I’ve been confused lately about what “business uncertainty” means.
We heard the term during the health-reform debate. And the banking-regulation debate. And the Bush tax-cut debate. And the debt-ceiling debate.
Is it uncertainty that’s causing our economic problems? Is that the main reason companies are sitting on more than $2 trillion in cash instead of hiring workers?
Or is it simpler than that, namely the lack of demand from scared consumers, who make up 70 percent of the economy?
To try to find out, I sat down with someone who has a unique vantage point — a CEO of a Sandy Springs company that operates in 220 countries.
I know Scott Davis of UPS to be a plain-talking, reasonable man. That must be why President Obama asked him and three other CEOs to lunch at the White House recently to discuss how to create more jobs.
So, Mr. Davis, is uncertainty standing in the way of putting people back to work, or is insufficient demand the culprit?
Turns out, he said, it’s both. We’re in a pickle.
“Supply and demand should drive the economy more than anything,” he said. But, he added, companies “want to understand what the world is going to be like” before investing in new jobs.
What happens in Washington matters, not only for the big companies known for long-range planning. Small and mid-sized firms, which comprise the bulk of UPS customers, also develop their strategies three to five years out, he said.
“Indecision [from Washington] on energy policy, health care … and other issues makes it difficult to make investments,” Davis, 59, said. Thousands of dollars are spent hiring and training each new worker, and businesses don’t want to waste that money if Washington changes the rules.
Still, in large part, it’s the lack of demand that’s keeping the economy down, Davis said.
“If you’re scared to death by the Great Recession, you’re going to keep your money in your pocket,” he said.
UPS has $5.6 billion in its pocket, or what the accountants call “cash on hand.”
“My first choice [in spending that money] is to reinvest in the business,” he said. “But you need to find the right investment.”
What would tip the balance to hire more workers?
“I’m a big believer in simplifying the tax code,” Davis said. “Get rid of deductions.” And combine that with lower rates and tax credits to get more people hired.
Davis also believes the federal government should spend more on infrastructure — roads, rail and ports.
And he’s fed up with the long delays in passing free-trade agreements with South Korea, Colombia and Panama.
“We desperately need to add jobs in this country,” he said. “You need to get exports going to reduce unemployment.”
Most importantly, he said, more common sense and civility are needed in Washington to deal with long-term issues, such as the $14.7 trillion debt.
“The polarization is what’s getting us now,” Davis said. “What happened to the middle? Both sides have to give.”
Yes they do.
– Henry Unger, The Biz Beat