UPS chief: D.C. politics gets in way of job creation

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.

Scott Davis

Scott Davis

What’s next?

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

31 comments Add your comment

Rick in Grayson

August 30th, 2011
5:37 am

DC politics most certainly gets in the way of filling jobs here in the US!

Why are H1-B visas still being granted to foreigners in the IT field (and others) while many US IT workers do not have jobs? It is simply because foreign workers will accept a salary that doesn’t make long term sense if one is a long term resident of the US. The US IT market has become a training ground for non-US citizens.

There has been plenty of evidence that IT salaries are being lowered by H1-B visa holders and US politicians still have their heads in the sand. The top 20% of H1-B visa holders may be the “best and the brightest”, but the other 80% don’t fit that description.

I understand now that H1-B visa holders are now targeting other job categories like lawyers and accountants. Outsourcing is another avenue for providing jobs to foreign nationals and work is being sent to other countries and our politicians can’t seem to come up with a system of tariffs that would tamp down on that activity.

Maybe we should elect politicians that are citizens of other countries since our own don’t protect the jobs and other resources of the US.

Z

August 30th, 2011
5:39 am

We only need to remove the “Elephant in the Room”, the 112th republican/teaparty majority congress to get this country on the move again..it is as simple as that.

Rick in Grayson

August 30th, 2011
6:55 am

While I agree with most of what Scott Davis states above, there is more to it than, “We desperately need to add jobs in this country”.

We also need to stop legal immigration, especially at a time when US citizens do not have jobs to support their families. Does it make sense to continually add new legal immigrants during this time? Does it make sense to add almost 2 million new legal immigrants to the US population each year, especially those with few skills? Job creation hasn’t been able to keep up with population growth over the last couple of years.

What is the population number that the US is shooting for over the next 50 years? Isn’t 310 million people enough to support our country? We will have 450 million at the current rate, especially with the high birth rate of Hispanics, many of whom are in the country illegally. Most of those in the country illegally have few skills, that only exacerbates competition for jobs needed by our most vulnerable US citizens. Don’t we already have enough HS drop outs to do these low skilled jobs? Of course not, we pay too many people to sit on their butts and collect from the US welfare state.

DC politics…you want DC politics! How about Obama creating an open borders immigration policy by executive fiat! Obama has created a backdoor amnesty for millions of illegal aliens and is now offering those illegal aliens the chance to receive work permits! Is this not the most IDIOTIC policy during a national recession! It is insane to give US jobs to those that are in the country illegally while there are not enough jobs for US citizens! Obama is putting the interests of illegal aliens before those of US citizens….AGAIN!

Obama wants to talk about creating jobs in the next couple of days…what has taken him so long to get around to it? He focussed a lot of time and energy on HEALTHCARE, most of which will not take place until 2014! He has granted waivers to all his “friends and family” (aka, labor unions) after saying how important it is that EVERYONE purchase health insurance. The government can require US citizens to purchase health insurance but they can’t deny jobs to illegal aliens…what a government!

The jobs that government creates are a waste of taxpayer resources. Here is a headline from another source, “Seattle Green Jobs Program Gets $20M, Creates 14 Posts”. Their are many more from other sources. Again, more wasteful spending of our taxpayer resources.

Rick in Grayson

August 30th, 2011
7:10 am

The future of agricultural jobs not only in the US but across the globe: http://www.kinze.com/news/viewNewsArticle.html

Farm equipment that can prepare fields, plant, and harvest crops with GPS controlled robotics.

I’m sure that UPS has it’s fair share of automated equipment and Google is testing “driverless” cars. Fewer jobs for humans over the next 50 years, yet the US and the world’s population continues to rise.

independent

August 30th, 2011
7:18 am

Obama is not a bad person… he just has no real world business experience… remember when you graduated college ??? you were probably alot more liberal…. because that’s what you get from college professors… especially IVY league… he had a racist preacher… ACORN ?? one term senator.. who voted ” present ” no common sense business…. own or run a company ?? not even a law practice… just a law student… Scott Davis here from UPS… a profitable business… look at his competitor… the U.S. Post Office… bleeding Million$… if Scott were in charge of Post Office ??? in one year he could make it profitable by raising bulk rates ( junk mail we throw away ) and home delivering 3 days M W F…. why can’t Obama do this ??? Postal Union… just one simple example.. could do this all through gov’t ..

Road Scholar

August 30th, 2011
8:13 am

Good job Henry!

Good Grief

August 30th, 2011
8:36 am

“We only need to remove the “Elephant in the Room””

@ Z … you’ve got part of it right, but the overwhelming majority would be correct in stating that the “elephant” is actually a donkey (jackass) and that would be Barack Obama!

Bottom line is both the consumer and businesses have no confidence!

independent

August 30th, 2011
10:15 am

Obama just appointed Alan Krueger ( a Princeton Prof. ) to head his economic team…. ” continuity appointment rather than a movement in a new direction “.. we need businessmen for advisors… from the real world… can’t be anti business with regulations, taxes, pro Union, and create jobs !!

