Washington View: Uncertainty keeping businesses’ cash on the sidelines
Tuesday, August 16, 2011
At the same time President Obama and Congress were locked in combat over raising the nation’s debt ceiling, leaders of state manufacturing associations from across America were meeting right here in Washington.
Despite the 3,000-mile distance, our futures — and their problems — are intertwined.
As the debt-ceiling debate raged, our nation’s debt climbed to $14.3 trillion, the U.S. Treasury’s cash on hand dwindled to $74 billion and America teetered on the brink of insolvency. Meanwhile, Apple, the world’s second largest corporation, was sitting on $76 billion in cash. A single U.S. company had more cash on hand than the entire federal government.
Why wasn’t Apple spending that money on expansion, new products and jobs? The answer is uncertainty — uncertainty over new taxes, massive new entitlement programs and costly new regulations.
Apple’s situation is not unique. Earlier this year, Standard & Poor’s reported that U.S. companies were sitting on nearly $2 trillion waiting for more certainty before investing. The question is, what will it take to open those checkbooks and start investing in new products and jobs?
Finding ways to spur private-sector investment is a key to recovery, but there are barriers.
For example, while the nation focused on our financial uncertainty, the Environmental Protection Agency and National Labor Relations Board were busy blocking the road to recovery.
EPA is about to publish a sweeping new set of air quality standards that could thwart development of renewable biomass energy. Its new ozone and boiler emission standards are nearly impossible to meet. So while President Obama wants green energy to replace coal-fired generation, EPA is undermining his initiatives.
One company that is spending money on new products is Boeing. It is spending billions to bring the 787 and 747-800 to market and plans to spend millions more to re-engineer the 737. Boeing’s main competition is the European Aeronautic Defence and Space Company, the parent of Airbus, which is heavily subsidized by the European governments.
But Boeing is under attack from the National Labor Relations Board for setting up a second 787 production line in South Carolina, a right-to-work state. The NLRB is pursuing claims that the South Carolina move was an illegal assault on the machinist union in Washington state.
Lurking in the background are the upcoming labor negotiations in 2012. The Boeing machinists want to keep production in Washington where their union has a strong grip on production. The NLRB’s action would provide the union with the advantage.
Health care questions
Finally, there is significant uncertainty over how the nation’s new health care law pushed through by the president will work and what it will cost. For example, the law’s centerpiece is the state exchanges, where the government markets health coverage. However, the Massachusetts exchange, known as the Connector, is in trouble after only a couple of years. Officials say it will need an estimated $5 billion in federal subsidies between 2014 and 2020 to survive.
Private employers worry about what will happen when other states find themselves in the same predicament and the federal government is unable to provide billions of dollars to prop up their exchanges.
With unemployment still above 9 percent, states have depleted their unemployment insurance trust funds and are borrowing heavily from the federal government to pay unemployment benefits. What happens when our debt-ridden federal government can no longer subsidize the states?
In short, the reason for uncertainty in the private sector is clear: uncontrolled federal spending, new requirements and costs from health care, and crippling regulations.
The cumulative effect of new taxes, more punitive regulations and increased borrowing has our nation teetering on the brink, and unless Congress, the president and his agencies start connecting the dots and address all the reasons we are becoming less and less competitive, our nation’s unemployment rate will remain high, and our financial solvency will remain in serious jeopardy.
Don Brunell is president of the Association of Washington Business, Washington state’s chamber of commerce. Visit http://www.awb.org.