Business Leaders Decry The Economic Cost Of Uncertainty

Oct 19, 2013
Originally published on October 25, 2013 9:08 am

Running a company is like driving a car. You need to be able to see what's coming down the road. The dysfunction in Washington has created a fog, and when driving in the fog, you have to slow down.

That's basically what's happening at thousands of companies around the country.

Bob Mosey, chairman of the National Tooling and Machining Association, bemoans the "uncertainty of not being able to plan for the future."

Mosey, whose trade group drew hundreds of manufacturing companies to Boston this week for a conference, said despite a two-week government shutdown, Congress "just kicked the can three months down the road. ... We're just going to be going through this again in three months."

Although the federal government reopened, CEOs at the conference said they remain concerned that lawmakers won't come together on at least the annual budget, let alone longer term tax and entitlement reform.

"A lot us were hiring like crazy; a lot of small manufacturing firms are still looking for skilled labor," says Patrick Shrader, vice president for Arundel Machine in Maine. "But what this has done is it just slowed down that whole need to hire more people."

Arundel Machine makes parts for military drones and submarines, as well as all kinds of non-military equipment. But Shrader says his business is hurt by not knowing where the government is going to be making cuts. "Right now they're not giving any numbers for what they believe that future funding is going to be."

And as a result, Shrader says his company has to play it safe. "We have hiring on hold right now. Until we know what's going to happen, we're not looking to grow the company."

If you take what Shrader's saying and multiply it by thousands of businesses large and small across the country, the ongoing deadlocks in Washington have to be taking a toll.

Joel Prakken, co-founder of the forecasting firm MacroEconomic Advisors, says in the past few years this short-term crisis driven fiscal policy has stunted growth in the U.S. by hundreds of billions of dollars a year. And when it comes to jobs: "The unemployment rate is higher to the tune of about 900,000 jobs."

Over the past three years, about a million more Americans would have jobs if things were working better in Washington, according to Prakken.

At the manufacturer's conference, Grady Cope, president of Reata Engineering and Machine Works in Englewood, Colo., says Congress is "playing with fire."

"Our customers start wondering, do they need to hold back and not purchase? So there's a chain reaction," says Cope, whose company is doing well, and just added five workers. But Cope's $4 million Small Business Administration loan was on hold during the government shutdown, and he says the debt ceiling showdowns hurt sales by making his customers nervous. "It's a huge deal," he says, "but I hope Congress understands that they're playing with fire."

Business leaders are now sending a pretty unified message to Washington: This ongoing dysfunction is hurting the U.S. economy.

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Transcript

SCOTT SIMON, HOST:

The stock market is near an all-time high after lawmakers averted that debt crisis this week. But that doesn't mean all of this brinkmanship has been good for business. Several new studies show the political battles have seriously hurt companies and workers. And some economists estimate that over the past few years, partisan standoffs have cost hundreds of billions of dollars and close to a million jobs.

NPR's Chris Arnold reports

CHRIS ARNOLD, BYLINE: Running a company is like driving a car; you need to be able to see what's coming down the road. And the dysfunction in Washington, that's created a fog. So driving in the fog, you kind of have to slow down. And that's basically what's happening at thousands of companies around the country.

(SOUNDBITE OF A CROWD)

BOB MOSEY: It's the uncertainty of not being able to plan for the future.

ARNOLD: Bob Mosey is the chairman of the National Tooling and Machining Association. It's a trade group that drew hundreds of manufacturing companies to Boston this week for a conference. Mosey fears that Congress is just headed for another standoff.

MOSEY: They just kicked the can pretty much down the road. We're just going to be going through this again in a few months.

ARNOLD: Even though, yes, the government is open again, the CEOs here are not celebrating. Republicans and Democrats alike are worried that lawmakers still won't come together on at least the annual budget, let alone longer term tax and entitlement reform. And this is doubly frustrating for many here, because coming out of the recession the high end manufacturing industry was picking up.

PATRICK SCHRAEDER: Yeah, a lot us were hiring like crazy. A lot of small manufacturing firms are still looking for skilled labor. But what this has done is it just slowed down that whole need to hire more people.

ARNOLD: Patrick Schraeder is a vice president for Arundel Machine in Maine. The company makes parts for military drones and submarines and all kinds of non-military equipment, too. But he wants to know where the government is going to make cuts; how drastic, how soon, which programs will survive. Dragging out these decisions hurts his business.

SCHRAEDER: Right now, they're not giving any numbers for what they believe that future funding is going to be.

ARNOLD: And, as a result, Schraeder's company has to play it safe and hunker down.

SCHRAEDER: We have hiring on hold right now. Until we know what's going to happen, we're not looking to grow the company.

ARNOLD: So if you take what Schraeder's saying and multiply it by thousands of businesses, large and small across the entire country, the ongoing deadlocks in Washington have to be taking a toll.

Joel Prakken is the co-founder of the forecasting firm MacroEconomic Advisors. He says in the past few years this short-term crisis-driven fiscal policy has stunted growth in the U.S. by hundreds of billions of dollars a year. And when it comes to jobs...

JOEL PRAKKEN: The unemployment rate is higher to the tune of about 900,000 jobs.

ARNOLD: So according to Prakken, over the past three years, about a million more Americans would have jobs if things were working better in Washington.

(SOUNDBITE OF A CROWD)

ARNOLD: Back at the manufacturer's conference, Grady Cope is the president of Reata Engineering and Machine Works in Englewood, Colorado. The company is doing well and he's just added five workers. But Cope has had a $4 million SBA loan on hold with the government shutdown - that's a headache. And he's just seen these debt ceiling showdowns make his customers very nervous, and that hurts sales.

GRADY COPE: Our customers start wondering, well, do they need to hold back and not purchase. So there's a chain reaction and we've seen it. It's a huge deal. And, but I hope Congress understands that they're playing with fire.

ARNOLD: So one question going forward is if politicians in Washington are having trouble working with and listening too each other, will they eventually start listening to CEOs around the country? Business leaders are now sending a pretty unified message - this ongoing dysfunction is hurting the U.S. economy.

Chris Arnold, NPR News, Boston.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.