Ben White at Politico tells us:
Obama has been happy to be seen by voters as cracking down on Wall Street but those efforts have had an unintended result: feeding a sense that the president and his party are indifferent or even actively hostile toward big business, whether those businesses are Silicon Valley tech companies, Midwestern manufacturers or Main Street small businesses.
And it is more than just politics: Obama’s aides believe confidence in the general direction of White House policy has an effect on the willingness of corporations to hire, invest and push the economy toward a more solid recovery.
We’ve all heard about the $1.8 trillion that companies and corporations have saved while they sit on the side-lines refusing to invest or hire. We’ve seen the likes of Mort Zuckerman declare that the policies and attitude of the administration are decidedly "anti-business". And we’ve seen little or no evidence that anything the government has done has, in fact, spurred economic recovery.
So – what’s the administration’s answer? A public relations campaign where they essentially tell us things have happened we know haven’t, take credit for things they had little to do with and essentially try to spin their way out of the "anti-business" label.
Or, “business as usual”:
So the White House has launched a campaign to help instill that confidence, highlighted by Obama’s remarks on Wednesday stressing his commitment to lifting trade barriers as a way to spur economic growth. That was followed by Treasury Secretary Timothy Geithner’s interview on CNBC’s “Kudlow Report” last night — following his spot on PBS’ “NewsHour” on Tuesday. Obama talked up the economy in Missouri Thursday as well.
In a Thursday interview, White House chief of staff Rahm Emanuel argued that rather than recoiling against Obama, business leaders should be grateful for his support on at least a half-dozen counts: his advocacy of greater international trade and education reform open markets despite union skepticism; his rejection of calls from some quarters to nationalize banks during the financial meltdown; the rescue of the automobile industry; the fact that the overhaul of health care preserved the private delivery system; the fact that billions in the stimulus package benefited business with lucrative new contracts, and that financial regulation reform will take away the uncertainty that existed with a broken, pre-crash regulatory apparatus.
But you see, businesses know all of that and they aren’t “grateful”, they’re alarmed. Not only that, they don’t see private banks and financial institutions as the sole problem in the financial meltdown – but they do see government trying to pretend it was all Wall Street and greedy corporations, while Freddie and Fannie have become half a trillion dollar financial sink holes that politicians don’t want to talk about.
They also understand that the Bush tax cuts are expiring, new health care laws and taxes are pending, new and onerous regulations are in the offing and the lame duck Congress will most likely try to push through some version of cap-and-trade. Add to that failing states like Illinois and California and the probability of higher taxes all the way around.
And then there’s the possibility of a double-dip recession.
Why wouldn’t business be sitting on their money given the “rest of the story” that the administration conveniently leaves out of their pitch?
This is a crew that has supreme confidence in their ability to propagandize anything and get away with it. And why shouldn’t they – look who is sitting in the White House. You’d have to believe if you can sell an empty suit to a majority of the nation, you can probably sell anything.
Seriously, by now just about anyone – to include the President’s panel of economic advisers – should be able to figure out why there are no jobs. The QoD below tells you why in so many words. Fareed Zakaria tells you why without mincing words:
The key to a sustainable recovery and robust economic growth is to get companies investing in America. So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.
Economic uncertainty was the primary cause of their caution. "We’ve just been through a tsunami and that produces caution," one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.
In other words, back off, get out of the freaking way, quit talking about massive new taxes and programs that deincentivize investment and employment, and let the 1.8 trillion in cash sitting on the sidelines in private hands do its job.
Wow, I wish I’d been saying that for, oh, 18 months or so.
It still astounds me, though, that I and others are still beating this drum this late into this economic disaster. As the title points out – this isn’t rocket science. Incentives work to increase behavior you want, disincentives work to discourage behavior you don’t want. If you talk about making it harder and more expensive to hire someone, you disincentivize hiring. Same with investment.
And that’s precisely what’s going on.
One CEO told me, "Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what’s in store for us for the future." Another pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations.
