The CEO problem

posted at 1:05 pm on July 5, 2010 by Ed Morrissey

Fareed Zakaria provides an interesting diagnosis to the economic woes that continue to plague the US as Barack Obama’s second year in office grinds towards the midterms.  He spoke to a number of CEOs, many of whom voted for Obama in November 2008, in order to get an idea of why these companies aren’t putting their resources to work in creating jobs and economic expansion.  Their answer?  They now see Obama as fundamentally anti-business and don’t want to take the risks:

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. …

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. …

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.

Once again, we have another road-to-Damascus opportunity for leaders of the business world: you don’t elect class warriors and expect pro-business policies to result.  None of the data in the last paragraph in the excerpt holds any new information.  Obama’s campaign had few business leaders on board, too, and his lack of executive and private-sector experience was clear from the beginning of his campaign.  Obama’s populist rhetoric throughout 2007 and 2008 made his antipathy towards the private sector and his predilection for government control all too obvious — as we repeatedly warned throughout the campaign.

Oddly, Zakaria offers a hair-of-the-dog solution in the short term, demanding another government stimulus package in the summer.  Why?  Because teachers will lose their jobs, Zakaria claims, falling into the same trap that the national media bought in the wake of Porkulus.  Never mind that dozens of state- and local-based media reported accurately that those jobs were never actually in jeopardy, as the “education” funds received by the states allowed them to shift resources to protect jobs in other bureaucracies.  Zakaria spends most of his column showing how destructive the government interventions have been, and then argues we can’t live without just one more round, like an alcoholic who promises to swear off the bottle tomorrow.

In order to unlock the capital in those ledgers, the US needs to set a fiscal course that demonstrates deficit reduction and elimination through substantial spending cuts rather than future tax hikes.  That means an end to government interventions, especially those added or enhanced in the last few years that took the annual federal budget from $2.77 trillion to over $3.8 trillion in just three fiscal years.  Capital markets need to see pro-capital policies, run by people who actually understand capital markets, and not by ivory-tower intellectuals whose closest experience to private-sector management was a case study published by the Harvard School of Business.  And until Washington starts producing those kinds of policies, investors will continue to shield their capital — or find other markets in which to invest it.

Update: King Banaian analyzes this and calls it regime uncertainty.  That’s an understatement, and as King notes, it doesn’t just apply to Obama.  Be sure to read it all.


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One of the major reasons the Great Depression didn’t end until the war buildup was that business leaders didn’t know what was coming at them next.

Obama has learned his lessons well.

He is determined to destroy capitalism completely this time.

notagool on July 5, 2010 at 7:56 PM

for fear of offending people in Washington

How frightening when private citizens, regardless of stature, have to consider such a thing lest their livelihood be threatened by representatives of the federal government.

rogerb on July 5, 2010 at 1:20 PM

Welcome to “Wesley Mouch”-style Czar-dom.

Who is John Galt on July 5, 2010 at 7:59 PM

The road to serfdom: FDR > LBJ > BHO

Dasher on July 5, 2010 at 8:23 PM

He spoke to a number of CEOs, many of whom voted for Obama in November 2008, in order to get an idea of why these companies aren’t putting their resources to work in creating jobs and economic expansion. Their answer? They now see Obama as fundamentally anti-business and don’t want to take the risks:

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.

So they get the feeling he’s Satan, what with the horns, ptichfork, goat legs, alluring scent of brimstone and obsession with dealing for mens’ souls. But they like his smile, though.

That is what I consider ego-driven cognitive dissonance. Kind of like “emperor has no clothes”, but more self-centered. They KNOW d@mn well that the guy is poison for business, but at the same time they like his mocha skin, or pleasant smile, or creased pant leg, and can’t quite get over the hurdle of their own ego – they don’t want to admit to themselves or anyone else that they voted for someone that is completely opposed to their interests. They don’t want to admit they made a huge mistake, that they were wrong and gave power to an empty-suit, narcissistic socialist fudge-up who’s hostile to business. They REFUSED to see him for what he is, for what a he!! of a lot of other people saw immediately. And so, they must justify their support of Barry, project their self-loathing onto their opponents pointing out the obvious, and hope that Barry somehow sees the light.

Saltyron on July 5, 2010 at 8:38 PM

notagool on July 5, 2010 at 7:56 PM

One thing I’ve noted about the end of the Depression: it was ended by massive government spending, but that spending was focused on jobs that made tangible goods of all kinds. Why can’t we try THAT for a change instead of handing out money to every set of outstretched hands and demanding nothing in return?

