Business Climate Change: Post-Election Layoff Tsunami

In the 48 hours since Obama was re-elected, dozens have companies have announced layoffs.

Why?   Saying that these companies are doing this to somehow “screw” Obama as I’ve already heard some say is simplistic and misses the mark.

Uncertainty in the marketplace about regulation, the healthcare law and the looming fiscal cliff was a major hindrance on hiring over the last year.   The picture is clearer now.  While the fiscal cliff still looms, we know now that the Affordable Health Care Act will be fully implemented.  Furthermore, the administrations enthusiastic appetite for regulations – especially in terms of the environment and energy – will continue to drive costs upward.  (Related: total costs of federal regulation.)   Coupled with the still stagnant economy, the effects of the administration’s policies do not create an ideal business climate.

So companies are re-trenching, hunkering down and reducing their workforce.  And it’s not a surprise.  Numerous large companies warned of layoffs if Obama was relected.

Reducing full-time staff in favor of part-time workers

In addition to layoffs, another defensive posture organizations are taking is reducing the number of full-time employees they have,  switching them to part-time status.

Why are they doing this?   The Huffington Post lays it out:

“Under the Affordable Health Care Act, businesses with more than 50 workers are required to provide health care coverage for full-time employees or those working more than 30 hours per week. Darden Restaurants, the parent company of Red Lobster and The Olive Garden, announced in October that it would downgrade workers to part-time status to limit costs from Obamacare.”

A stark view was offered in a radio call-in discussion on KXNT in Las Vegas.  A small business owner named David called in with the news that he had laid off 22 employees due to Obama’s re-election, citing the costs of Obamacare.

“I had to lay off 22 people today to make sure that my business is gonna thrive and I’m gonna be around for years to come. I have to build up that nest egg now for the taxes and regulations that are coming my way. Elections do have consequences, but so do choices. A choice you make every day has consequences and you know what, I’ve always put my employees first, but unfortunately today I have to put me and my family first, and you watch what’s gonna happen. I’m just one guy with 114 employees — well was 114 employees — watch what happens in the next six months. The Dow alone lost 314 points today. There’s a tsunami coming and if you didn’t think this election had consequences, just wait.”

Who benefits from the Obama administrations’ policies?
So what’s the net effect?  Higher unemployment, for sure.  And increased dependence upon government programs such as unemployment benefits, food stamps and Obamacare.

Who benefits from this?  Certainly not the recipients of government this government largesse.  They’re going to see a reduction in their quality of life.   Taxpayers – those still generating incomes – won’t benefit.  They’ll be paying the tab.  Shareholders won’t benefit.  We’re not going to see business growth.

The beneficiaries will be the small handful of people who have a vested interest in increasing the number of people on the government dole.   For them, this is job security.  For them, this is re-election.

I am skeptical of any interest that does not have increasing the competitive advantage of the US and driving economic growth at its heart.    And if I have this wrong, I’d love to hear an opposing view.

Companies announcing layoffs included:

Abbott Labs

AlcatelLucent

Atlantic Lottery Corporation

American Coal

Boeing

Boston Scientific

Brake Parts

BristolMyers

Caterpillar

Center for Hospice NY

Commerzbank

Corning

Covidien

CVPH Medical Center

Dana Holding

Darden Restaurants

Ericsson

Gameforge Berlin

Hawker Beechcraft

Hill Rom

Husqvarna

Iberia

ING

JANCOA

Kinetic Concepts

Kroger

Lightyear Network Solutions

Lower Bucks Hospital

Majestic Star Casino and Hotel

Medtronic

Momentive Performance Materials

Murray Energy

Oce North America

PerkinElmer

Providence Journal

Research in Motion Ltd.

Rocketdyne

Smith & Nephew

SRA International

St. Jude

Stryker

Umatilla Chemical

United Blood Services Gulf

US Cellular

Vestas Wind Systems

Welch Allyn

Westinghouse

 

If I Wanted America to Fail …

This video from Free Market America does an amazing job of framing the collective effect of the left’s policies – ranging from energy to education.   Watch, and then ponder our slowing economy,  sliding educational standards and the difficult path ahead of us.  Will these regulations make America more competitive?  Are we instilling a desire for achievement and excellence in the next generation?  What’s the end game the policy makers really have in mind?

Anti-business? Revelations from review of Obama & Biden’s personal finances

Kiplinger ran an article this month titled “An Inside Look at the Personal Finances of the Obamas and the Bidens”  that reveals a deeply personal distrust of the stock market and calls the financial acumen of both the President and the Veep into question.   Tellingly, the investment strategies (or lack thereof) provide insight into the fundamental beliefs that shape the decisions Obama and Biden make.

Lack of trust in the market? Or lack of understanding?