The immediate implication is they’re sitting on the sidelines, sitting on their cash instead of investing it, and they’re not hiring. And every reason you seen listed above has to do with government. Not down markets, or lack of demand, or whatever else one might want to blame on “capitalism”.
Of course, as an aside, I have little sympathy for many of these CEOs. They’ve learned you get what you vote for:
Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business.
Yet these titans of industry and banking apparently weren’t astute enough, or didn’t want to look under the veneer this “smart” guy presented. Seems interesting to me that they never got it, but many of us out here in fly-over land saw through candidate Obama immediately.
Now they – and we – are paying a pretty high price for voting for someone they see as “anti-business” and apparently clueless about how to do what is necessary (or, perhaps, unwilling) to settle the markets, help establish a positive business climate and provide incentives for flowing that 1.8 trillion (it won’t cost the taxpayers a dime) into the economy and spur expansion and hiring.
They must be so pleased with the regime they’ve helped put into place, given their current positions on the sidelines trying to figure out how to stay in business.
Great rant in the Las Vegas Review Journal by Wayne Allyn Root in which he points out the obvious – President Obama wouldn’t know how to create a job if his life depended on it. However, it appears he certainly knows how to kill any incentives to create jobs. Key graf:
I’ve polled all my friends who own small businesses — many of them in the Internet and high-tech fields. They all agree that in this new Obama world of high business taxes, income taxes, payroll taxes, capital gains taxes, and workers compensation taxes, the key to success is to avoid employees. The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.
There in a nutshell is why you see employers sitting on the sidelines – government has made it too expensive to hire new ones. Literally. So businesses are looking at ways to do the same thing they’re doing with fewer employees, and, if they need some help, looking to independent contractors (1099 hires) to fill the void. They require nothing in terms of health care, social security, or other tax collections. They can be let go at a moment’s notice. They are, at least in my opinion, the way many small businesses will choose to “hire” in the coming years, or, as long as they are essentially penalized for hiring new employees.
Root goes on to call Obama the “great job destroyer”. I’m not sure I’d go that far, but I think the policies he and the Democrats are putting in place (to include their obvious union preferences) are extremely damaging to the employment outlook and because of them, we’re going to see high single digit unemployment for a while. In fact, because of the fact that employers are being penalized for hiring new employees, high single digit unemployment may become the new “norm”.
That would include almost all of the establishment beltway Republicans:
Ethanol subsidies, oil drilling incentives, government insurance and loan guarantees for nuclear energy, natural gas subsidies: These proposals tend to have as many or more Republican advocates as Democratic advocates. Even worse, self-described free-market conservatives often rally for energy subsidies and claim it’s not a deviation from their principles.
Q. Your energy proposals consist largely of incentives — essentially, subsidies. You’ve also fought efforts to remove subsidies from fossil fuels. If you support free, open, and competitive markets, shouldn’t you support removing subsidies that distort the market?
A. [Gingrich] Not if you believe that a low-cost energy regime is essential to our country — both in terms of its internal transportation cost and its competitiveness in the world market.
Of course that argument can be made for absolutely any politically desired program. In fact, Democrats make it for solar and wind power.
So, when you hear establishment Republicans talk about “free markets” it’s really not what they’re talking about – instead they’re talking about favored businesses. Or, as Carney points out, they’re more pro-business than pro-market. Crony capitalism – not free markets.
As Dan Riehl argues that’s why grassroots conservatives and establishment “conservatives” really don’t see eye to eye:
Herein lies the dirty little secret of why the GOP is slow to actually empower the grassroots and conservative movement. It’s also why, in some measure, we can no longer rely on the so called Beltway conservative establishment. Just like Republicans, they’ve come to rely on corporate money, allowing them to drive a large part of their agenda.
Or, unsurprisingly, they’ve been co-opted – more in a long line politicians reduced to rent-seeking for favored corporations to fund their re-election campaigns.
When the GOP talks about being “pro-market”, you’re advised to take that with a grain of salt.
By that I mean the belief that massive public deficit spending is the cure for an economic recession/depression?
