President Obama surely knows that the key to his re-election in 2012 will lie in creating jobs and putting a significant number of the 14.5 million Americans currently unemployed back to work.
To do that Obama needs to convince U.S. businesses that the economy is strengthening and that his administration is doing all it can to foster an environment in which businesses can expand and succeed.
The person expected to serve as point man for this effort is Bill Daley, who was named Obama’s new chief of staff last week. Daley is a scion of the Daley political dynasty in Chicago, a former Commerce Secretary in the Clinton administration, and most recently an executive with banking giant JPMorgan Chase (NYSE:JPM).
Both Daley and Sperling are widely viewed as political centrists and far more likely than their immediate predecessors to not only reach across the political aisle to Republicans but also improve frayed relations with U.S. business leaders, many of whom have felt wrongfully impugned by the Obama administration.
The appointments are seen by many as a loud and clear message that Obama recognizes the need to bridge the gap -- whether it be real or merely perceived -- between his administration and the U.S. business community.
Tom Donahue, CEO of the U.S. Chamber of Commerce, said the White House is “moving in the right direction” in an interview earlier this week on the FOX Business Network.
But Donohue was quick to cite examples of real action that needs to occur if the Obama administration hopes to play a role in alleviating the uncertainty that continues to plague businesses and is blocking the growth that will lead the economy out of its doldrums.
Specifically, Obama needs to start rolling back the “the extraordinary regulatory explosion” that has rocked the business landscape in the wake of the recent economic crisis, said Donohue. The health care reform bill and new financial regulations passed by Congress last year are viewed by many businesses as impediments to growth.
Economist Peter Morici, meanwhile, suggested the appointments are little more than window dressing. “Don’t be fooled,” Morici wrote in a column earlier this week. “Deeper in the administration, the president’s electricians are busily rewiring American capitalism for failure.”
In short, the president’s critics believe his administration’s actions need to speak louder than the words of its high-profile appointees.
An interview with small business owner Todd Magatagan, a landscape irrigation consultant in East Texas, reflects the widespread skepticism held by many employers toward the Obama administration.
Magatagan said that after two years of policies he believes have made it harder for small business owners like himself to succeed it will take more than a few new faces to convince him the Obama administration really means business (so to speak).
“Regardless of who he appoints I don’t think it’s going to do me any good,” he said.
Magatagan, owner of ATM Property Management and Around the Grounds, said Obama needs to aggressively attack the problems that make it more expensive to own a business: namely high taxes and a glut of regulation. Only then can the U.S. economy start growing at a rate that will induce companies to expand and hire.
“What we have to do is grow our way out of this, and the only way we’re going to do that is to lower regulation burdens and lower tax burdens. That serves as an incentive for businesses to grow and hire,” Magatagan said.
“I can concentrate on being productive and not being compliant,” he added.
Another top priority for the White House should be making it easier for small businesses to get loans. “If you’re a small business there is no money available right now for expansion,” he said.
Magatagan was critical of the two-year extension of the Bush tax cuts, reached last month as a compromise agreement between the Obama administration and Republican Congressional leaders. The extension does nothing to alleviate the uncertainty facing business owners, he said.
“Two years is just a temporary reprieve and it doesn’t allow me to plan,” he said, adding that the tax cuts should be made permanent.
Government can lower taxes by slashing spending, said Magatagan, noting that he’s been forced to reduce the number of workers he employs, scale back on equipment costs, and even cut his own salary. Federal, state and local governments shouldn’t be immune to such austerity.
Like many small business owners, Magatagan believes the U.S. is badly in need of tax reform.
“I’m a strong advocate of a flat tax environment,” he said. “The economy would explode if everyone knew their personal income tax was, say, a flat 20%. Everyone would know immediately what their burden is.”
Furthermore, the business tax rate should also be significantly changed -- perhaps a flat rate of 3% to 5% on gross revenue. “After that the government stays out of my business on how I spend my money,” said Magatagan
“Those two things would make our economy explode with innovation and we’d grow our way out of this (downturn) in a short time,” he said.
From a small business owner’s standpoint, Texas has weathered the economic downturn relatively well compared to the rest of the nation, according to Magatagan. A strong energy industry has contributed to that strength, and when an important sector such as energy does well that benefits the rest of the state’s economy.
“It’s trickle-down economics,” he said.
Magatagan said Texas business owners are not overly burdened by taxes: Texas has no state income tax and its corporate tax is comparatively low to other states, he said.
Finally, Texas is a so-called “right to work” state, meaning unions don’t exert the same influence as in Northeastern states such as New York and New Jersey, and, according to Magatagan, the state has a “business friendly environment when it comes to regulation.”
“It hasn’t been fun, but we’ve weathered this economy,” he said. “We’re all surviving.”