Jim DeMint, U.S. Senator, South Carolina

MidlandsBiz:
Name a key event in your formative years.

Jim DeMint:
Unfortunately, my parents divorced when I was very young so my two bothers, my sister and I were raised by my mother.

In order to make ends meet, my mother started a ballroom dancing school in our house.  As her business grew over the years, she expanded to include after school programs for children as well as adult dance classes at night.  My first job in sales was recruiting our friends to come over to our house.  I still run into people all over the country who tell me that they went to my mother’s dancing school.

It was also the closest I would come to basic training when I was growing up.  Starting at 6:00 am in the morning, we all had scheduled duties. It seemed like child abuse at the time, but looking back I admire her determination and discipline.

MidlandsBiz:
What is your educational and professional background?

Jim DeMint:
I graduated from public high school and went to the University of Tennessee.  Through university, I didn’t know what I wanted to do, but when my father-in-law, Jim Henderson, who started Henderson Advertising in Greenville, introduced me to his business, I loved it.  I liked all aspects of the advertising industry, but thought if I had to focus on one area it would be as a writer.

My father-in-law would not give me a job until I earned an MBA, so I enrolled in graduate school at Georgia State.  By that time, I was so burned out on school that I dropped out and took a job selling paper products for Scott Paper in Greensboro, North Carolina.  I had always thought being a salesman was the lowest job on the totem pole, but quickly learned how important a good salesperson is to an organization.  Everybody needs to have some sales experience in their life.

After stints at Henderson and Leslie Advertising, I decided to pursue a dream and start my own marketing and strategic planning company.  Over the 15 years that I had the business, we worked with companies from a wide variety of industries, from manufacturing, to consumer products, colleges, and hospitals assisting them in the area of continuous quality improvement.

MidlandsBiz:
How did you get into politics?

Jim DeMint:
I was not interested in politics and to be honest, in fact, I didn’t have a very positive impression of politicians. As a business owner, I had started to see how taxes and regulations affected my business.  When Bob Inglis asked me to handle the marketing of his campaign for Congress, it put the thought in my mind that maybe people who had not spent their lives in politics could actually win an election.

In 1996, I decided to run for office and in 1998, I was elected to the South Carolina House of Representatives.  Six years later, I decided to run for Fritz Hollings seat in the United States Senate.

MidlandsBiz:
Why take the risk of starting your own business, and then decide to go into politics?

Jim DeMint:
My wife asked the same question – she thought I was crazy.

I had became burdened by the loss of freedom in our society and our growing dependency on government for everything from low income programs such as welfare, to social security, Medicare and Medicaid.  I had also become involved in the community in Greenville and the more I learned about how things operated, the more I understood how problems in our society such as broken homes, crime, and school dropout  were a direct result of well intended, but misdirected government policies.  I believed that it was freedom that worked, but what I saw was a continuous shift to more of a socialistic style of government. In my mind, that trend acted in opposition to how a free and democratic society should operate where the people should hold the government accountable, rather than the government being masters of the people.

My campaign theme in that first election was, Bring freedom home, as we sought to convey a message of bringing decision making and money back to individuals and families.  I arrived in Washington like Don Quixote with bold ideas, but very naïve.

MidlandsBiz:
Skip ahead to 2009 and we are probably facing the biggest expansion of the role of government in history.  You have consistently come out against the bailouts. Why?

Jim DeMint:
It does appear that we are headed towards some kind of a meltdown.  Over the last several months, the phrase that I have heard most frequently from people is, What can I do?   People don’t exactly know what is going on in Washington, but they understand almost intuitively that things simply don’t add up.  They understand that the government is close to nationalizing our whole financial system, our health care system, even our education system, and in doing so, they have put us on an unsustainable course.  They have crossed the line when it comes to the role of government in our society.

So many people, some literally crying, have come up to me to thank me for taking a stand against all these bailouts, that I feel that I do feel compelled to continue on and fight the good fight.  I hope that people will wake up and realize that it is not too late.

The entire debate surrounding these bailouts is off target.  We are addressing the symptoms and not the problem itself.

The question that needs to be asked is what actually caused our current problems.  It was bad government policy that forced banks to make loans to low income people.  It was bad government policy that created a tax code that rewards debt and punishes investment.  In business, you can deduct the cost of your loans, but if you put in real equity into your business and succeed, you will either be taxed through corporate income taxes or be hit with capital gains taxes.  As a result, we are witnessing the effects of highly leveraged individuals and businesses, particularly on Wall Street.  We are willing to throw money at the problem, but we have not begun to address the bad policies that are still in place.

MidlandsBiz:
Do you support any form of government fiscal policy?

Jim DeMint:
If you want to stimulate the economy, you have to do more than simply build roads and bridges.  I’m not saying that government spending in these areas won’t create jobs, but these are short-term solutions.  The main objectives of government are twofold: protect the value of our currency, and provide a predictable tax and regulatory structure for businesses in which to operate.

