Cliff Diving with Congress

A good cliff is a rather breathtaking affair. I’ve always been impressed by the Mexican cliff divers in Acapulco, but I’m talking about something even bigger. Think White Cliffs of Dover or Half Dome at Yosemite. Now, those are some gargantuan cliffs.

A cliff – with its massive, sheer vertical wall of rock or earth or ice – will get your heart pumping and head spinning, because by its very nature, a cliff is a dangerous place. Witness the exploits of Wile E. Coyote and the tragic Buzz Gunderson.

For that reason, I give cliffs a wide berth. You’ll not see me hovering near a ledge, as self-preservation has meaning to me now that I have survived my youth.

You would think our illustrious members of Congress, none of which are teenagers (but prove to be fully capable of acting like ones in late night frolicking along the Sea of Galilee) would also have an appreciation for safety and prudence, but with an 12 percent approval rating, you really have to wonder.

From all outward appearance, it would appear that our Congressmen are intent on periodically taking us to the brink and back. My theory is that they want to be taken seriously or at the very least be noticed.

And so they are now the focus of our attention as we approach what is being called a “fiscal cliff,” to which most economists and now a growing chorus of business leaders say is a precarious thing as it would tip our economy into a new recession.

The fiscal cliff refers to a series of tax increases and spending cuts that would take place in January 2013 unless Congress reaches agreement to forestall those measures. And therein lies the scary part, as we find ourselves actually dependent upon Congress to agree on something and take action. Now why is this important?

Well, the nonpartisan Congressional Budget Office, which ostensibly works for the Gang That Couldn’t Shoot Straight, came out with a report that past week that said that if Congress does nothing, and that we all take the plunge over the fiscal cliff, that while the outlook of the federal government’s budget deficit would improve, the unemployment rate would push back up to 9.1 percent by the end of 2013, and produce economic conditions “that will probably be considered a recession.”

In short, it would mean 2 million fewer jobs than if the tax cuts are renewed and the spending cuts averted, said Douglas Elmendorf, the budget office’s director. In 2013 alone, the combination tax increases and spending cuts would be a more than $500 billion hit to the economy.

The CBO’s latest fiscal outlook is great fodder for the dueling camps as the Nov. 6 elections approach. Republicans, including presidential candidate Mitt Romney, want to postpone the biggest chunk of the cliff – $331 billion in tax increases – to give Congress time to overhaul the tax code. Democrats, including President Obama, say they will not delay tax increases set to hit the richest Americans.

As you can imagine, the Romney camp jumped on the CBO report like a dog on a bone, while the White House said it was all the fault of those wascally wepublicans.

“Today’s CBO report is another indictment of President Obama’s economic policies that have resulted in overspending, increasing debt, and a growing financial burden on the next generation,” said Romney campaign spokesperson Amanda Henneberg.

The White House said the CBO report showed it is time for the Republican-led House to approve tax cuts for all but the nation’s highest earners.

“They’re willing to hold the middle class hostage unless we also give massive new tax cuts to millionaires and billionaires – tax cuts we can’t afford that would do nothing to strengthen the economy,” White House spokesman Jay Carney said of Republicans in a written statement.

The Obama administration seeks to renew the expiring tax cuts but let rates rise on amounts exceeding $200,000 annually for individuals and $250,000 for couples. Republicans insist that all tax reductions should be continued.

One thing for certain, if Congress doesn’t act, just about everyone is going to get hammered big time.

According to a study by the nonpartisan Tax Foundation on the perils of the nation’s fiscal cliff, Americans would face the biggest tax increase since the end World War II if the Bush tax cuts are allowed to expire at the end of 2012.

Connecticut residents would get hammered the worst, with an additional cost of $5,783 a year, while New Yorkers would get hit $5,542 on average. Mississippi residents get the least impact, at $1,310 on average, but 29 of the 50 states will see taxpayers get hit at least $2,000, according to the Tax Foundation.

New Jersey residents would take the third-highest hit at $5,030, with Massachusetts ($4,277) and California ($4,242). Besides Mississippi, Residents in states lease affected would include New Mexico ($1,465) 49th, Alabama ($1,496) 48th, Tennessee ($1,522) 47th, and West Virginia ($1,530) 46th.

If the Bush cuts expire, top tax rates will increase from 35 percent to 39.6 percent. The capital gains rate will jump from 15 percent to 20 percent while dividends also would revert to a higher rate.

The uncertainty of how and when lawmakers will resolve the issue is hurting business confidence and weighing heavily on companies’ investment and hiring decisions. This is clear if you listen to what some prominent CEOs are saying.

Travelers Cos. Chairman and Chief Executive Officer Jay Fishman said that businesses are curbing spending and hiring because U.S. lawmakers haven’t addressed fiscal imbalances the country faces in the next decade.

“The best thing that could happen right now is a bipartisan solution” to the nation’s mounting debt and widening deficit, Fishman told Bloomberg. “The sense of gloom and despair would lift and, in fact, businesspeople would be more optimistic.”

Customers of Caterpillar are “scared to death” that tax rates will rise as public expenditure stalls, said company CEO Doug Oberhelman.

