Monday, November 19, 2012

Certainty is the Key

Recently, American Public Media (APM) interviewed UPS CEO Scott Davis on their Marketplace program. You can read the short transcript here. The discussion centered primarily around how Davis sees the fiscal cliff issue in Washington, how UPS is likely to respond, and what he would like to see in a deal and moving forward after the new year.

Davis makes some interesting points that seem to fly in the face of what is traditionally heard about and from CEOs. For example, Davis says he thinks a balanced agreement that includes revenue increases, whether through raising rates or shutting loopholes, is important. That's something we've often heard the wealthy do not want. And, seeing has how UPS works with about 6% of the US GDP, you can imagine that Davis has a lot of interest and money invested in this.

Davis makes another really great point, right at the end. He points out that UPS, like many big companies, are sitting on huge sums of cash. The reason they aren't investing it, Davis says, is that they don't know what's going to happen in Washington over the next several years. There's no clear way forward, with both parties refusing to work with the other. That uncertainty is forcing companies like UPS to keep their money close rather than spreading it out into the economy.

This same trend is probably why our markets and overall economy are stagnating. Investors, CEOs, and entrepeneurs have no way of knowing what Washington is going to do in the next few years. It doesn't really matter all that much who is in charge and what they do. They could raise or lower taxes, regulate or deregulate, spend or save, and it wouldn't matter as long as it was a clear and consistent pattern.

Companies don't need more money, as Davis points out, they just need an environment where they feel safe spending what they have. Consistency and certainty are the things that Washington should be producing right now. Gridlock bogged down our economy and our country, and led to a credit downgrade. Now, as we're in the midst of round 2, we need real compromise and real solutions that will work from here unto the ends of the fiscal year.

No comments: