Obama's CEO problem -- and ours

[GG]

The American economy is sputtering and we are running out of options. Interest rates can't go any lower. Another burst of government spending -- whether a good or bad idea -- looks politically impossible. Can anything protect us from the dangers of stagnation or a double dip? Actually, there is a second stimulus that could have a dramatic effect on the economy -- even more so than government spending. And it won't add to the deficit.

The Federal Reserve recently reported that America's 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. Yet most corporations are not spending this money on new plants, equipment or workers. Were they to loosen their purse strings, hundreds of billions of dollars would start pouring through the economy. These investments would probably have greater effect and staying power than a government stimulus.

To be clear: There is a strong case for a temporary and targeted government stimulus. Consumers and companies are being very cautious about spending. Right now, government spending is keeping the economy afloat. Without a second stimulus, state and local governments will have to slash spending and raise taxes, which will produce a downward spiral of higher unemployment, slower growth, lower tax revenue and a larger deficit. Joel Klein, the New York City schools chancellor, told me that when the stimulus money runs out at the end of this year, he will be forced to lay off 5,000 teachers. Multiply that example a thousand times to get a sense of what 2011 could look like.

But government spending can only be a bridge to private-sector investment. 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.

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. Lobbyists have been delighted by all this activity. "[Obama] exaggerates our power, but he increases demand for our services," superlobbyist Tony Podesta told the New York Times.

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. When I asked for specifics, they pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he's made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.

Some of this is a product of chance. The economic crisis forced the government to expand its authority in dozens of areas, from finance to automobiles. But precisely because of these circumstances, Obama needs to outline a growth and competitiveness agenda that is compelling to the business community. This might sound like psychology more than economics, and the populist left will surely scream that the last thing we need to do is pander to business. But the first thing we need is for these people to start spending their money -- soon. As a leading New York businessman who publicly supported Obama during the campaign told me, "their perception is our reality."

Fareed Zakaria is editor of Newsweek International. His e-mail address is comments@fareedzakaria.com.

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/04/AR2010070403856.html?nav=rss_opinion/columns

[GG]

The worm is turning.   Even those that supported President Obama are starting to turn on him.   

I'm seeing a one term President. 

It just points up we need pragmatist, not idealist to hold the office of President. 

[nathanm]

So what Fareed is saying is that the corporations are holding our economy hostage to get the regulatory regime they desire. Nice.

[we vs us]

I read/listen to Zakaria a good amount and he seems to know his stuff, so it's interesting to hear this from him.  He's normally not in the habit of making pleas for the CEOs of the world.  Not that he's some sort of raving communist or anything, but his capitalism tends to be internationalist or European in bent and so a lot of Americans would see it from a ZOMGSOCIALISM standpoint.  And in general he's been for more regulation, rather than less in the face of the world economy disintegrating.

So.

I'll listen when he says this stuff, but don't know -- aside from more access to White House decisionmakers -- what these CEOs realistically expect.  We're in a time of huge change in America (and in the world); that would be true whether Obama, McCain, or Bobo the Chimp were running the country.  There's no way to address these problems without rocking the boat.  There just isn't.  Healthcare, immigration, climate change/energy policy, two wars . . . not to mention the utter collapse of the credit industry.  The problems Obama's addressing are huge and structural to our economy/nation.  They're each one of them big enough to shake the foundations at least a little. 

That's why I think of this as a bit disingenuous; how could these CEOs vote for a guy who promises change and then get all in a huff when he starts to change things?  Whether you agree with his policies or not -- and that's obviously up for debate -- the actual implementation of change itself is gonna make for an unsettled environment.

As for the worm turning, that's some seriously wishful thinking.  With the caveat that we're still 2 years away from the elections, without a legitimate opposition party and a legitimate candidate (of which there's exactly none on the GOP horizon), Obama's policies alone will kick him out of office. 

[GG]

I read/listen to Zakaria a good amount and he seems to know his stuff, so it's interesting to hear this from him.  He's normally not in the habit of making pleas for the CEOs of the world.  Not that he's some sort of raving communist or anything, but his capitalism tends to be internationalist or European in bent and so a lot of Americans would see it from a ZOMGSOCIALISM standpoint.  And in general he's been for more regulation, rather than less in the face of the world economy disintegrating.

So.

I'll listen when he says this stuff, but don't know -- aside from more access to White House decisionmakers -- what these CEOs realistically expect.  We're in a time of huge change in America (and in the world); that would be true whether Obama, McCain, or Bobo the Chimp were running the country.  There's no way to address these problems without rocking the boat.  There just isn't.  Healthcare, immigration, climate change/energy policy, two wars . . . not to mention the utter collapse of the credit industry.  The problems Obama's addressing are huge and structural to our economy/nation.  They're each one of them big enough to shake the foundations at least a little. 

That's why I think of this as a bit disingenuous; how could these CEOs vote for a guy who promises change and then get all in a huff when he starts to change things?  Whether you agree with his policies or not -- and that's obviously up for debate -- the actual implementation of change itself is gonna make for an unsettled environment.

As for the worm turning, that's some seriously wishful thinking.  With the caveat that we're still 2 years away from the elections, without a legitimate opposition party and a legitimate candidate (of which there's exactly none on the GOP horizon), Obama's policies alone will kick him out of office. 

You make some great points, about the problems we are facing and how people react to change. 

But who says it has to be someone from the GOP that replaces him.   

Right now Hilary is looking pretty good to me, at least she's pragmatic.

[Breadburner]

I'm sure its hard for the president to undestand CEO's when you have never had a job....

[guido911]

I'm sure its hard for the president to undestand CEO's when you have never had a job....

[Conan71]

Yep, he laid the smackdown on that one.

[we vs us]

Ooooooo YEAH!

*scratches jock*

[guido911]

So what Fareed is saying is that the corporations are holding our economy hostage to get the regulatory regime they desire. Nice.

It's not just the CEOs. It's also the wealthy who apparently are not spending enough of their own money which is causing a stagnation in a recovery.

http://finance.yahoo.com/news/Wealthy-Reduce-Buying-in-a-nytimes-3611525031.html?x=0&.v=1

Those damned wealthy people who refuse to spread the wealth around are at it again.

[rwarn17588]

Those damned wealthy people who refuse to spread the wealth around are at it again.

So sez the fellow who freely admits he's slacking off so he doesn't have to pay taxes. 

[guido911]

So sez the fellow who freely admits he's slacking off so he doesn't have to pay taxes. 

I also have cut back on charitable giving to certain organizations as well.