Big Business Remains Silent On Need For Job Creation
What explains the silence from most of the business world on the need to get serious about creating millions of jobs?
In what passes for the national discourse, talk of joblessness is invariably cast as political fodder -- Can Obama get reelected despite the horrible jobs numbers? -- or as an opportunity to ooze sympathy for people struggling to find work. But where are the self-interested, profit-making American corporations in this conversation? If the government gets serious about financing big-ticket infrastructure projects and induces the private sector to start hiring in large numbers, that will generate spending power throughout the economy, and more opportunities for industries across the board.
When the economy is growing and people are bringing home paychecks, that spells more demand for restaurant meals, dry cleaning services, and tickets to Hollywood movies. It means more people are able to shell out for seats to watch local sports teams and airplane tickets to take their families to Disney World. Growth should mean more deals for giant banks on Wall Street, and more residual business for their law firms and accountants, not to mention the boutiques, art galleries, and wine merchants at which they distribute their lucre.
Until recently, you could argue that corporate America and the American workforce occupied two different realms, eliminating the need for big companies to worry about elevated unemployment. They could sell products abroad while figuring out how to produce more with fewer people on the payroll, boosting their profits even as unemployment has festered. But turmoil in Europe has cast a damper on overseas sales. Would-be consumers are too shell-shocked by their underwater mortgage statements to spend. Goldman Sachs is now losing money.
Yet the only interest groups speaking up consistently for a muscular jobs program –- and in particular, infrastructure spending -– are the usual suspects: labor unions, the construction trade, and manufacturers. Why isn't the rest of the business world clamoring for an end to the politics of obstruction and the beginning of a sustained effort to put people back to work?
"There's no confidence in the direction of the country," said Howard Schultz, chief executive officer of Starbucks, when I asked him this on Tuesday. He stopped by The Huffington Post to talk to editors and reporters here and tout his own job creation initiative –- a new collaboration with the Opportunity Finance Network, which lends money to small businesses that can’t get loans from major banks. "When there's no confidence, there's inertia. That's the core reason."
Schultz's job creation effort is premised on the idea that political gridlock is guaranteed during the course of the presidential campaign, so those who care about jobs have to take matters into their own hands.
"What can we do given the fact that over the next 13 months, Washington's not going to do squat?" he asked. "We're not going to wait for Washington. We're going to do something on our own."
It's tough to quibble with that political calculus. Republicans continue to oppose anything that might improve the economy as they bet that greater suffering among the citizenry provides them a better shot at capturing the White House. Democrats continue to chase the fantasy of bipartisanship, seeking impossible compromises while delivering little of consequence toward creating jobs. But if a broad range of American industries began to demand a serious job creation program, might that alter the politics and make such a strategy more realistic?
The problem is that no credible job creation strategy exists, maintains an executive at a major Wall Street firm who spoke on the condition he not be named. No one in his world has any faith that the Obama administration or government in general can create jobs, he said. Indeed, he insisted, the biggest impediment to job creation is the government itself: Continued uncertainty over a thicket of proposed regulations are preventing banks from taking greater risks, lending more money, and helping generate more paychecks. And when government tries to create jobs, he added, it winds up wasting taxpayer money on inefficient boondoggles.
One small problem with this narrative: It's ridiculous. Wall Street loves to whine about regulatory uncertainty, but its financial wizards are expert at exploiting the crevices of ambiguity for profit. During the real estate bubble, uncertainty posed no problem for major banks as they issued mortgages to anyone with access to a pen and hawked the resulting piles of toxic loans to suckers around the globe. Uncertainty abounded. At any point, the Fed could have stepped in and suggested that perhaps the banks ought to employ a smidgen of discretion in their lending. Treasury or Justice could have probed for fraud instead of catering the festivities with regulatory abdication.
The idea that Wall Street is suddenly a stickler for the efficient expenditure of taxpayer money is a bit like hearing that the drug cartels are alarmed by the plague of drinking and driving. Wall Street cared not a whit about efficient use of public money while it leaned on government-backed Fannie Mae and Freddie Mac insurance on its radioactive mortgage-backed securities.
The most interesting theory I heard to explain the lack of interest in job creation on Wall Street came from a finance expert who suggested that the bankers want Washington to conserve its funds so it will be able to manage the next inevitable bailout of the as-yet-unreformed financial system. But that's too grandiose and conspiratorial. The real answer seems to be that executives at banks and other large American companies are too busy worrying about their own pocketbooks to be concerned about the health of the broader economy. They are focused like a laser on the sole issue that hits them personally: Taxation.
The same Obama administration that now champions its so-called jobs bill also rightly wants to jack up the tax rate on millionaires to address economic inequality. The same liberal advocacy groups demanding a fix to the epidemic of unemployment are inclined to treat capital gains like regular income, subjecting bankers and corporate chieftains in general to much higher rates of taxation. These sorts of policies should put more cash in the hands of more Americans, creating a bigger market for American companies. But they will also sock the people in the corner offices with larger tax bills.
Some suggest that people running major businesses -– and in particular, those within high finance -– have become so accustomed to pursuing profits derived at the expense of workers and the broader economy that they are incapable of thinking about their prosperity in anything but isolation.
"Their model is set up to be completely shortsighted and to never look past the immediate moment," said Monika Mitchell, a former chief executive of a boutique financial industry search firm that handled accounts for Goldman Sachs and Bank of America, and co-author of a forthcoming book, "Conversations With Wall Street: The Inside Story of the Financial Armageddon And How To Prevent The Next One." "They're just trying to figure out how to get the profits going again. They're not trying to save the economic system."
A third class of people should now be entering the conversation: shareholders. If corporate leaders are so narrowly focused on their own issues -– tax rates -– that they have taken their eyes off the welfare of the broader economy, then they are effectively cheating the people who own their stocks by failing to promote growing markets.
The silence of big business in the face of an urgent need for job creation is not merely bad news for the people who need the work: It is bad for the bottom line.
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First Posted: 11/01/11 04:40 PM ET Updated: 11/01/11 04:40 PM ET