Shirley U. Jest

August 30th, 2011
12:28 pm

Yeah, Good Grief, Obama did all of that himself. But Scott Davis clearly said “both sides”. But keep on turning a blind eye to what the Republicans and Democrats have done.

It is like two girls having a catfight on the playground. Everybody including businesses are tired of watching the catfight, and not getting a chance to play on the swings.

Let's Be Reasonable

August 30th, 2011
1:05 pm

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 “The polarization is what’s getting us now,” Davis said. “What happened to the middle? Both sides have to give.”

Now ask yourselves what branch of government is holding up trade agreements? And spending on infrastructure, for get about it says the Tea Party. Remember back during the campaing for 2010 elections, ” We are not going to Washington to sing Cum ba yay with Mr. obama.” Sounds familiar?

Tyler Durden

August 30th, 2011
1:53 pm

Quote from Shirley U. Jest at 12:28 “It is like two girls having a catfight on the playground.” I totally loooooove cat fights!

By Definition

August 30th, 2011
4:49 pm

Demo: to demolish, to destroy
Crat: to participate in

Democrats are living up to their name!

Scott Davis tries to have it both ways

August 31st, 2011
6:52 am

Davis gives an honest and obvious answer when asked why his company, like so many others is hoarding cash. He says demand is so weak, that it doesn’t make sense to invest the money.

Then he veers into the nonsense of blaming DC politicians for being “indecisive” on health care, energy policy, etc. Granted, Chambliss, Isakson, Obama et. al. have made plenty of mistakes. One of the biggest was making the stimulus package too small and too weighted with tax cuts. The problem with a lack of business investment is that high unemployment is draging everything else down.

Notice that Davis doesn’t actually blame one particular group of politicians or even the president. He probably doesn’t want to seem overtly partisan.

It's the liquidity trap

August 31st, 2011
7:42 am

UPS sits on large amounts of cash because interest rates are near zero. There is no cost to sitting on cash. There is no benefit in keeping it in bonds, in fact if the money is tied-up in bonds, it cannot be quickly shifted to other purposes.

Once demand increases, employment will improve, wages will rise and UPS will put those billions into improved and/or expanded distribution systems, etc.

Everything hinges upon employment. But Georgia’s GOP is determined not to support jobs programs. As such, we will be stuck with a weak economy and high unemployment.

independent

August 31st, 2011
8:24 am

Gov’t jobs programs don’t work… period … cost$ out way benefits… Repubs want to incentivize.. private sector/ small business to hire… these are the real tax payers…. Get NLRB off closing the new boeing Plant in S.C. !! Boeing will lose plane orders to French… get oil and gas production here in U.S… going !! keep min. wage low to allow entry level to get jobs!!

RGB

August 31st, 2011
9:49 am

This administration is the most anti-business America has ever known. Only about 16% of Obama’s cabinet has ever worked in the private sector–a historical low.

And of course Scott Davis supports infrastructure spending. Gosh, I’ll bet he supports increased funding for the FAA too. His job is to advocate things that benefit his company regardless of their impact on anyone else. Smooth and numerous roads plus clear skies mean profitability for UPS.

Obama’s new egghead Princeton economic adviser has written that a good way to stimulate the economy is to have a 5% consumption tax effective two years from now, reasoning that consumers will want to avoid that tax and therefore will spend money now. What?

And you people who use the Tea Party as a whipping boy should know that every time you do you disqualify yourselves as serious people. Thank God there are people who want this country to live within its means. Spending every dollar we have and borrowing 40% more hasn’t worked yet and is responsible for the malaise we are now in.

Too bad Henry didn’t specifically ask or write about Davis’s view on domestic energy production. That would seem to be a necessary component of a story about a transportation/logistics company.

??

August 31st, 2011
9:57 am

Houston, TX can report an AP story about APD, but AJC can’t? Seems a bit shady. What gives AJC? http://www.chron.com/news/article/Audit-85-Atlanta-officers-lost-arrest-powers-2148062.php

Shirley U. Jest

August 31st, 2011
10:37 am

Most people supported the Tea Party when it ran on the slogan that it included Democrats, Independents, and Republicans. Now, the Tea Party has morphed into a wing of the Republican party. That is why people are making the tea party a “whipping boy”.

Truth B. Told

August 31st, 2011
2:27 pm

“Most people supported the Tea Party when it ran on the slogan that it included Democrats, Independents, and Republicans. Now, the Tea Party has morphed into a wing of the Republican party. That is why people are making the tea party a “whipping boy”.”

Most people do support the Tea Party, but you liberals are the ones that are constantly trying to discredit them by calling them racist, and other hate filled names. The liberals sure do get hypocritical and hateful when their backs are up against a wall! Obama is loosing ground and all he can do is listen to the morons that voted for him and cry about the “hateful” Tea Party.

Koolaid is filled with artifical everything and loads of stuff that is bad for you. But it is cheap and thats why you liberals keep chugging it down!