Many people – myself included – describe the Obama administration as being “anti-business.”  I stand by that statement – the emphasis on regulation and belief in government as a creator of jobs – suggest to me that the President is deeply skeptical of private enterprise.   His investments underscore that.  Obama, according to the article, is worth almost $5 million.  However, 92% of his money is in cash.  Only $325,000 is invested in the stock market.  That investment sits entirely within a 500-stock index fund.

Biden’s financial approach is similarly weird. He and wife Jill have a mishmash of nine checking and savings accounts, with balances between $1,000 and $15,000.  They also own two CDs, worth between $100,000 and $200,000.  Like Obama, they have a very small exposure to the stock market.

These strategies say one of two things about Obama and Biden.  They either don’t understand the stock market, or they don’t trust it.   And by extension,  you can also say they both lack trust in and understanding of the American business marketplace that underpins the stock market.

A lax attitude toward personal debt … and the nation’s?

Both Obama and Biden also carry debt, and neither are doing a particularly good job of managing it.   Obama hasn’t refinanced his house since 2005.   With rates at an all-time low, and with his balance estimated at $750,000, he could end up saving himself more than $100,000 if he refinanced.

Biden carries considerably more debt, borrowing against home equity lines of credit and insurance policies in addition to carrying a traditional mortgage.   Some of his loans carry interest rates that are stunningly high (9.9%) given the historic lows.   He has enough cash on hand to retire some of the higher rate loans, or he could consolidate them.  Either way,  Biden appears to be completely disorganized – and he’s doing some really stupid things with respect to his personal finances.

The fact that both men take a lax attitude toward managing debt in their personal lives is reflected in the fact that they seem to be completely at ease with the burgeoning government debt.   I can’t help but believe that someone with sensibilities geared more toward penny-pinching wouldn’t take a more active approach in managing the US debt.

Simple lack of financial acumen? Or something else?

While I’m no fan of their politics, I’m not willing to say that Obama and Biden are idiots.  They are both smart and accomplished people.   I’m confident they both understand concepts like compound interest.   And while they’re both busy, busy men, they’re surrounded by people.   To me, the “too busy” and “I don’t get it” excuses for poor financial planning simply don’t apply to either.

So what is going on here?  Why do a couple of the most powerful men in America have such ineffective, unsophisticated approaches to their own personal finance?    It’s going to get a bit ugly, but here are a few of my theories:

• Narcissism: Once out of office, rich speaking gigs, book deal and lobbying gigs await.   Obama and Biden (and their wives) may be banking on their future ability to cash in, and thus aren’t concerned about paying attention to their day-to-day affairs.
• Belief in big government:   The retirement benefits received by former Presidents include a pension, Secret Service protection, and reimbursements for staff, travel, mail, and office expenses. The Presidential pension is not a fixed amount, rather it matches the current salary of Cabinet members (or Executive Level I personnel), which was $191,300/year as of March, 2008 and is now higher.  Biden and his wife Jill are currently on track to receive pension benefits of about $90,000 annually when they retire.   So, effectively, defined benefit  plans – which have fallen far by the wayside in the real world of private enterprise – form the basis for the futures of both the President’s and the VP’s families.   This “I don’t have to take care of me because the government will,” belief is strongly reflected in the Democratic leadership’s dim view of personal responsibility and the fact that big government is the solution they offer to most problems.

Simply put, it’s not Mitt Romney who is out of touch.  He gives copiously to charity (as in millions of dollars) and sees to it that his investments are managed aggressively and skillfully, despite the fact that he (like all pols) needs to be certain to avoid conflicts of interest.

Who will do a better job of running the economy and the country’s affairs?  My vote is for the guy who respects business and knows how to handle his own money.  That would be Mitt Romney.

 

 

How Obama’s economic policies have throttled job growth.

Diane Swonk, a much respected economist with Mesirow Financial, broke down some of the key problems with Obama’s economic policy vis a vis American business in an interview on Chicago Public Radio’s Afternoon Shift show yesterday.

First, on the subject of the most recent jobs numbers, Swonk had a dim view. In order to actually make a dent in unemployment, the US needs to be adding 150,000 – 200,000 jobs per month.   The 96,000 jobs reported yesterday is close to a stall rate.  The economy has

“It’s not all that statistically significant from zero,” she said.

The fiscal cliff in January is another problem. Swonk says that CEOs she’s spoken to have said that with no roadmap in front of them – no certainty around tax policy, spending policy and the deficit – they delaying hiring and projects.  Simply put, they don’t know if we’re going to have another recession in January.

Certainly, the uncertainty businesses are facing is compounded by the looming election, and the possibility of a Romney win, which would lead to the departure of Bernanke from the Fed and carries the likelihood of significant changes to (if not the repeal of) the Affordable Care Act (aka Obamacare.)