Let’s look at the first issue.  By borrowing and printing incredible sums of money we are jeopardizing the value of our currency.  We are placing our financial future in the hands of the Saudis and the Chinese who, for the moment, are willing to finance our loans by buying our bonds as the old debt becomes due.  But as our spending on Chinese goods continues to decline, and as China starts to figure out that we will eventually be paying them back with a devalued currency, all of a sudden our bonds will not look like such an attractive investment.  We are at the precipice of default.

Take a look at the figures and you will see a huge ratcheting up of the money supply over the past 6 months.  The effects of this are largely obscured because the economy is in decline, but when things turn around, interest rates will likely have to go sky high to protect against inflation.

On the second point, the bailouts only accentuate an environment of instability.  What causes a recession is uncertainty.  It works just like tr
affic on I-95 where if one person puts on the breaks, then the person behind them follows suit, then the next, and soon enough you have everybody backed up for miles. In this environment, businesses don’t know what their tax rate is going to be next year.  Investors don’t know what their capital gains or dividends are going to be.

During the presidential campaign, then President-elect Obama suggested that a way to get businesses to hire employees would be to give them $3,000. To me, that just shows a complete lack of understanding of how business operates.  I don’t know any business that would hire someone just because you gave them $3,000.  The way to get businesses to hire is to help them become more profitable, and the government can do that by affecting a line item in their income statement: taxes.  If we had a 25% corporate tax rate that was competitive globally, if we lowered the capital gains tax rate or even eliminated it on a temporary basis, we could permanently impact a business’ bottom line, and they would hire more people.  Furthermore, it would encourage the 12 trillion dollars in equity that is currently sitting on the sidelines right now to enter back into the market.

Anyone with any common sense understands that we need to be helping businesses become more profitable before we go around throwing all this government spending.  Government spending does not reward the work, risk and the productivity improvements in the same way as capital investment!

MidlandsBiz:
How about bailing out the banks?

Jim DeMint:
The initial idea was for the government to buy up the toxic assets.  That’s what they said they were going to do, but two weeks later they changed their mind.  $350 Billion, none of which made its way to the banks(?), and we are still operating in tight credit market conditions.

Here is how I think we should have helped the banks.  Let the banks know that the government will back fill any loans that they make, if necessary.  Overnight, you eliminate the uncertainty for the banks and money starts flowing.

MidlandsBiz:
Bailing out Detroit?

Jim DeMint:
What Detroit needed was to restructure.  The CEOs of the Big Three have been putting off the inevitable for way too long. We were close to negotiating a settlement with the creditors of GM and Chrysler who were willing to take 1/3 of what was owed them in exchange for the union workers accepting a pay package in line with the workers in the other car companies.  The unions refused thinking that the government would bail them out – and they were right.

In 2007, GM had it best sales year ever and sold the same number of cars as Toyota.  But it lost about $40B while Toyota made about $20B in profit.  If GM can’t make money during its best year in history, no amount of money in a bailout is going to fix that.

Their unsustainable cost structure goes back to years of union negotiations and the legacy cost of pension plans.  We have to disconnect those legacy costs from future operations of the car companies, and the only way to do that is to restructure through bankruptcy and have operations overseen by a judge.  As soon as you declare bankruptcy, those union contracts are out the window.  It’s no coincidence that the only car companies that are making it in the United States have moved into non-union, right to work states such as South Carolina.

If the car companies could start fresh, they could make it and could be the best in the world.  The unions are pretty much the major supporter of the Democratic Party right now.  They are willing to let the car companies go under before they give up on their demands because they don’t want to weaken the whole union system.

Socialism and freedom don’t mix.  We have tried to make capitalism fairer over the years, but we have ended up rewarding failure (which is what we are doing now with this bailout).  I see the money going to the people who delivered colossal failures.

MidlandsBiz:
But would people buy a car from a company that was in bankruptcy?

Jim DeMint:
Americans are used to doing business with companies in bankruptcy because we have seen so many of them go through it and come out.  Take the airlines, for example.  And consumers are smart.  They would be more inclined to buy a car from an American car company with a plan for restructuring than they are now through the bailout plan.  The bailout has only heightened the uncertainty.

MidlandsBiz:
Tough time to be a Republican.  What happened?

Jim DeMint:
I’m just as critical of the Republican Party as I am of the Democratics.  We deserved it.  The Democrats are much clearer on their vision of where they are going.  If we look through the lenses of history, this will be a movement towards a more centralized system of government.

By supporting free enterprise and limited government, the Republicans are supposed to provide a counterpoint to that philosophy.  I’m concerned that we have allowed a few senior Republicans to steer our party towards compassionate conservatism which in my mind is just another word for big government.  President Bush expanded the federal role of education, health care and spending earmarks exploded under his administration.  As a result, the brand of Republican is no longer worth anything.  The silver lining of the current situation is that the Democrats are in complete power and Americans will get to see their real stripes.

