Related topics: Barack Obama, Intel, Michael Brush, politics, stocks
Is fear of President Barack Obama one reason we're stuck with sluggish economic growth?
That's the message the CEOs of several major companies are sending out.
In unusually vitriolic attacks on a sitting president, including references to communist Russia and Adolf Hitler, CEOs have complained they can't predict what Obama will do next -- and how his new regulations and taxes might hit their companies.
The result is a bunker mentality that has CEOs holding back -- and the economy growing more slowly as a result.
"We don't know what the latest great idea from Obama will be. Therefore, we are hunkering down," Cypress Semiconductor (CY, news) CEO T.J. Rodgers told me last week, echoing public comments over summer from CEOs at companies such as Intel (INTC, news) and Verizon Communications (VZ, news).
Michael Brush
He said that because of Obama, CEOs are focusing on their core businesses and hiring less, to control costs and risks. "CEOs are uncertain, so they don't want to have the liability of adding a lot of employees," Rodgers said.
There's certainly a lot of uncertainty out there as we approach November's midterm elections. Next year's tax rules are in limbo. The effects of health care and financial reform have yet to be seen. And then there's what many perceive as an anti-CEO message in Obama's rhetoric -- aimed mostly at chiefs of big banks and health insurers but also at hunkered-down execs in general.
"Obama uses political rhetoric to demean me and my motives, but the fact is, I am completely happy with my motives and the morality of my decisions," Rodgers said. "My moral responsibility is to protect and grow the investment of shareholders."
Are conditions really that bad?
The irony is that, by many measures, public companies are doing quite well in the Obama economy. The Standard & Poor's 500 Index ($INX) is up about 35% since Inauguration Day. Profits are expected to rise 36% in 2010, Bloomberg reports. And companies are sitting on a near-record $2 trillion in cash, money they could use to invest and create jobs.
Of course, those profits and that treasure are to a great degree the result of hunkering down and cutting costs.
Obama defenders say his criticism of big bank and insurance CEOs have been justified, given the financial meltdown and the number of Americans without health coverage. And, of course, no president can afford to be anti-business.
"Using Obama's priorities for fixing the economy as an excuse is deplorable," said Brandon Rees, the deputy director of the AFL-CIO Office of Investment. "These CEOs would be better off focusing on their businesses."
In fact, many CEOs, including Brian Roberts of Comcast (CMCSA, news) and Mike Duke of Wal-Mart Stores (WMT, news), have supported Obama's reforms, and Warren Buffett opined recently that the economy is back on track.
It's hardly rare for CEOs to speak out against Washington when it's doing something they don't like. What's different now is the vitriol and directness of these corner-office broadsides.
CEOs on the offensive
Consider the following attacks on Obama and the Democrats in recent months:
- Intel CEO Paul Otellini, referring to Obama and the Democrats, said in an August speech to the Technology Policy Institute's Aspen Forum, "I think this group does not understand what it takes to create jobs."
- Verizon CEO Ivan Seidenberg, in a June speech at the Economic Club of Washington, accused Obama of creating an "increasingly hostile environment for investment and job creation."
- Cypress Semiconductor's Rodgers told me last week that he had "started out happy with Obama because we had broken through the white male barrier" and made "a step forward for equality." But Rodgers added: "I have become deeply disappointed with him. It is amateur hour in Washington. The guy hasn't got a clue about the economy, how jobs are created, how wealth is created. It reminds me of the Jimmy Carter years, only worse."
- Blackstone Group CEO Steven Schwarzman seemed to compare the Obama administration to Hitler by saying in a recent private meeting that Washington's push to increase taxes on private-equity firms is war, "like when Hitler invaded Poland in 1939," according to Newsweek.
Observers say such overt attacks are rare. "I don't remember corporate leaders speaking out this vehemently in the past, said Gary Shilling of A. Gary Shilling & Co., which offers investment advice. "People in these positions don't get there unless they know how to keep their mouths shut when they need to."
