BUD BREWER
One Man's Opinion
“Risk Aversion” Is it an inevitable or an adjustable worry?
October 3, 2011: Recently Robert J. Samuelson of the Washington Post wrote an article entitled “Risk Aversion”. In reading the piece, I was reminded of my fear during the summer of 2008 that, if elected, the Obama Presidency would create a wider than usual division of attitudes held among conservative and liberal voters making up the electorate in this country. Like most conservatives at that time, I felt his political views were so far to the left that should he be elected, the country would experience a shift toward more socially driven government policies. I felt that more government directed economic programs would cause severe dislocation in the market based system that had generated such enormous economic growth over the last half of the 20th century. But experience also told me that when he or any candidate gets elected in this country, in order to govern, they must move to the center and give up their radical ideas. Playing to your base is not unusual when campaigning but when the elected officer takes over, be he Democrat or Republican, they normally move in a subtle way back toward the center so they can govern. In the case of Obama, however, with the super majority he achieved in the 2008 election, upon taking office he continued his liberal rhetoric and began to do what he said he was going to do. The business community nevertheless felt that the economy would begin to recover and Obama as a symbol of American diversity was going to be a good thing. They did what they normally do in the face of a business correction, they reduced employment, cut costs, adopted more efficient systems and shut down marginal or high risk expansion programs (Coincidently, productivity and profit margins expanded sharply producing high cash flows on relatively modest growth in revenues). They planned to patiently wait until demand picked up before increasing their investment in new product or intiate expansion in developing markets. In a normal inventory based recession business recovers when demand and supply comes into balance. But this was not an inventory induced recession. It was a “Financial Tsunami” caused by excessive risks taken by financial institutions (supported by Government policies) funding and trading in overvalued mortgage and derivative instruments creating assumed but false capital values in the global banking industry. Corporate reluctance to invest continued into the first few months of the Obama Presidency as two pieces of radical legislation began to work their way through Congress. President Obama had promoted their consideration and was strongly endorsing their passage as good for the “People of America”. Most Small business executives just assumed that neither bill would be passed if it was going to be an unacceptable financial burden for them. But the very reluctance large multinational companies had exercised to invest their growing cash capital reserves combined with the increasing restrictive lending policies at small and intermediate sized banks were making it difficult for middle sized and small businesses to fund their operations. The result was increasing levels of unemployment and its affect upon consumer demand. As the housing market continued to implode, consumer confidence deteriorated further and notwithstanding a huge shift in the electorate’s attitude culminated by the 2010 midterm-elections, the economy continues weak. Business managers see little reason to risk capital given the uncertainty of the impact from the huge increases in our projected national debt caused by seemingly unbridled government spending, “Obamacare”, the Dodd-Frank financial regulatory legislation, and President Obama’s call for increasing tax rates upon those earning over $200,000. He calls it “paying their fair share”.
Seeing this continued economic weakness and reluctance by multinational corporations to invest their growing cash balances, one would expect the President to use his “bully pulpit” to adopt a policy of building confidence in both the consumer and producer so economic activity would be stimulated. Obama and his supporters see it differently. They see it as a demand problem to be solved by fiscal and monetary stimulus programs at the U. S. Treasury and the Federal Reserve combined with an increase in the tax rates payable by the wealthy. The President calls his new spending plan a “Jobs Program”. He is out fireing up his Base in campaign mode calling for immediate passage for a Bill to spend $450 Billion more to stimulate the economy. One of the benefits provided for is the special credit to be paid to businesses that will hire a currently unemployed person. I guess the author of this plan just has no comprehension of what motivates a business manager to hire people. It is not to receive a check from the Government! It is because they have a need for the value and skills provided by that individual in the context of making a profit from the productivity of that individual over an indefinite future. Business managers understand the value of investing in human capital, government legislators apparently do not. Thus we have deteriorating confidence in our future and the “Risk Aversion” referred to by Samuelson in his recent article in the Washington Post.
A real leader, understanding the potential of the American Spirit, voicing his confidence in individual actions and personal responsibility will cause the American economy to right itself. He will verbally nurture commitment and the willingness to assume investment risk by proposing tax policy that incentivizes such at the margin for the long term. He will slash bureaucratic excesses and eliminate unnecessary government agencies. He will lead by example supporting private institutions operating for the benefit of their community. He will concentrate upon providing a military capability that assures, within reasonable fiscal limitations, the personal freedom and safety of American citizens both domestically and internationally. He will avoid class warfare in his actions and rhetoric. He will eschew Political Correctness by embracing national programs that are in the best interests of all Americans over the long term. He will nuture the aspirations of all Americans and defend the Constitution and the rights provided by that document.
Can there be a real leader out there?—Only time and effort will tell.
One Man’s Opinion,
Bud Brewer
Does your site have a contact page? I’m having trouble locating it but, I’d like to shoot you an e-mail. I’ve got some suggestions for your blog you might be interested in hearing for example you could add topics about “health articles”. Either way, great site and I look forward to seeing it expand over time.