boasted about how “MCT was able to secure a diesel-powered aircraft maintenance contract with the U.S. Air Force” thanks to the “assistance” of a federal agency.

Earlier this year, the Albuquerque City Council declined to authorize about $5 million of industrial revenue bonds for MCT. IRBs are a racket—legal, unfortunately—in which local governments use their right to issue federal-tax-exempt bonds in order to raise money for private companies. The company gets to borrow at a below-market interest rate, subsidized by the loss to the federal Treasury. In Albuquerque, the lucky companies get exempted from local property taxes and some state taxes to boot. MCT did not want the money for job-creating expansion but to refinance IRBs it already enjoys to get an even lower interest rate. Those IRBs helped to finance a factory to build maintenance equipment and do R & D, both for the Defense Department.

October 2002. MCT is one of the contributors to a PAC that paid for the mayor’s family to visit China.

July 2002. The Bureau of Indian Affairs approves an MCT municipal garbage landfill on an Indian reservation. Also, the New Mexico Rural Development Response Council and several state agencies help MCT to acquire land for a factory to build platforms for aircraft repairs.

August 1999. Waste News reports that Albuquerque has a bizarre regulation requiring all city garbage trucks to be made out of a particular brand of steel. Only one company sells trucks made out of this material. Guess.

December 1998. The Energy Department (secretary: Bill Richardson, now governor of New Mexico) hires MCT to build magnets to be used in making tritium for nuclear warheads.

June 1997. MCT, as a local company, competes against a national waste-management firm for a local garbage-collection contract. It wins the contract and sells the business to the national firm the next day.

October 1996. Republican vice presidential candidate Jack Kemp holds a rally at MCT. Ted Martinez hands him a document asserting that almost a third of MCT’s payroll goes to paying federal, state, and local taxes. In his speech, Kemp makes it “half.”

October 1995. Giant defense contractor TRW announces that it has won a $185 million contract from the Air Force, which it will share with two “small disadvantaged business” including MCT.

December 1994. In congressional testimony about export assistance for small businesses, a Commerce Department official talks about how the federal government sponsored an exhibit by MCT at the Paris Air Show and subsequent Commerce Department shows in China and Dubai.

So you get rich with a dozen different types of tax-funded help, you become a Republican, and you live happily ever after complaining about how much you pay in taxes. Maybe President Bush was right after all, that is the American dream.