Obama Gropes to Find More Jobs

by John M. Curtis
(310) 204-8700

Copyright December 11, 2010
All Rights Reserved.                                

              With his presidency hanging in the balance, President Barack Obama announced he will host Dec. 15, 20 CEOs of the nation’s biggest companies at Blair House to brainstorm about jobs creation.  Barack hopes to build rapport with the business community but knows such grandstanding has little to do with jobs creation.  Since markets melted down in Dec. 2007, the nation has lost nearly 8 million jobs, jumping the nation’s unemployment rate to 9.8%.  As Barack knows, publicly traded companies answer to share holders and boards of directors, seeking nothing short of spectacular earnings to spur share prices.  In order to keep the cash flowing, the stock market must continue its upward direction.  Today’s short-selling hedge and private equity funds have created a roller coaster ride for investors, where markets rise sharply then proceed to sell off with lightening speed.

            Publicly traded companies count on the stock market to provide the liquidity needed to refurbish plant and equipment, improve research and development, and, yes, expand payrolls.  When markets head south, share prices drop along with the cash needed to grow payrolls, by far the biggest overhead for publicly held companies.  Obama wants to find out what helps the business community to get off the dime and expand payrolls.  Since most companies are driven by earnings, cutting payrolls becomes the biggest savings affecting the bottom line.  Growing unemployment hurts consumer demand by stripping consumers of the cash needed to expand payrolls.  While there’s some controversy over what to do to stimulate the economy, there’s no debate over what drives jobs creation.  More cash in the coffers of publicly traded companies ads to companies employment capacity.

            Since roughly two-thirds of the nations’ Gross Domestic Product depends on consumer spending, getting cash in consumers’ pockets takes on the highest priority.  It’s no enough to talk about jobs creation, White House officials, Federal Reserve Board Chairman Ben S. Bernanke and Capitol Hill politicians must get on the same page and do something about unregulated hedge and private equity funds.  While there are many moving parts in Wall Street’s last meltdown, unregulated hedge and private equity funds continue to profit when the market heads south.  Short sellers have been given a free reign to take down markets whenever the bears take over.  Obama knows that as long the shorts dominate the market, it’s going to be difficult to build confidence in equity markets.  Short selling assures that publicly held companies don’t have the extra cash needed to expand payrolls.

            Creating consumer demand involves first adding jobs and reducing the unemployment rate.  When consumers have cash in their pockets, they’re more likely to buy things, the only thing that creates more demand.  Obama’s recent support for the continuation of Bush-era tax cuts attempts to provide another round of stimulus to an otherwise sluggish economy.  With the help of former President Bill Clinton, Barack hopes to convince Capitol Hill Democrats to buy in, giving the business community more hope for the future.  While business leaders are concerned about growing federal budget deficits, they’re far more worried about how high unemployment hurts consumer demand and slows the economy.  Obama’s new focus on jobs should help reassure the business community that the White House gets the relationship between jobs, consumer demand and economic growth.

            Business leaders can only do so much to generate jobs without help from Wall Street.  They’ve asked Barack before and they’ll ask him again to fix currently unregulated hedge and private equity funds.  Long-term growth depends on reining in the shorts, especially in fragile financial markets that, since the Dec. 2007 meltdown, have been reluctant to lend out money.  Without money flowing from banks into the hands of businesses and consumers, it’s difficult to improve the real estate and consumer spending markets.  Today’s overly harsh lending standards put most consumers and businesses on a cash-and-carry basis, unable to make the big-ticket purchases needed to stimulate growth.  Obama must work with the Federal Reserve Board, Treasury Dept., commercial banks and businesses to revise today’s austere lending to improve consumer and business spending.

            When Barack meets with CEOs on this week on job creation, he should ask them to stop outsourcing manufacturing and services.  While improving U.S. exports is a worthy goal, the real problem with American jobs involves far too many cheap foreign imports, especially from Asia.  Like Congress did with the auto industry, it’s time to catch up with consumer electronics and appliances, insisting that foreign companies manufacture in the U.S.  Most foreign companies would sell more goods and make bigger profits manufacturing in the U.S.  When foreign companies supply more jobs in the U.S., it creates the cash-flow needed for consumers to contribute their part to growing the economy.  More U.S. jobs help foreign competitors sell more goods.  Obama must give CEOs the big picture, insist on more domestic services and manufacturing and demand more American jobs.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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