(and before the hardcore cases jump down my throat,
I acknowledge that such a solution is far from perfect.)

Of course, when in this day and age that the civilian sector has thrown sanity to the wind on this very matter…

What can I say? We’re trying to keep up a prosperous empire on borrowed money and massive imports, which is roughly like trying to fuel a steam engine on tissue paper.

Dark-Star on July 5, 2010 at 8:39 PM

Those who had met him thought he was unusually smart.

I call BS!!

From his own speeches and actions, Obama must have flunked every course he ever took in History, Civics, Geography, Economics, and Business.

He’s immature, petulant, covetous, self-absorbed, and a ‘bull in a china shop’ who’s also self-destructive.

Smart? I don’t think so: where’s the evidence?

landlines on July 5, 2010 at 8:43 PM

Saltyron on July 5, 2010 at 8:38 PM

“The devil’s greatest scheme was convincing mankind that he didn’t exist!”

landlines on July 5, 2010 at 8:46 PM

Blind Fools

These corporate leaders? Right wing asses. Like a general hosting a Rolling Stone reporter.

Did the moron ask to see some prior issues? They have had stuff crazier than Gonzo and almost always left wing.

Then we have our vision impared media working to get The One elected. Then keep all the illegals in this country. Have those idiots ever visited Mexico? Why not limit the regulation to Wall Street? Of course, those guys are major donors.

Katie Couric should be forced to live in a Gilfstream trailer, not jet, on a couple of beaches near Baton Rouge, some black neighborhoods in Chicago or a few other places I can name so she can see the fruit of The One’s management ability. Katie, I am going traveling, how much do you want for a tour? Too bad she make 20 million or I would try to bribe her. I would find out which lying newspapers she reads. And we could discuss a COIN program aimed at the real problems in free enterprise.

And skip the carpet bombing by this administration!

IlikedAUH2O on July 5, 2010 at 9:03 PM

One thing I’ve noted about the end of the Depression: it was ended by massive government spending, but that spending was focused on jobs that made tangible goods of all kinds. Why can’t we try THAT for a change instead of handing out money to every set of outstretched hands and demanding nothing in return?

(and before the hardcore cases jump down my throat,
I acknowledge that such a solution is far from perfect.)

Of course, when in this day and age that the civilian sector has thrown sanity to the wind on this very matter…

What can I say? We’re trying to keep up a prosperous empire on borrowed money and massive imports, which is roughly like trying to fuel a steam engine on tissue paper.

Dark-Star on July 5, 2010 at 8:39 PM

Make the Bush tax cuts permanent and suspend capital gains taxes for a minimum of one year. Oh and halt all government hiring for two decades.

Inanemergencydial on July 5, 2010 at 9:05 PM

Make the Bush tax cuts permanent and suspend capital gains taxes for a minimum of one year. Oh and halt all government hiring for two decades.

Inanemergencydial on July 5, 2010 at 9:05 PM

No argument here whatsoever. Now we just have to make it law. 8-{

Dark-Star on July 5, 2010 at 9:50 PM

I find it amazing that a CEO would vote for a presidential candidate based on the vague promise of “hope and change.” My guess is they did it primarily because: 1) it was the “in” thing to do in their social circles, 2) political correctness and 3) good old liberal white guilt.

bw222 on July 5, 2010 at 9:53 PM

I have a theory that CEOs don’t trust CEOs who run for President.

Look at Ross Perot, Steve Forbes, and Mitt Rommney. They are all men who have been successful CEOs, know how to run businesses and yet they were unsuccessful in winning the White House.

You would think that CEOs would rally around one of their own. Why don’t they?

Conservative Samizdat on July 5, 2010 at 6:43 PM

The Left and Democrats hate capitalism, so any such Rethuglican capitalist CEO alumni candidate who runs will never get any positive coverage from the Left-controlled press.

I doubt any of these CEOs bother to take the time to check any other filters of information anyway, so it’s a moot point.

Del Dolemonte on July 5, 2010 at 10:39 PM

“…thought he was unusually smart”

What exactly did they think he was smart about? Getting elected? Playing Chicago politics? Spending other people’s money? He hasn’t done anything successful anywhere else. Apparently those CEO’s are poor judges of character and their shareholders’ value.

ray on July 5, 2010 at 11:36 PM

They are interested in Omerica.

They want America back.