However, a lot of the blame for the shaky ground can be laid at Obama’s feet.  And the fact that he’s willing to accept these macroeconomic uncertainties – and let them persist – indicates the degree to which he doesn’t understand business.   Uncertainty stifles job growth, period.   And Obama’s policies have created this uncertainty.

 

Unions – the ultimate special interest group. #DNC2012 #tcot

Big labor on parade in Charlotte.

It’s hard to miss organized labor at the Democratic National Convention, and no wonder.  Big Labor has found a sympathetic home in the Democratic party – politicians willing to take union dollars, and an overarching political philosophy that’s perfectly OK with socking it to “the man” and redistributing wealth to union members.

Unions are a special interest, just like any other lobby.  Unlike the much reviled lobbies for the energy, agriculture, sugar and pharmaceutical industries, however, unions don’t represent industries that power the economy by creating jobs, intellectual capital and goods for export.  Instead, unions exist for one reason and one reason only – to extract a better deal for their workers.  And in the case of unions like SEIU and ASFME – which represent workers in the public sector – they are draining government coffers.  They are on the taxpayer’s dole.

The unholy alliance between unions and the Democratic party isn’t too hard to figure out.  While I’m sure that most politicians of any political stripe secretly (or not so secretly) wish them gone, the fact of the matter is simple – unions have bags of money they give to politicians willing to defend their “rights” and renew their contracts.  Unions also have a large base of people they can tap for get-out-the-vote efforts.

It’s a simple you scratch my back, I’ll scratch yours proposition.  And it offers no benefit to taxpayers or shareholders.   Unions exist solely to provide fat-cat jobs for the guys at the top and extract  above-market premiums and benefits for their members.  Any song and dance about educating our children or building cars for America’s future or whatever other slogan union members hoist on placards is simply an exercise in PR.  They don’t mean it.  If they did, they would start acting in the interest of their employers, not themselves.

Cases in point:

• Teachers in Chicago – still one of the most appallingly bad school systems in America – are waging an epic contract battle.  One benefit they’re trying to cling to – banking unused sick days year after year, for a big payout when they retire.  While it makes good sense to give people incentive to not use personal days, most companies do so by letting you roll a certain number of unused sick days over to more vacation days the following year.  That provides a business benefit and is good for the employee.   The unused sick day payoff scheme?   Not so much.
• People who work for the Metropolitan Water District of Chicago have a 7 hour day, including a one hour lunch.  So effectively, they’re working 6 hours.  Word is that you best not be standing in front of the elevators at 4:00, lest you’ll get trampled.
• In the private sector, Hostess is struggling against bankruptcy.  The company has myriad issues, but one key driver is its labor situation.  The company has to contend with 372 collective-bargaining agreements, a dozen separate unions, 5,500 delivery routes, and no fewer than 40 multi-employer pension plans – a hideously costly administrative nightmare. According to Fortune magazine, Hostess still has ludicrous work rules: The Teamsters had separate drivers for deliveries of such goodies as Yankee Doodles and Nature’s Pride Nutty Oat.  You read that correctly.  Different trucks for different cookies.  It’s a jobs preserving rule, one that Hostess agreed to in the last negotiation.  But why would any union ask for something like that, other than pure self-interest?

Acting in the interest of the employer is absolute anathema to the union mentality.  But it’s how the private sector works.  Employees are promoted based on merit, they’re fired if they do crappy work, and they’re rewarded when the company does well.  It’s a system that works well.

I do believe there are a few exceptions.  Coal miners come to mind.  The economics of that industry are clearly out of whack, since it seems that companies gain a bigger reward by maintaining unsafe working conditions.  The mine workers need some muscle behind them.  But airline pilots?  The gal behind the desk at the DOT? The clerks at City Hall?  The IT professionals at the water district?  These people don’t need unions to protect them.  Government would be more efficient if it wasn’t hamstrung by Big Labor and could run more like a business.

Contrary to this week’s DNC talking points, entrepreneurs *are* risk takers.

MSNBC host Melissa Harris-Perry erupts (and clearly doesn’t understand entrepreneurial risk)

It appears that new talking points have been issued in advance of the Democratic National Convention, because today’s Sunday a.m. news shows leveled considerable vitriol at entrepreneurs, taking issue with the notion of risk-taking, in the business-building, entrepreneurial sense.

