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Morning Jay: The Wet Blanket

By Jay Cost

Steve Wynn’s comments about the Obama administration caused quite a stir this week. The Las Vegas tycoon said:

And I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems, that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration. And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America. 

He’s not the only high profile business leader blasting the feds. Consider this interview with Home Depot cofounder Bernie Marcus, who says that the U.S. government is the biggest impediment to business growth today.

One big reason for business discontent? Obamacare, which unfortunately duplicated the worst feature of Hillarycare from 1994. In rejecting a single-payer system, Hillarycare put forward a program of “managed competition” that came across like a Rube Goldberg device. Few people could understand it. Similarly, Obamacare shied away from a Canadian-style system of socialized medicine, instead offering heavily regulated health care exchanges, but its design is so clunky that businesses are having a hard time figuring out what is going to happen.

Evidence of this uncertainty can be found all around, and not just in the comments of high-profile leaders like Wynn and Marcus. The Federal Reserve “Beige Book” is an anecdotal collection of business conditions in the Fed’s twelve districts. Published eight times a year, the Beige Book has long been noting broad-based unease when it comes to Obamacare.

This is from the Richmond Fed, in June:

One hospital administrator also expressed uncertainty about the financial effect on his hospital of the increase in “newly insured” populations under healthcare reform.

This is from the Boston Fed, in January:

One respondent is concerned that uncertain potential employer costs associated with healthcare reform may affect hiring.

This is from the Atlanta Fed, in January:

A majority of business contacts indicated that current cost pressures were higher, citing increasing material prices and rising labor and benefit costs. Many firms also noted that they were setting aside funds for expected future increases in employment taxes and healthcare costs.

This is from the Boston Fed, in October:

[A] healthcare consulting firm saw revenues rise 10 percent in the third quarter and 25 percent year-over-year; this contact explains that businesses are still responding to regulatory changes following healthcare reform, which keeps demand for healthcare consulting services strong.

This is from the Chicago Fed, in October:

[S]ome contacts highlighted large expected increases in the cost of healthcare for employees.

This is from the Chicago Fed, last August:

[S]everal contacts expressed concern over the prospect of rising healthcare costs in the coming year. 

Other anecdotal collections from the regional Federal Reserve banks confirm this widespread apprehension. The Philadelphia Fed’s May 2011 outlook commented:

The most frequently cited factor for restraining hiring among all the firms was the need to keep costs low and low expectations of sales growth. Uncertainty about health-care costs, regulations, and government policies was also prominently listed.

In October, the Atlanta Fed reported:

In addition to slow and uncertain revenue growth, contacts in this recovery are frequently citing a number of other factors that are impeding hiring. Prominent among these is the lack of clarity about the cost implications of the recent health care legislation. We’ve frequently heard strong comments to the effect of “my company won’t hire a single additional worker until we know what health insurance costs are going to be.” 

A recent Chamber of Commerce survey of small businesses found a large number listing Obamacare, new regulations, and high taxes as big challenges moving forward. In fact, a whopping 75 percent of respondents at least partially agreed with the statement, “the recent healthcare law makes it harder for my business to hire more employees.”

Democrats won’t admit it publicly, but many of them surely recognize that all this is a huge problem for their party. When he won the nomination in 2008, Barack Obama took charge of a coalition that, thanks to the efforts of Bill Clinton, had won a measure of credibility with the business community for the economic boom of the 1990s. Clinton’s “New Democrat” approach had given the party a pro-business image, one that stood in stark contrast to, for instance, the “People Versus the Powerful” rhetoric of Walter Mondale in 1984.

Judging by the reactions of business people across the country, Obama has greatly damaged his party’s reputation as a pro-business party. He is easily the least business-friendly president since Harry Truman, the last national leader to pit one group of Americans against another so persistently. That is going to be a big problem for Obama next year, and subsequent Democratic leaders will have to work hard to rebuild the bridges that this president has clearly destroyed with American business.

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