Moesart on July 6, 2010 at 1:12 AM

They are not interested in Omerica.

Moesart on July 6, 2010 at 1:12 AM

Those who had met him thought he was unusually smart

I laughed.

Metro on July 6, 2010 at 1:45 AM

Make the Bush tax cuts permanent and suspend capital gains taxes for a minimum of one year. Oh and halt all government hiring for two decades.

Inanemergencydial on July 5, 2010 at 9:05 PM

A very good idea, but instead when the tax increases come on Jan 1 2011 we will wish it were 2010 again.

dogsoldier on July 6, 2010 at 6:52 AM

dear leader: what does ceo stand for?

cmsinaz on July 6, 2010 at 6:55 AM

I find it amazing that a CEO would vote for a presidential candidate based on the vague promise of “hope and change.” My guess is they did it primarily because: 1) it was the “in” thing to do in their social circles, 2) political correctness and 3) good old liberal white guilt.

bw222 on July 5, 2010 at 9:53 PM

Don’t forget that Harvard Law degree. Impresses the easily impressionable.

txmomof6 on July 6, 2010 at 7:53 AM

What exactly is “smart” about this guy?

I failed to see it before and I fail to see it now.

Maybe these CEOs are too naive to see what a con man this guy has.

The crap he’s peddling would get him thrown out of a three card monte game on the street.

These guys need to get out more. This guy is a classic “talk the talk” situation.

NoDonkey on July 6, 2010 at 8:00 AM

The BP oil spill illustrates this. Obama would like nothing better than to “lead” by creating a narrative making BP the villian in this, like, they cut corners on safety to save money. Then responsibility could be put on BP, and Obama wouldn’t have any responsibility for even leading. He could just finger point and “kick a**”. But the last thing BP wanted was an oil spill — it doesn’t make sense they even suspected their methods were more likely to lead to this. So since the “blame BP” narrative is insufficient, it puts responsibility to lead back on Obama. And he can’t do it, he won’t do it. He’s not a leader.

Paul-Cincy on July 6, 2010 at 8:40 AM

We have a CEO problem, alright. It’s the CEO of the United States of America. He’s the problem. We need to replace him.

RonF on July 6, 2010 at 12:25 PM

“Men of factious tempers, of local prejudices, or of sinister designs, may by intrigue, by corruption, or by other means, first obtain the suffrages, and then betray the interests of the people.” ~ James Madison (Federalist #10 November 22, 1787)

scullymj on July 6, 2010 at 1:51 PM

Glad to hear Tony Podesta is making money like crazy these days. I’m sure it was an accident that John Podesta proposed legislation that had the happy side-effect of earning money for his brother…

hawksruleva on July 6, 2010 at 2:24 PM

I have lived and worked in international business for 25+ years. The one thing that has always driven our decision making on where to make asset commitments is the stability of the regime and the relative consistant application of law, tax and compliance will be stable in the medium to long term. The atomsphere being fostered by the Obama adminstration remind me greatly of those I saw in 3rd world counties in the past decade of so. Investment will not flow under such conditions.

jimwesty on July 6, 2010 at 2:28 PM

notagool on July 5, 2010 at 7:56 PM

The Great Depression didn’t end with the start of WW2, the US economy didn’t boom until the late 40’s and 50’s.

If you think about it, it’s easy to understand. After WW2 who could supply the world with goods?

Western Europe? Nope, Western Europe was bombed to ruble and dust.
Eastern Europe? Nope, Eastern Europe was bombed to ruble and dust.
Asia? Nope, Asia was bombed to ruble and dust.

The only major industrial country intact at the end of WW2 was the USA.

DSchoen on July 6, 2010 at 8:55 PM

I personally think we all need to start sending daily emails to the white house with a simple seven word message,

“Daddy, did you plug the hole yet?

Vntnrse on July 7, 2010 at 1:47 AM

Don’t forget that Harvard Law degree. Impresses the easily impressionable.

txmomof6 on July 6, 2010 at 7:53 AM

.
What Affirmative Actioncan do for you:
Barely make it through Occidental? No problem! Affirmative action will get you into Columbia! Barely make it through Columbia? No problem! Affirmative action will get you into Harvard Law? Barely make it through Harvard Law? No problem! Affirmative action will get you a position as President of Harvard Law Review! Only publish one article in Harvard’s Law Review? No problem! Affirmative action will get you …

Mike OMalley on July 7, 2010 at 1:51 PM

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