Jon

August 31st, 2011
5:44 pm

The problems are several but at their base exists a common cause. Energy prices are rising as the easiest to extract petroleum has been discovered and burned. The entire industrial age and the modern economy are predicated on cheap energy, which no longer exists. We are moving into or are already in the peak oil plateau. Unless new methods of obtaining and distributing energy are discovered we will soon begin the long slide down the backside of the bell curve of peak oil.

Our current economic depression is a byproduct of the lack of economic growth. Economic growth is built on cheap energy, cheap energy no longer exists. We cannot expect our economy to rebound when conditions are not receptive to growth.

If we had leadership, both corporate and political, this facts would be explained to people on a daily basis. Instead we get American Idol and political theater where each party blames the other for all sins. Polarization is not the problem, the problem is ignoring the real problems to play at political theater while our real economy and the world it operates in collapses.

There was time to mitigate our problems, but we wasted it on meaningless wars and corporate profit. The future will belong to those who see our real problem, a 150 year petroleum bubble that is bursting all around us. What will be left is the prepetroleum world filled with relics of cheap energy that are no longer functional or practical in an expensive energy world.

Localism will return, it will no longer be feasible to build a 500 watt television half a world away. More efficient heating and cooling will replace the mania for larger televisions and bigger SUV’s.

We cannot find an infinite supply of oil on an finite planet. The entire geopolitical economy is in turmoil. What causes simultaneous recessions and economic collapse worldwide? Energy – the one thing all economies need for growth. Cheap energy that is at the heart of all our problems and no one is addressing it.

We can’t fix, what we won’t even talk about. Energy. lets talk about it.

Jim Avena

September 1st, 2011
9:39 pm

The existing tax as structured needs to be realigned the Fair Tax will do just that. The Obama administration needs someone who knows what happens when you reduce taxes, because that will increase revenue. More people will invest and ‘obtain cash to start new business. also expand existing business.

Ha! Fair Tax, get it. It's a joke

September 2nd, 2011
7:11 am

The Fair Tax is a puchline that never get’s old. People suckered into this fairy tale of utopian tax policy always overlook the obvious. Someone will be paying more under the plan. Older Americans and the poor will pay more (yes, even with the “prebate”).

Politicians and radio blow-hards have been playing the “Fair Tax”ers for fools. Politicians have no intention of ever making it law and talk show hosts keep people listening to them rant about how much better things would be under the “Fair Tax”.

santoka

September 2nd, 2011
8:12 am

Rick’s first comment is spot on. I would bet UPS (and other domestic based companies) is/are creating jobs now – just most of them are in India.

santoka

September 2nd, 2011
8:15 am

I keep hearing the “US needs to graduate more engineers and computer science majors” when US industry does not want to pay the US rate for that talent. Little bit of chicken and egg – if I don’t know if I will spend 4 difficult years in a major to come out to H1-B set salaries, then maybe I will take something different.

Homer

September 2nd, 2011
9:44 am

How about this, santoka – make the sacrifice and get your education. Start at the bottom like everyone else then do something on the job that makes your employer notice your superior intelligence, drive and ambition. Then you can demand a better salary. That’s the American dream. For those of you that are a few generations away from immigrant status, that’s the way it works. You don’t have a birthright to a high paying job with no competition.

Homer

September 2nd, 2011
9:52 am

How come Apple isn’t complaining about uncertainty? How come Google isn’t complaining about uncertainty? What do they know that Scott Davis doesn’t know?

santoka

September 2nd, 2011
2:49 pm

Thanks for the advice Homer – I have three degrees now and working on a second masters now.

Roadrunner

September 3rd, 2011
5:10 pm

Rick in Grayson, you are 100% correct!! Jobs for Americans is what its going to take to get us out of this mess and importing those from lower cost sources isn’t going to cut it!

And for those who say, “he said both sides are to blame”, Seriously? CEO’s for major corporations aren’t stupid. He may think Obama, Pelosi, Reed, et al. are all the biggest morons in the world and it wouldn’t matter, they are morons who hold major power of his company’s ability to survive & thrive. So if he’s a little less than candid and hesitant to be critical of those in power today you may not want to hang too much on his politically astute words…

Homer

September 3rd, 2011
8:36 pm

You’re not helping yourself, santoka.

willydoit?

September 3rd, 2011
9:08 pm

Engergy policies have a lot to do with uncertainty, or should I say non-energy policies??
As long as the price of gas stays above $2.50 a gallon or until politicians get out of the way of the electric utilities building more power plants, we should all get used to 10% unemployeement being the norm.
Large companies with huge fleets of vehicles are being raped at the pump. Also, those same large companies have no idea what their electric and gas bills will look like in a few years.

Bob Walters

September 4th, 2011
4:54 pm

“Indecision [from Washington] on energy policy, health care … and other issues makes it difficult to make investments,” Davis, 59…

That statement reinforces the positions of Bachmann, Palin, Paul, and Perry:
– repeal ObamaCare
– eliminate ALL corporate income taxes
– eliminate the EPA
– end the H1 Visa program
– mass deportation of illegal aliens
– end all foreign conflicts immediately
– shut down all US military bases on foreign soil
– end Medicare, Medicaid, and Social Security

Radical solutions for radical change: Tea Party 2012