January 21 2010 by Dale Buss
John Cook is trying to keep his 46-year-old manufacturing company growing in the U.S., but the federal government is standing squarely in his way. Proposed healthcare legislation targets device manufacturers like Cook Medical Products, in Bloomington, Ind., with major new taxes to help pay for the nationalization of the medical-insurance industry and Cook is mad as hell.
“It makes me absolutely sick,” said Cook, whose $1.6 billion concern is the nation’s largest privately held player in the industry and employs about 6,700 people in this country along with another 2,700 around the world. “Everything they’re doing is putting obstacles in front of us. That tax burden alone would cause me to automate some processes and have to put about 1,000 Americans out of work.” If the government were to create tax breaks for the medical equipment business instead of financially penalizing the industry, Cook says he would be able to not only refrain from cutting jobs in the U.S., but also repatriate an additional 1,000 manufacturing jobs.
Ironically, Cook’s remarks to Chief Executive came on the day President Obama was conducting his so called jobs summit in Washington, D.C. And Cook is just one of many American CEOs who have concluded, some with great reluctance, that the Obama administration and Congress have set a course that would bring severe harm to a roster of particular industries and long-term, general economic malaise to the nation.
The concerns shared by these CEOs go way beyond their significant doubts about the course and potency of any nascent economic recovery. What vexes them more is that the current administration seems intent on throttling, controlling or, at the very least, more tightly regulating a wide swath of the American economy. The list of the threatened industries includes the obvious, such as healthcare providers and coal-fired utilities, and the automotive and banking industries that the Obama administration essentially has taken over already. But it also goes way beyond, to media companies and defense contractors, beverage makers and dairy processors, drug manufacturers and chemical producers.
“You go to trade association meetings, and the CEOs at each and every one feel like they have a bull’s eye on their back,” said J. Larry Nichols, chairman and CEO of Devon Energy, a $15-billion oil- and gas-exploration company based in Oklahoma City, and current president of the American Petroleum Institute. “And I’m not just talking about our industry it’s every kind of industry.”
Indeed, these CEOs recognize that Washington now is more fundamentally hostile to what businesspeople do and how they think than perhaps ever before. Barely a major company CEO, for example, was invited to the jobs summit in early December.
One more thing also rankles many of the CEOs: The Obama administration isn’t entirely uniform in its disdain for business, nor vice versa. A handful of CEOs, such as Eric Schmidt of Google and Fred Smith of FedEx who did attend Obama’s summit clearly are favored by the White House. And in turn some are enamored of the new administration if only because of how their companies in particular are benefiting from its policies. Most notably, this includes Jeffrey Immelt, CEO of General Electric, whose company makes, among other things, equipment for solar, wind and other “green” technologies favored by the administration.
To be sure, the Obama administration is spreading favor on companies involved in alternative energy. Also in Obama’s defense, a few CEOs actually acknowledge the bull’s eyes on them but aren’t complaining. They include Prohibition Beverage Co. CEO R. Scott Winters, whose company makes caffeinated alcohol drinks, though the Food & Drug Administration (FDA) ordered all manufacturers to prove such products are safe.
I’m afraid that [President Obama] fundamentally does think business is evil and that government has a better way to run things.
“All of our experience has been very positive,” insisted winters, whose company makes p.i.n.k. spirits. “We don’t feel we are being targeted in any sense. They are trying to work with us.”
And some early fears about anti business actions haven’t been fulfilled. Coal industry CEOs worried that President Obama quickly would ban “mountaintop-removal” mining in the Appalachians, for example, but by summer the federal government was granting dozens of new permits for companies to conduct the procedure that environmentalists have harshly criticized.
“So if you’re a coal executive, and you think Obama is going to end your industry as you know it that’s not true,” said Peter Van Doren, editor of Regulation magazine, published by the libertarian Cato Institute, in Washington, D.C.
