The rhetoric opposing business is reaching a fever pitch in the White House. It’s become a matter of national policy. The President is using it as a rallying cry as he is criss-crossing the country making campaign-style stump speeches. The partisan crowds eat it up as they cheer on cue every time he regurgitates his ‘driving the car in the ditch’ analogy, which has really become quite dated. It’s been replayed endlessly through a compliant media. President Obama has been playing a cat-and-mouse game in an attempt to publicly vilify Wall Street and corporate America, while at the same time conduct business as usual behind the scenes with the very same people.
It reminds one of similar strategies in other walks of life that seem to contradict each other. In the gambling world, the casino sports books set the betting lines utilizing this technique. A football team may be projected to win by 7 points, however, that is used as reference point in which to evenly divide the bets between the two teams as opposed to predicting the actual outcome of the game. It’s certainly worked famously for them. The lobbyist world would be another example in which it is commonplace to donate to both parties involved in a debate to ensure your bases are covered regardless of the winner.
President Obama is actively engaging this policy. Publicly, he has sided with the unions and is making big business the fall guy for America’s woes. At the same time, he has been working with Congress to enact the bailout legislation ensuring that big business, and Wall Street in particular, are the recipients of publicly funded paydays. In ordinary times, this would likely be a very profitable alliance for all parties involved. Today, however, playing both sides of the fence is becoming increasingly difficult as transparency rather than opaqueness is the reality. The President promised this on the campaign trail, yet this is not what he had in mind in doing so.
In many ways, our politicians seem relegated to the stone age. They act indifferent to the fact that we now live in a global workplace. The arrogance of America. This is not unique to the Obama administration. It has been going on for quite some time now. The result has been an ever-increasing anti-business climate. Much of it is politically motivated. It is not by accident that we continue to operate with such a large negative trade balance. Manufacturing has been on the march out of this country for decades now. We have the 2nd highest corporate tax rate in the free world, trailing only Japan, which is moving toward reducing theirs to clear the way for us to take over the top spot.
Regulatory expenses are increasingly onerous and the trend is for this to become ever more so. Health care expenses will no doubt alter the way in which business conducts itself. There are limits into how much of the cost burden can be passed on to customers and employees. The result will be further constraining the expansion of business and if businesses can’t grow, they can’t hire. Forecasters are reflecting this in predicting a high unemployment rate for years to come.
This topic was at the center of the recent debate between Senator Harry Reid and challenger Sharron Angle in Nevada. Reid decried that it was his duty to provide jobs for Americans. Angle disputed that noting that his duty was to provide an environment of confidence to allow business to operate and thus create jobs. This is a core issue between the two major political parties. Democrats believe in actively providing jobs through government intervention. Republicans believe that is best suited for the private sector.
These would appear to be substantial differences between the parties. Yet, the result over the past several decades has been nearly identical regardless of the party in charge. Ideological differences on the surface always seem to melt away when it comes time to implement policy. We now operate in an environment which simply does not favor business.The result has been a decade of no growth. The GDP measure validates this. No longer is growth of less than 3% in a quarter considered growth as the penalties to compensate for high unemployment and debt service counteract it. Unemployment itself works in a similar fashion. We need a minimum of 100,000 new private sector jobs created each month merely to keep up with our expanding population rate.
The long-term prospects have little appeal to an entrepreneur contemplating starting or expanding a business. You will always see hiring in a business where it is directly warranted to keep up with demand. What we need to get the 15 million Americans out of work is these entrepreneurs to invest initially without that demand in place. They do this based on a business model that has taken into account two factors, known and forecast. Known factors include infrastructure costs such as buildings and equipment. It’s the forecast side that is so murky. Labor costs are volatile, specifically because of the health care increases coming. Licensing, permits and other regulatory burdens are not a known quantity any longer and cannot be adequately forecast. Inventory costs are always dynamic but raw materials are particularly volatile and can alter your cost structure immensely in a short period of time.
These are just a few costs of doing business. The bottom line is that more and more of them are moving over to the unknown side of the equation making planning exceedingly difficult. Sources used for financing new businesses demand well conceived business plans that account for these variables and if you are unable to provide a reliable accounting of such, you’ll find securing financing very difficult indeed. A common misconception presented by the Obama administration is that financing is not available. This just is not accurate. Credit lenders have capital to work with. They have simply tightened lending standards as a hedge against the volatility of the economy. This is the responsible course of action to take, yet they are derided by the White House for doing so. This is another example of the administration conducting policy seemingly unaware of the consequences of it.
There is a simple explanation for the difference between the actions of business and of government. Businesses are held accountable to shareholders and investors and the fact is that they only exist to make a profit. When used as a guide for directing decision-making, this tends to make things black and white and not clouded by factors such as public approval ratings and re-election consequences. Government, on the other hand, is guided primarily by these factors. They also have a huge trump card when making financial decisions. It’s not their money. Taxpayer funds are akin to monopoly money. Debt qualifies here as well. Spending money they don’t have is rather easy when it will be some future administration that will have to deal with the fallout of accruing debt.
The Obama administration commonly uses the public format to chastise business for not conforming as they see fit. It’s a no-win for business. Spend too much and you’re irresponsible. Spend too little and you’re greedy and failing to do your part. If you’re big business, this is tolerated because you have been getting compensated through the back door. However, if you’re too small or not on the donor list of the administration, you’re left out in the cold. Again, this has been the trend for quite some time and is not confined to just Obama.
It’s impressive to observe just how powerful the American economic engine is. It has been absorbing these body blows for many years, yet we continue to be the largest economy in the world by far. China is certainly on the rise, but is still a long way behind. Others such as Brazil and India also have bright prospects. What is without doubt is the fact that we cannot continue on our current path or we will not retain our standing. The fact that we can still right the ship should not be lost on the misguided policies currently in place. Put in place an administration that understands the value of the private sector and they could quickly turn impediments into incentives that would send our economy rocketing upward again. Voters need to carefully consider the specific agendas of the party they vote into office the next several election cycles as this will likely determine the future of American business for decades to come.