Saturday, October 22, 2011

Uncertainty holds back economic recovery

Politicians, policy experts and business leaders gathered in September to try to make sense of the economy and what the government is doing about it. I noticed this panel and the burden our non-elected appointees and czars are imposing on the economy. Small businesses, particularly, can't keep up with the rules, or even hire the staff to wade through them to be in compliance, so why hire or expand, even if you have the money or credit? We were discussing the business climate with a retired friend last night who has passed his firm on to his sons (who divided it), and they no longer have permanent workers, everything is contracted. The complexity of running a small business is overwhelming them. This is why stiffer regulations are supported by some very large firms--puts the competition out of business.
"The next panel “The Uncertain Environment and what it Means for American Business” was led by Bob Norton, chief income tax officer for Vertex Inc. Panelists included David A. Heywood, vice president, tax and general counsel, Lockheed Martin Corp.; Hal S. Jones, senior vice president and CFO, The Washington Post Co.; Michael Kenny, CFO, Panduit Corp.; and Cathy Santoro, vice president, finance and assistant treasurer, Wal-Mart Stores Inc.

Norton listed areas that are replete with uncertainty on many fronts. Among them: global economy, geo-political sea changes, technology revolution, security (cyber and other) and regulation. He also provided statistics to reinforce reasons why businesses are facing uncertainty. For example, federal agencies issued 3,573 final rules in 2010, while Congress enacted 217 bills into law. The result of this, he added, is that ”significant law-making power is being delegated more and more to unelected bureaucrats;” the number of pages in the Federal Register last year topped 81,405; and the Dodd-Frank Wall Street Reform and Consumer Protection Act requires 11 new federal agencies tasked with creating 235 rulemaking provisions – 100 rules by the U.S. Securities and Exchange Commission alone.

Jones said that two-thirds of The Washington Post Co.’s revenue comes from education and training, and that this year more than 400 pages of new regulations have been issued related to education. Dealing with so many new rules has caused the company to hold back on hiring, marketing, planning or expanding. The company is willing to comply with the rules, he said, but not knowing what they are is causing the business to stay on hold.

Kenny expressed concern about tax reform and stated he favors business tax reform – not corporate tax reform. (With more than 90 percent of U.S. businesses operating as pass-through private companies, thus taxed at the individual rate, just doing corporate tax reform won’t help these private companies.) He also noted concern for companies that are not large enough to stay abreast of the constant flurry of new rules and laws, not a issue for his company, but a real challenge for untold others."

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