Robert Murray begs to differ. The Democrats’ intentions with “cap-and trade” legislation regarding greenhouse gases are evidence enough for him. “There’s no question that Barack Obama and the Democratic leadership of Congress want to eliminate the U.S. coal industry, which will destroy the economy of 40 states,” said the founder and CEO of Murray Energy, the nation’s largest privately held coal producer, a $2.6-billion enterprise based in Pepper Pike, Ohio.
So, Murray trekked to Washington every other week from July through the end of 2009 to plead the industry’s case on Capitol Hill, meeting personally with about one quarter of the Senate and with top staffers representing another quarter. On November 17 alone he had a dozen meetings. At one point, Murray said, he was spending about 40 percent of his executive time just trying to thwart cap-and-trade.
Beyond this campaign, Murray also pointedly called out other large-company CEOs who, he said, have sold out to the Obama administration for various reasons by favoring or at least acquiescing to the prospect of some form of cap-and-trade legislation. He reserved the most bile for John Rowe, CEO of Exelon, and James Rogers, CEO of Duke Energy both utilities that have positioned themselves to profit from cap-and-trade schemes.
Chicago-based Exelon says it stands to gain $1.1 billion if Waxman Markey, the House version of cap and trade goes through. Murray puts the figure much higher and points out that the revenue will come from “the American taxpayer and American utility-ratepayers.”
If Murray’s ad hominem vitriol toward other CEOs strikes some as unseemly, he has a staunch defender in Myron Ebell, director of energy policy for the Competitive Enterprise Institute in Washington. “Bob Murray is admirable because he believes in America and our free-market economy and competition, not in going to Washington to get some kind of special deal for his company,” Ebell said. Meanwhile, he added, the CEOs Murray criticized “have made a very cynical calculation that they can make a windfall profit and the future of the economy be damned.”
You go to trade association meetings, and the CEOs at each and every one feel like they have a bull’s eye on their back.
Murray is 78 years old, but he and his free-market counterparts haven’t had to cope with an anti business ideologue as president since, perhaps, Jimmy Carter in the late ’70s. There were Republicans Ronald Reagan and George H.W. Bush, of course. Bill Clinton was a liberal Democrat, but as president he quickly “triangulated” toward the center, especially in fiscal matters, and was proud that the U.S. economy boomed during his tenure. Republican George W. Bush preceded Obama.
But a growing number of aggrieved CEOs now share a conviction that the Obama administration has put the very essence of American-style free market capitalism on trial in a way that the nation has never seen not even in the aftermath of the excesses that led to the Great Depression.
“I’m afraid that [President Obama] fundamentally does think business is evil and that government has a bet better way to run things,” said Joel Manby, CEO of Herschend Family Entertainment, an Atlanta based company that runs tourism venues across the country, including Dolly wood, in Pigeon Forge, Tenn., and Silver Dollar City, in Branson, Mo.
This anti business philosophy, Manby believes, hurts most businesses in various ways, including his own. Corporate group tourism, which accounts for about one-fifth of Herschend’s revenues, dropped by about half in 2009 after Obama talked down business travel in Las Vegas. “The whole business of group meetings is going to come back very slowly, and part of the reason is political,” Manby said, in addition to the sluggish economy.
Such complaints are shared by many economic and business analysts as well. “All of the debt and all of the spending have put us in an extremely deep fiscal hole right now and will make us poorer, not richer, over time,” argued Steve Moore, co-author of a new book, The End of Prosperity, and chief economic correspondent for The Wall Street Journal. “We’re not going to go backward to another Great Depression but to a ’70s style slow growth environment that will lead to continuing high rates of unemployment and rising inflation.”
Peter Wallison of the American Enterprise Institute noted that President Obama began failing in economic policy with his first major initiative: last winter’s $787 billion stimulus bill. It generated only a relative handful of new jobs; most of them were short-lived and in the public sector; and the nation ended 2009 with an unemployment rate of around 10 percent even though the president had vowed to keep it no higher than 8 percent.
“They used the stimulus as a way of spending on all kinds of projects that Congress always wanted but had been restricted before that, by deficits and the presence of the Bush White House,” said Wallison, a senior fellow of the Washington based think tank. “Suddenly they were handed a blank check and they raised the base of government spending and created a gigantic deficit.”
