Tag Archive for 'jobs'

Mr. President, a recovery is not an expansion

Dear President Obama:

For as long as there have been organized economies there have been economic cycles, of which there are essentially three elements:

  • Beginning at the bottom, a recession (sometimes, but rarely, a depression). Historically, sir, recessions are short – often measured in months.
  • In the middle is a recovery, which has the task of healing the defects that caused the downturn while reversing negative growth. Depending on the severity of the recession, recoveries take a little longer, from months to a year or so.
  • And finally, the tide that floats all boats, the expansion. Expansions can last for years, as they did under two of your predecessors, Reagan and Clinton.

In America, we expect a recovery to be a means to an end, not a way of life. Alas, that isn’t your standard, because perpetual recovery has been our economic fate since you took office, four months before the Great Recession ended in June 2009.

Recently, in a speech in Elkhart, Indiana, you said this: “By almost every economic measure, America is better off than when I came here at the beginning of my presidency.” Those of us who have made payroll every month of your tenure see things differently, as, apparently, does your own Department of Labor. Two days after the Elkhart speech, the Bureau of Labor Statistics reported a measly 38,000 jobs were created in May – the worst jobs month in six years. And labor participation – the number of Americans who work – has languished under your watch at rates not seen since the last president who manufactured malaise, President Carter. You can’t have an expansion, sir, if people aren’t working.

Let’s review your economic performance, Mr. President, by the numbers. First, we’ll cut you some slack and throw out your first year in office, 2009. The recession ended halfway through, but ’09 was a horrible year you didn’t create, going almost 3 percent negative. But the next six years, through 2015, the economy averaged a pitiful 2.15% GDP growth. Those are not expansion numbers, sir, and they’re the worst for any president since World War II. Any economist will tell you an expansion is annual growth averaging at least 3%. By the way, 2016 is not trending any better than the past six.

It’s a misnomer to refer to a president as “handling of the economy,” because there are really only two ways you factor directly into its performance: 1) helping by getting government out of the way of job creators; and 2) hurting by putting government in the way. Mr. President, you’ve set a record for the latter as an unprecedented assaulter on job creators. Your weapons are:

  • Anti-business rhetoric – “You didn’t build that” and referring to successful people as “fortunate” who need to pay their “fair share”;
  • Anti-business laws – both the specter and the reality of Obamacare, plus Dodd-Frank, to name the big two;
  • Anti-business regulations, guidance and executive orders from your EPA, NLRB, Labor and FCC.

All of these are unprecedented for any president in their tone, scope, and damage. Not to mention the palpable fear and uncertainty that manifested among job creators.

Here’s more evidence: The NFIB Index of Small Business Optimism, the gold standard for such research, reports the longest stretch of pessimism in the Index’s 43 years during your presidency. This from the sector that creates over half of the jobs and half of the U.S. economy. In my own polling of small business owners, only 9% think you have “been good for the economy,” while more than two-thirds think your policies have been “an economic nightmare.”

Referring to the economy in the Elkhart speech, you said, “We can make it even stronger.” Who are “we,” Mr. President? The Oval Office door will soon hit you in the backside for the last time. With all due respect, sir, if “we” make “it” stronger, that will happen after you leave.

Write this on a rock … Out here on Main Street, Mr. President, we’re not going to miss you when you’re gone.

The kinship of private equity and small business

Mitt Romney’s record in the private equity industry has become part of the election year political debate. The Romney campaign offers it as a positive credential and the Obama campaign has disparaged the industry as a way of casting a negative on Romney’s record.

Recently, a former leader in the private equity sector and President Obama’s former “car czar” and loyal supporter, Steven Rattner, weighed in with support for private equity by allowing that these firms are completely legitimate and add value to our economic system. But, as if to throw a bone to his former boss, Rattner also pointed out that private equity firms are founded to create wealth, not jobs. Here is one of Rattner’s quotes on this issue:

“Bain Capital — like other private equity firms — was founded and managed for profit … earned legally and legitimately. Any job creation was a welcome but a secondary byproduct.”

With this pronouncement, Mr. Rattner finds himself in historic company.

In his seminal work, “The Wealth of Nations” (1776), Adam Smith, introduced his now immortal “invisible hand” theory, which proposes that an individual, “led by an invisible hand” in pursuit of “his own interest, frequently promotes that of society more than when he really intends to promote it.”

For Smith, who is considered the father of economics, there was no chicken/egg quandary. The chicken – individual self-interest – comes first, followed by the egg – benefit to society. Mr. Rattner, perhaps without intending it, is singing Smith’s song in 21st century English: profit first, jobs second.

Nor is there a chicken/egg quandary today. In our capitalist, free-market economic system, the chicken is profit and the egg is jobs. It’s superfluous to say that jobs are the secondary byproduct of private equity; jobs are the byproduct of capitalism – period. In fact, the only economic system that has job creation as a founding imperative is communism.

From the very first small business created in America to the millions that have been formed since, from the sole proprietor to the 499-employee high-growth enterprise, all were founded with the nuclear notion of generating profits that will ultimately create wealth. And as essential as employees are to accomplishing a business founder’s wealth-creation goal, no pre-start-up entrepreneurial dreamer ever thought, “I want to commit all of my time, energy and resources – and risk everything – so I can create jobs.”

Like any venture that takes risks, private equity firms have to make tough business decisions and they make mistakes, which are fair game for critics. But if you’re going to malign private equity firms because their founding principle is to create profit and wealth, then you would have to extend that indictment to all 26 million American small businesses.

Led by an invisible hand in pursuit of their own wealth-creation self-interests, America’s small businesses benefit society by producing over half of U.S. GDP, creating most of America’s new jobs and delivering tens-of-millions of paychecks to their productive and grateful employees every month.

For small business, the chicken is profit and the egg is jobs.

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I talked more about the “Profit first - jobs second” business motivation on The Small Business Advocate Show. Click here to listen or download.

Check out more great SBA content HERE!

Take this week’s poll HERE!

Small Business Advocate Poll: Are you worried about declining American manufacturing?

The Question:
Are you worried that America has lost too many manufacturing jobs over the past 20 years?

75% - Yes, and we should do what we can to bring those jobs back to the U.S.

25% - No, the 21st century economy naturally has fewer manufacturing jobs


Jim’s Comments:

It is the height of understatement to say that the issue of creating and preserving manufacturing jobs is complicated. Manufacturing jobs are influenced by globalization, technology, politics, capital markets and customer expectations, just to name a few.

Nevertheless, when Americans are asked what should be done about manufacturing jobs in the U.S., the response, as we see with our poll this week, almost always indicates that the solution is simpler than it really is.

As you can see above, three-fourths of our respondents said “Just bring the jobs back,” while the rest are more willing to acknowledge the forces that are influencing the evolution of the marketplace. I will have more to say about this in the next week or so. Stay tuned.

Watch Jim’s videos HERE!

Take this week’s poll HERE!

Check out more great SBA content HERE!




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