It should be. And that’s the argument going on in at the G20 meeting in Toronto. The US is urging Europe and the rest of the world to “pump it up”. The rest of the world, rightly in my estimation, is resistant to the plea. The WSJ reviews why for us, using the US’s experience as the case study:
Like many bad ideas, the current Keynesian revival began under George W. Bush. Larry Summers, then a private economist, told Congress that a “timely, targeted and temporary” spending program of $150 billion was urgently needed to boost consumer “demand.” Democrats who had retaken Congress adopted the idea—they love an excuse to spend—and the politically tapped-out Mr. Bush went along with $168 billion in spending and one-time tax rebates.
The cash did produce a statistical blip in GDP growth in mid-2008, but it didn’t stop the financial panic and second phase of recession. So enter Stimulus II, with Mr. Summers again leading the intellectual charge, this time as President Obama’s adviser and this time suggesting upwards of $500 billion. When Congress was done two months later, in February 2009, the amount was $862 billion. A pair of White House economists famously promised that this spending would keep the unemployment rate below 8%.
Seventeen months later, and despite historically easy monetary policy for that entire period, the jobless rate is still 9.7%. Yesterday, the Bureau of Economic Analysis once again reduced the GDP estimate for first quarter growth, this time to 2.7%, while economic indicators in the second quarter have been mediocre. As the nearby table shows, this is a far cry from the snappy recovery that typically follows a steep recession, most recently in 1983-84 after the Reagan tax cuts.
The chart in question:
2.7% is not good, especially when most of the spending is government spending. Or said another way – this isn’t a great advertisement for over a trillion dollars spent to “stimulate” the economy.
And, as you see here – for the money, job creation has been absolutely abysmal, except for government jobs.
Now couple all of that with the awful news about house sales this past month (down 33%) and it would appear, economically, that the “stimulus” has essentially failed in its dual role of stimulating economic and job growth, wouldn’t you say?
Yet it seems the spin doctors in the administration want to pretend otherwise and, by the way, hook the rest of the world on their public spending addiciton. Thankfully, at least for their citizens, most of the rest of the world isn’t buying into the scheme. We, however, are stuck with the world’s most profligate spendthrifts in the guise of the Obama administration and the Democratic Congress.
We are told to let Congress continue to spend and borrow until the precise moment when Mr. Summers and Mark Zandi and the other architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced. Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more government control over nearly every area of the economy. Even the CEOs of the Business Roundtable now see the damage this is doing.
That’s a long way of saying the anticipation of raised taxes to pay off this unprecedented and massive assumption of public debt is keeping businesses on the sidelines and the business atmosphere unsettled. They’re not about to expand their businesses until they have a much better handle on what it will cost them to do so. That’s why, for what little recovery is taking place, it is mostly a jobless one.
Most who understand at least rudimentary economics knows that some “stimulus” from government spending, coupled with other government actions, such as tax cuts for individuals and businesses, may have a beneficial effect in times of recession. The stimulus funds get money in circulation and the tax cuts encourage businesses to expand and hire.
What we’ve seen is nothing but “stimulus” – no tax cuts, no incentive for businesses to come off the side lines. Additionally we’ve seen attacks on the business community, calls for much more draconian regulation and new mandates imposed by legislation such as health care reform.
The result has been a seemingly perpetually unsettled business atmosphere that has provided absolutely no incentive for companies to expand or hire.
What we should have all taken from this is that government “stimulus” funded by massive public debt isn’t the answer we were led to believe it was and, when it is all that is done, is more of a problem than any sort of a solution. All the “stimulus” has managed to accomplish is the promise of large tax increases to pay down the debt it created.
The other service it hopefully has rendered is to prove defective the once cherished Keynesian belief that government can spend us out of recessions.
When government doesn’t want to pay a bill, you have little recourse except the courts in most law abiding countries.
In the dictatorship that is Venezuela, not only does the government not pay the bill, but it takes you means of livelihood to boot for daring to attempt to collect what you’re owed. Such is the fate of one American owned country which tried to collect on its debt.
