C-Suite Insider: Bouncing Along the Bottom
This past week the word stimulus has been said more times than I can remember and with both sides of the aisle battling over the success or failure of the first stimulus, and if this second round of spending will boost the economy, I decided to ask some of my contacts on what they think about the economy and the second stimulus policies unveiled by the President.
Mark Olson, former Federal Reserve Governor and co-chairman of the financial services strategic advisory firm, Treliant Risk Advisors says the talk of an economic stimulus was inevitable due to the continuing sluggish economy in an election year, but that doesn't mean opening Uncle Sam's wallet should be the first plan of action, "If Congress chooses to go that path I hope they utilize selected tax incentives as opposed to increased government spending. Tax incentives such as accelerated depreciation can make a quick impact while increased government spending is both inefficient and often an ineffective method of economic stimulation."
In his 75 minute press conference Friday, President Obama did talk about tax incentives such as the proposal on tax breaks for businesses when it comes to research and investment. When Congress comes back from its Summer holiday next week, the politicization of the economy will be front and center and you know "tax breaks" will be one of the biggest talking points of that debate. I got a taste of it today after calling some DC contacts. Representative Paul Ryan (R-Wisconsin), ranking member of the Budget Committee told me "Washington's economic experiment has failed....Uncertainty fueled by looming tax hikes and unsustainable levels of government spending continue to stifle job creation and stagnate growth."
Nadeam Elshami, spokesperson from Speaker Nancy Pelosi's office said, "Their (Leader Boehner and Republicans) vision for America is Bush’s plan all over again: privatize Social Security and give tax breaks to millionaires and billionaires. We will continue to move America forward by investing in small businesses, providing tax cuts for Middle Class Americans and ensuring that America’s manufacturing sector is creating good paying jobs and will work with the President to achieve those goals."
Its this political jousting that leaves little confidence with some of my C-suite contacts when it comes to what Congress can deliver. CEOs like Stephen Ross, Founder, Chairman and CEO of The Related Companies stressed Wall Street and investors need to be confident in what the government is planning to do to turn this economy around and until then we'll keep "bumping along the bottom". Wilbur Ross, Chairman and CEO of WL Ross and Company echoed a sentiment I've been hearing from numerous CEOs in terms of his economic outlook, " I do not see a "V" or a "W" for the US economy. In fact I don't see any alphabet letters at all. Instead ,it will resemble punctuation marks. Dots, dashes, an occasional question mark and periodic exclamation points. In short,just bumbling along."
So what does Congress need to do to instill confidence and boost the economy off its perceived bumbling path? Larry Lindsey, former director of the National Economic Council and President and CEO of The Lindsey Group emphasized quality is just as important as quantity when it comes to the inner-workings of a stimulus policy, " We need to make sure that we get maximum job creation from each fiscal dollar. The evidence is overwhelming both domestically and from countries like Japan that government spending programs are not the way to do this.
Marginal rate reductions that both increase incentives and the cash flow of households and firms are".
The mid-terms are less than two months away and the economic sparring is going to heat up. From the conversations with some of my contacts, the status quo of bouncing along the bottom will continue.