On Fareed Zakaria’s show, GPS, guest Nick Hanaheur – himself a VC – questioned the risk guys like Mark Zuckerberg really take, making the argument that people like Zuck (and Jobs, Gates, Brin, Page & Bezos) come from good families, and don’t really take any personal risk.   Here are his comments, taken straight from CNN”s transcripts from the show:

“But I just want to address this risk thing for a moment because I find it absurd. I mean, if you think about the iconic so-called risk takers in our economy, Bezos, Zuckerberg, Gates, the Google guys, just imagine their lives, right? So the Google guys — and God bless them, they’ve done a great thing. But they’ve grown up in families where their parents are professors of mathematics and computer science. So far, no risk. They go to Stanford University to get Ph.D.’s in computer science. Other than being born in the British Royal family, no institution on earth more insulates you from risk than a Ph.D. in computer science from Stanford. At the best time in human history in the best place in human history, they go off to live the dream and start an Internet company in Silicon Valley in the mid ’90s. So far, no risk. The money that goes into Google comes from venture capitalists. You think maybe they took a risk, but not really because venture capitalists like private equity people make money whether the deal works or not.

The only people who took a risk in this entire chain are the working people whose pension funds the venture capital — venture capital company invested in Google. Because if Google goes bankrupt, those people will actually lose their money. There’s this idea that we owe the so-called risk-takers fealty or special tax treatment is utterly absurd. It’s just not true and not fair.”  Nick Hanaheur, co-founder, Second Avenue Partners

Oh, Holy Mother in Heaven.

Hanaheur does come from money, and apparently always had enough dollars in the bank to seed his ventures.  Evidently, he never lived hand to mouth, living on ramen noodles, maxing out credit cards, borrowing money from friends and family for money in order to keep things going long enough to get the product to the point it can be shipped/used/shown/demoed, hopefully leading to a cash infusion, either from sales or an investor.

Smart people who found companies do so because they are they ones who want to grab the brass ring.  They do not want to become cogs in the corporate wheel, or a tenure-grasping academic.  Whether their motivation is to get rich or build something that will make the world a better place, these entrepreneurs all make the decision to delay gratification (or, steady employment with health benefits) in order to pursue their vision.  They knowingly eschew the “easy way.”

Even after all their efforts, there is no guarantee they will succeed.  Most start ups and small businesses don’t turn into brands like Amazon, Facebook or McDonalds.  Most fail.   Start ups – whether they’re a tech venture down in Austin or the burrito place a couple miles from my home – burn through their founders’ time and cash.  And therein is a big hunk of personal risk.   Because they will lose money (note to Hanahuer – it’s called OPPORTUNITY COST).  And time.  And the benefits they would have accrued had they taken a safer, less risky path.

Hanaheur doesn’t think entrepreneurs deserve incentives to launch companies.  Republicans generally disagree.  Innovation is an engine that drives jobs in this country.  Entrepreneurs create jobs.  Not the government.

And then, in an entirely unrelated show over on MSNBC, host Melissa Harris-Perry flipped out over the issue of risk taking.  By her calculus, if you don’t live in a neighborhood where you could be shot, you aren’t taking risks.    That video is at the top of this post.

So it looks like new talking points have been issued.  Entrepreneurs are this week’s red-headed economic stepchild.  If you have a small business or a start up, and you are wondering how to cast your vote in November, I think the choice is pretty clear.   Romney is going to support you.  Obama, on the other hand, reviles you.

Being Pro-Business is GOOD for the US Economy.

A snapshot of unemployment in the U.S. over time. The last few years sure look damming. Click on the graphic to go to the interactive original on the Wall St. Journal site.

Today in America, half our countrymen receive some form of government aid, due in part to the fact that the US Government is running ads to get more people onto foodstamps – a practice that actually started under George W. Bush. Today, under the Obama administration, fully one in seven Americans are receiving food aid.

Rather than spending time, energy and resource on expanding government assistance, the economy as a whole (and we as individuals) would benefit more if the focus was on re-starting our economic engines. Instead, we have a stalled Presidential Jobs Commission that hasn’t met for months. Why is that the case? Possibly because the commission’s latest set of recommendations – which included reducing regulation (including EPA, SarbOx and Dodd-Frank) and easing taxes on investors – don’t jibe with the president’s point of view.

Let’s talk about that point of view for a second, with respect to business, which, last time I looked is unequivocally the principal revenue generator in any economy.  But  I am beginning to agree with the assessment heard last night during Convention coverage that Obama is hostile toward business. While I hate hyperbole, after reflection, in this case it’s warranted.

President Obama has, over the course of his presidency:

• Ignited a class war class war, pitting “the rich” against America and supported the Occupy movement
• Impugned successful people along the way
• Been openly dismissive of the private sector
• Ignored the solid, bi-partisan advice of both the Budget Deficit Commission and his own jobs panel, because the recommendations ran counter to the big government solutions Obama espouses
• Piled on crippling and horrifically expensive regulation, including an expansion (some call it an overreach) of the EPA and Dodd-Frank.

Simply put, I’m not voting for this guy:

But I’d vote for Mia Love all day long:

Or this guy, Artur Davis:

Simply put, one of the key reasons I’m voting for Romney is because he’s pro-business, and so am I.