Venezuela will nationalize a fleet of oil rigs belonging to U.S. company Helmerich and Payne, the latest takeover in a push to socialism as President Hugo Chavez struggles with lower oil output and a recession.
The 11 drilling rigs have been idled for months following a dispute over pending payments by the OPEC member’s state oil company PDVSA. Oil Minister Rafael Ramirez said on Wednesday the rigs, the Oklahoma-based company’s entire Venezuelan fleet, were being nationalized to bring them back into production.
The reason they weren’t presently in production is the Venezuelan government refuses to pay them for $49 million for past services.
Of course the government of Venezuela has devised an excuse for what would be grand theft in any other law abiding society:
Ramirez said companies that refused to put their rigs into production were part of a plan to weaken Chavez’s government,
“There is a group of drill owners that has refused to discuss tariffs and services with PDVSA and have preferred to keep this equipment stored for a year,” Ramirez told reporters in the oil producing state of Zulia. “That is the specific case with U.S. multinational Helmerich and Payne.”
Interestingly, we here have the opposite problem. Venezuela’s government is trying to get drilling rigs into production and has resorted to nationalized theft to do it.
We have a government trying to take drilling rigs out of production, and is prepared to ignore court rulings to the contrary and do so by executive fiat.
In all the hype about the McChrystal story and the focus on the Gulf spill, you may have missed this story about Hugo Chavez’s continued destruction of the Venezuelan economy:
Venezuelan army soldiers swept through the working class, pro-Chavez neighborhood of Catia in Caracas last week, seizing 120 tons of rice along with coffee and powdered milk that officials said was to be sold above regulated prices. “The battle for food is a matter of national security,” said a red-shirted official from the Food Ministry, resting his arm on a pallet laden with bags of coffee.
How dare they not heed price controls? Meanwhile, in the ultra-efficient state machine bureaucracy, things are going swimmingly:
Critics accuse him of steering the country toward a communist dictatorship and say he is destroying the private sector. They point to 80,000 tons of rotting food found in warehouses belonging to the government as evidence the state is a poor and corrupt administrator.
120 tons confiscated. 80,000 tons allowed to rot. You can do the math.
“We are bringing order to prices,” Trade Minister Richard Canan told Reuters during the Catia raid. “There are traders who are taking these products to the black market … That is a crime and our government will continue to target these stores.”
Food prices are up 41% this past year. Price controls. If you don’t think you’re paying enough now, try them.
Unsurprising, really, but certainly something I think Apple needs to hear about from consumers:
Apple Inc. is now collecting the “precise,” “real-time geographic location” of its users’ iPhones, iPads and computers.
When users attempt to download apps or media from the iTunes store, they are prompted to agree to the new terms and conditions. Until they agree, they cannot download anything through the store.
The company says the data is anonymous and does not personally identify users. Analysts have shown, however, that large, specific data sets can be used to identify people based on behavior patterns.
Now I’m like most people – I don’t have the time or interest, usually, to read the “I agree” statements that accompany many software updates and licenses. Most of us automatically hit the “I agree” button and get on with business.
And I also know that it is up to me (i.e. my responsibility) to read those things and if I don’t then what they do is on me for not doing so.
That said, when I either have to agree to use the produce and software I’ve already paid for or else, then I think there’s a certain level of coercion involved that I find disturbing.
So – given the circumstance (and no, I don’t have an iPhone), this should be something clearly stated by Apple with an “opt in” clause, where it is the customer’s option to let the consumer decide to share their data – not the other way around.
Until then, I think iPhone users ought to raise holy hell with Apple until they change their agreement.
I’m sorry but the more I watch this White House operate, the more I realize that most of the conciliatory rhetoric about bringing “new politics” to Washington was just so much hot air. They’ve certainly brought a different brand of politics to the place, but “new” isn’t how I’d characterize them.