We are fighting a move towards socialism on every front.  Republicans need to convince everyone that freedom can work for everyone and that includes finding solutions for health insurance for everybody and a better education system for everybody.

There will be those of us who will be working to organize a freedom party that will champion these ideas over the several years.  Hopefully it will be called the Republican Party.

MidlandsBiz:
What is your stand on education?

Jim DeMint:
We spend more than any other country on education – over $10,000 a year per student.  Education spending takes up half of our local budgets, half of our state budgets, and some of our federal budget, yet every year we are losing ground to other countries.  Nearly half of our students are dropping out.  You can’t drop out of high school these days and expect to get a job.

My passion is to try and change the education system.  I try to tell people that publicly funded education is essential and we all need to get behind it.  But the minute you start talking about changing the model, you get a chorus of detractors saying that you are against public education.  My definition of public school does not mean government-run.  Making education available to every student, every member of the public- that is public education to me.

The government system of educating people just doesn’t work.  I was speaking to a General over at the military base the other day.  He told me that only 3 out of 10 every people between the ages of 18 and 24 have a sufficient level of education and fitness to even qualify to be in the military!  That’s unbelievable.

We have to break through on the willingness to explore competitive, alternative education systems.  We have seen incredible success with charter schools where graduation rates increase to as high as 99%.  If we opened up to new ideas, you would see a surge of innovation coming into education and incredible diversity of educational learning opportunities. You would see the best minds, the Bill Gates of the world, focusing resources on ed
ucation. The business community has to demand change and stop continuing to be enablers of a government run system.

MidlandsBiz:
Do you support vouchers or credits for private schools?

Jim DeMint:
The criticism of vouchers has always been that they will take money away from the public system.  They might, but they will also draw investment into the education system because the best operators will be able to make money providing the best educational services.  We have to think about the student.  Right now the whole system is geared towards protecting the system, not the student.

MidlandsBiz:
What advice would you give to entrepreneurs?

Jim DeMint:
Entrepreneurialism starts young with individualism and confidence.  We need to teach our students that life is not something that happens to them, but rather something that they can change.  The concept of individual freedom and responsibility is so important to economic development and innovation in our country.  We are squashing that with our movement towards collectivism.

I don’t think that is a coincidence that you will often find a strong faith background in many entrepreneurs.  If you study history, it’s hard not to trace the relationship between our entrepreneurial spirit in this country and the values and character building that are taught in our faith institutions.  We tend to push this character development out of our current education system.

MidlandsBiz:
What leaders influenced you?

Jim DeMint:
Growing up without a dad in the house, one of the areas that I looked to for role models was television.  Lorne Greene, who played Ben Cartwright on Bonanza, was a great model of a calm style of leadership, using his wisdom and persuasiveness instead of force.

My father-in-law, Jim Henderson, was a strong business role model for me.

During my 20’s, I joined a Christian businessman’s committee.  This group of men from all different denominations had by far the biggest impact on my life. That’s when I really started to see a different dimension of my role as a businessman, husband and father.

MidlandsBiz:
Are you a lone wolf when it comes to pushing a conservative agenda?

Jim DeMint:
I’m a lone wolf when it comes to voting record.  Many in both parties will include conservative rhetoric in their speeches, but not back it up on the floor of the Senate.  People will tell me they know I’m right, but always follow it up with the uninspired phrase, Well…we have to do something.  You know you are in trouble when you hear that phrase.

Our oath of office a Senators is to protect the constitution.  That’s a pretty simple job description.

MidlandsBiz:
Is it exciting to be voting on these major historical issues or is it depressing?

Jim DeMint:
It’s exciting and I absolutely love representing this state.  I wish more people in Washington, and more South Carolinians for that matter, knew about the amazing things that are going on here.

But it is a crazy time.  People either really love you or really hate you. It’s a strange process to be going through for a small business guy like me.

MidlandsBiz:
What do you do to unwind?

Jim DeMint:
We have four children who are married and I have a 2 year old grandson now.  Any spare time I get now, they best place for me to unwind is at home.

MidlandsBiz:
Where do you see yourself in 5 years?  Would you ever run for President?

Jim DeMint:

For now, I am going to run again in 2010, but eventually I would like to get back in the private sector.  I have no plans to run for President, but I’m not ruling it out, either.   I wrote a book last year with Professor David Woodard called, Why We Whisper, about the importance of freedom of speech in our culture.  I just finished another book called Saving Freedom – We Can Stop America’s Slide to Socialism which will be published in August.  I would like to continue to write.

The best way I can have an impact on changing Washington is to continue to take this message of freedom to the American people.  Everybody at Treasury knows how wealth is traded, but not how wealth is created.  We have to decide whether we want to be government driven or free enterprise driven – the two don’t mix very well.