Even more troubling in this view is that it seems the president and Congress now are determined to increase the onus they already have placed on businesses and the economy by adding still more burdens: healthcare regulation and cap and trade legislation. Fundamental to “affording” those programs would be multiplying the national debt and imposing a dizzying array of new and extra taxes on businesses large and small, and on well off individuals.
“If they’re trying to fund all of these changes by just moving money around or with more taxes, it could cause us to slip back economically,” said Barry Arbuckle, president and CEO of Memorial Care Health System, a multibillion dollar healthcare system based in Southern California.
Manby noted that Herschend will have to subtract any general increase in business taxes from its own reinvestment plans. And the hefty penalties on even uninsured part time workers in health-reform legislation would “decimate our profits and decimate our industry” because tourism depends on millions of part time seasonal workers, he said.
Even more acute fears attend CEOs such as Murray who find their industries clearly designated as sacrificial lambs for the economic transition that the Obama administration is trying to pull off. The biggest such “culprits,” of course, are healthcare providers and insurers, and producers and distributors of carbon-based forms of energy.
For their part, many healthcare CEOs are only slightly relieved by the difficulties that the president and Congress have had in coming up with a final reform package. “Overall, we would have been much better off taking on healthcare reform compartmentally and dealing with components in turn, then moving on to payment mechanisms,” said Chris Van Gorder, president and CEO of another Southern California hospital concern, Scripps Health.
And the energy chiefs aren’t entirely comforted by the fact that cap-and-trade seems dead at least until next year and that the U.S. didn’t obligate itself to much of anything at the Copenhagen climate summit in December. They aren’t even completely assuaged by last fall’s “Climate gate” controversy over potential manipulation of temperature data, which could ease global warming hysteria.
So the current regime in Washington is shaking up lots of CEOs who find their industries in its sights. In December, the Senate switched to targeting tanning salons instead of botox and other cosmetic procedures for a new tax to help pay for health reform.
The black hole of health reform expenses may even end up penalizing major pharmaceutical manufacturers, whose CEOs made a handshake deal with the Democrats last spring to pick up an estimated $80 billion in healthcare costs over 10 years in exchange for no further cuts in Medicare reimbursements to the industry.
And where President Obama and congressional leaders haven’t specified industries or companies for particular sacrifices in the national interest, the administration’s new activist regulatory appointees are picking up the slack with a more interventionist approach toward every field of commerce they oversee.
Chemical producers suddenly are finding the Environmental Protection Agency interested in regulating chemical management more closely, for example. And Matrixx Initiatives CEO William Hemelt told securities analysts that his company lost about $33 million after the FDA last fall warned Americans to stop using the company’s ZicamCold Remedy swab products, warning that some consumers could lose their sense of smell.
“In the Bush administration, the problem was that political folks were hostile to the mission, “Michael Livermore, executive director of the Institute for the Study of Regulation at New York University Law School, told The Washington Post. But with regulators now, “You’re going to see a lot more stuff happening [to] fit Obama’s broad vision for government.”
Another part of the problem CEOs are confronting is that this administration is, in turn, emboldening various groups on the left to intensify their own anti business agendas. The idea of slapping taxes on high sugar and high fat foods and beverages, for instance, has been advanced for years by an anti corporate posse of activists and academics without gaining much political or legal traction, even as American obesity rates soared to new highs.
But the “food police” have gained ground with the new group in Washington. Now they’re also working for limits on advertising junk foods to kids. So Coca-Cola CEO Muhtar Kent felt compelled to take a preemptive step: He penned an opinion piece for The Wall Street Journal in October headlined, “Coke Didn’t Make America Fat.”
“Policy makers should stop spending their valuable time demonizing an industry that directly employs more than 220,000 people in the U.S., and through supporting industries, an additional three million,” Kent wrote. “Instead, business and government should come together to help encourage greater physical activity and sensible eating and drinking, while allowing Americans to enjoy the simple pleasure of a Coca-Cola.”