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Unintended consequences and uncertainty preventing the recovery

Published October 23. 2010 09:00AM

There is a lot of uncertainty in the business environment. This makes business managers unwilling to invest in new equipment or hire workers. Part of this uneasiness stems from the unintended consequences of government actions and speeches by President Obama. First let's look at the economic downturn in Las Vegas. This downturn was caused by the President publicly chastising businesses that held conferences in Las Vegas. He vehemently opposed corporate executives attending these "junkets". As a result the conference business in Las Vegas collapsed. It is now recovering but attendance remains lower as corporate executives fear a government backlash when sending their staff to meetings in Las Vegas, Phoenix and other resort areas.

In another attack on corporate executives, our President decided to chastise General Motors and other car-manufacturing executives for using their corporate jets when summoned to Washington for a pummeling by the President and Congress. Yet the President flies in Air Force One and Marine One. His family went to Spain on a government 747 along with a large entourage of friends and followers. Speaker Pelosi flies around in her government 757 and other government jets. In addition she uses the 757 to travel back and forth between her home in California and Washington DC.

As one who's traveled extensively on commercial airlines I understand the difficulties flying poses. When several corporate executives need to travel to the same location, a corporate jet is not only cost-effective but it optimizes their time and permits them to prepare for their meetings when they land. The unintended consequences of President Obama's statements regarding corporate jets killed orders at the Learjet plant in Wichita Kansas. This sent the business jet market into a tailspin that only now is beginning to recover.

The health care legislation is starting to have an impact on medical plans. We were assured that we would be able to keep our existing coverage under Obamacare. Well this is not so. The Medicare Advantage program has been canceled by several insurers including Humana, Harvard Pilgrim, Independence Blue Cross, and some Aetna plans just to name a few. We were also assured we could keep our own doctors. Unfortunately the Mayo Clinic family practice units in Arizona stopped accepting Medicare due to the cut in reimbursements. Many other practitioners have opted out of Medicare in the last few months. Their patients must now seek other doctors who are willing to accept the minuscule payments from the Medicare system. As I write this article, Boeing has announced a reduction in benefits because of the increased cost of the Obamacare package. This is just the beginning. More cutbacks are certainly on the way. More of us will loose access to our health care providers and our insurance plans.

Meanwhile, the moratorium on Gulf drilling cost over 10,000 jobs. Several drilling rigs have been moved overseas. Just recently Diamond Offshore moved a rig to Egypt. These rigs will not be coming back nor will the jobs these rigs provided. While the moratorium has ended, the cost and timeframe to comply with the new government regulations will mean that oil drilling will not be resuming for several months. This double whammy has decimated the economy in the Gulf States including Louisiana which is still recovering from Hurricane Katrina. Declining sales has hurt other businesses that rely on the drilling industry. When people are working, they spend. When they lose their jobs, they stop shopping. As a result we can expect the economic impact of the moratorium to extend well into 2011.

Businesses are paralyzed by uncertainty. Many executives are having difficulty coping with the recession, the impact of healthcare, and the Cap and Trade legislation. This legislation passed the House and is awaiting passage in the Senate. If implemented, this Cap and Trade along with the impact of health care and the recession will prevent a recovery. Corporate accountants are trying to calculate the costs related to Obamacare for major corporations and small businesses. Each enterprise is trying to access the impact on their ability to provide medical coverage to their employees and retirees. Several major corporations have taken reserves for medical benefits, while other corporations have decided to discontinue coverage for their retirees. Everyone is ignoring Cap and Trade in the hope that it will go away. I expect it to pass in the lame duck session following the election.

I would like you to remember the items mentioned in this article on November 2. Vote wisely and put the pressure on elected officials to do what they said they would. To me, this means eliminating business uncertainty, reducing the size of government, eliminating or reducing wasteful earmarks attached to major bills and reducing the taxes for all Americans. Ronald Reagan had it right. Reduce taxes, limit the size of government, provide for strong defense and our nation will thrive. It is time to return to Reaganomics to restore prosperity to our nation. As we prosper, the economy will grow. The unemployed will be hired. New businesses will be started and even more will expand. To make this happen, uncertainty must be eliminated and unintended consequences must be minimized. It is time for every American, every company and our government to work together to build a pathway to prosperity. We must put our friends and neighbors back to work and provide jobs for young workers entering the workforce. We cannot wait for the recovery to start by itself. We must make it happen now.

© 2010 Gordon Smith - All Rights Reserved

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