This bunch acts like thugs engaged in intimidation and shakedowns. The latest example has to do with health insurance companies – which, if anyone is paying attention, are being set up to fail. So now, in anticipation of the the health care bill’s impact and a desire to keep what should happen from happening, the thugs go to work:
President Obama, whose vilification of insurers helped push a landmark health care overhaul through Congress, plans to sternly warn industry executives at a White House meeting on Tuesday against imposing hefty rate increases in anticipation of tightening regulation under the new law, administration officials said Monday.
The White House is concerned that health insurers will blame the new law for increases in premiums that are intended to maximize profits rather than covering claims. The administration is also closely watching investigations by a number of states into the actuarial soundness of double-digit rate increases.
Of course, the insurance companies no longer can deny pre-existing condition and must take anyone who applies. That means a much different risk pool than previously – one which will be much more costly than their present pool of insured.
With the usual attitude of anticipating the worst, the White House plans to warn them off of raising prices. That, of course, shouldn’t be any of the administration’s business, but with the new law, they made it their business. And remember – the charter, the base premise of the law is “cost containment”. The hidden agenda, however, is single-payer.
So where, you ask, does the thugishness come in? Well that would be David Axelrod’s department. Here’s his offer they can’t refuse:
“Our message to them is to work with this law, not against it; don’t try and take advantage of it or we will work with state authorities and gather the authority we have to stop rate gouging,” David Axelrod, Mr. Obama’s senior adviser, said in an interview. “Our concern is that they not try and, under the cover of the act, get in under the wire here on rate increases.”
Note the imperial “we”. Also note that they will decide what constitutes “rate gouging”. If this isn’t a “with us or against us” statement, I’m not sure what you’d call it.
The law does not grant the federal government new authority to regulate health care premiums, which remains the province of state insurance departments. But with important provisions taking effect this summer and fall, the Obama administration has repeatedly reminded insurers — and the public — that it will expose industry pricing to what the health secretary, Kathleen Sebelius, has called a “bright spotlight.”
The general war against business continues.
USA Today brings us a story that should surprise no one. Medicare, the supposed model of a government run health care system, is finding that fewer and fewer doctors are willing to take on new patients under that system. They cite the low payments Medicare offers (or perhaps forces) for patient treatment. Baby boomers just now entering the system are going to find their choice of a doctor restricted.
The numbers break down like this:
• The American Academy of Family Physicians says 13% of respondents didn’t participate in Medicare last year, up from 8% in 2008 and 6% in 2004.
• The American Osteopathic Association says 15% of its members don’t participate in Medicare and 19% don’t accept new Medicare patients. If the cut is not reversed, it says, the numbers will double.
• The American Medical Association says 17% of more than 9,000 doctors surveyed restrict the number of Medicare patients in their practice. Among primary care physicians, the rate is 31%.
Note especially that final group. Primary care physicians are the group of physicians that the newly passed health care reform law depends on to implement its “preventive care” regime.
The reason is rather simple and straight forward – Medicare offers 78% of what private insurance pays in compensation for a doctor’s services. Why doctors are leaving or restricting new Medicare patients is rather easy to understand as well:
“Physicians are saying, ‘I can’t afford to keep losing money,’ ” says Lori Heim, president of the family doctors’ group.
Consequently they cut or drastically restrict the source of the loss. While most doctors are not going to turn away existing Medicare patients, they may not accept new ones and finally, through attrition, close their practice to Medicare patients.
It isn’t rocket science – no good businessman is going to continue to do things in which the net result is a loss of money. And a doctor’s private practice is a business – one which employs a number of people. He or she, like any business person running a small business, cannot afford the losses. So they identify the problem and eliminate it.
As this continues it will put them in a direct confrontation with the federal government. It is anyone’s guess, given the current administration’s choices for wielding power, how that will turn out. But what this rejection of the compensation offered by government is doing is bringing to the fore is one of the underlying conflicts of the new health care law – the premise of the law is that government can control costs (and payments) and thereby make medical care less costly. The doctors are saying, go for it, but I’m not playing.
At some point, government is going to have too address those who make that declaration. We’ll then see how free of a country we really are, won’t we?