“It’s starting to hold us back,” Oberhelman told Bloomberg. “For the contractor base and customers in this country, it’s worrisome. It has a chill in the air.”

The Obama administration forecast July 27 that the country’s budget deficit will be $1.21 trillion this year. Government spending exceeded revenue by more than $1 trillion annually since 2009 as the U.S. sought to stimulate the economy and spur job growth after the longest recession in almost eight decades.

Gross domestic product, the value of all goods and services produced, slowed to a 1.5 percent annual rate in the second quarter from 2 percent in the first three months of the year as limited job growth prompted Americans to curb spending, according to U.S. Commerce Department data. The jobless rate has remained above 8 percent since January 2009.

Between 2013 and 2022, the CBO expects $10.7 trillion will be added to the national deficit if policy makers extend current policies, including the 2001 and 2003 tax cuts. U.S. debt is expected to total 73 percent of gross domestic product this year, rising to 93 percent in 2022.

Now that is not sustainable, whether you are a liberal or a conservative. That dog just won’t hunt.

After his first month in office, President Obama spoke passionately about the need to reduce the deficit. He sounded very much like the adult in the room, which at the time gave me pause and a degree of confidence.

“Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration or the next generation. We are paying the price for these deficits right now,” he said.

“We risk sinking into another crisis down the road. As our interest payments rise, our obligations come due, confidence in our economy erodes and our children and our grandchildren are unable to pursue their dreams because they’re saddled with our debts. But I refuse to leave our children with a debt that they cannot repay, and that means taking responsibility right now, in this administration, for getting our spending under control.”

Since then, I have lost my confidence. Federal spending ($3.7 trillion in 2012 with $2.2 trillion of that earmarked for Medicare and Social Security) under control? Mr. President, with all due respect, sir, this would be the fourth consecutive year the U.S. would run a trillion-dollar budget deficit.

But the day of reckoning is coming. We can only kick this can down the road so long. Judging from the campaign rhetoric coming from both sides, entitlements will not be seriously curbed anytime soon. Privately, thoughtful conservatives and liberal members of Congress acknowledge that any meaningful deficit reduction plan must include increased revenue along with spending cuts.

But they will not tell you that. Not now, not while they are trying to get elected.

No, they will promise you the moon, while skirting the truth. And the truth is that if we are going to seriously tackle our nation’s long-term debt, spending cuts alone will not make it happen. Whether we like it or not, our taxes are going in only one direction and it’s not south.

And that is even if we avoid the cliff.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

 

 

Special Ops Required for Site Selection and Zombie Eradication

I had lunch this past week with a friend who, like me, is an all-knowing, sage-like consultant. (Actually, he is a very humble and nice man and does not view himself as a guru of sorts. Notice that I did not say that about myself.)

We periodically get together at a barbecue joint, because we enjoy each other’s company and like to talk shop and compare notes. And because he is a friend, I can run ideas by him without fear of contempt and ridicule. He will kindly review and provide valuable input on some of my PowerPoint presentations before I give them to assembled groups of economic developers or prospective corporate customers.

“Dean, you cannot tell folks to stockpile food and ammunition for the coming Armageddon.  That just won’t fly.”

“Yea, you’re probably right, but can I at least keep the slide about growing your own food and learning Mandarin Chinese?”

If it makes any difference, I’ll mention none of this when I speak later this month at the annual meeting of the Arkansas Economic Developers.  For the record, my topic will be business retention and expansion.  On the advice of my astute friend, I never once spoke about how to best deal with zombie outbreaks during my presentations earlier this year at the Texas Economic Development Council and the Florida Economic Development Council.

(But I will tell you that zombies will devastate your local business climate as you cannot reason with them. Now you can take that to the bank.)

But back to my lunch with my consultant friend. After we pigged out on smoked meat, he gave me a thumb drive that included a presentation of his own that he gave at a recent conference of economic developers. As I had my laptop with me, we took a look at it together. I think he wanted my input.

As I knew would be the case, my friend’s presentation was very insightful and topnotch.  It included his rather sophisticated thoughts on how the site selection process, an area of great interest for both of us, should ideally work for a corporate client, with an emphasis on the importance of logistics in relation to customers and suppliers.

His presentation was so good, in fact, that I told him that I wanted to steal some of his ideas, to which he smiled and said, “Just give me credit where credit is due,” which was the right thing to say. That’s what I would have said, even if I have no clue where most of my ideas came from. Sometimes, they just sort of percolate up in me.

I do know that in our many meals together, we have talked a great deal about the proper ingredients that should go into that gumbo stew that we call site selection. It is not clear to me if I influenced him or he has influenced me. Probably both, as we seem to agree that a whole host of business factors rather than incentives should be of primary concern.

So my future graphic on my future PowerPoint slide may show a gumbo pot with all these different ingredients to be thrown into the mix. (Unless, of course, he tells me it’s a bad idea.)

Also, this past week, I got a message from an acquaintance that had just joined a consulting firm, which advertises site selection as a primary function.  He is a tax accountant by training, and, not surprising, the tax implications and incentive negotiations in regard to taxes are his chief bailiwick and that of his firm. I suspect that he is very good at what he does, but I do wonder if he delves deeply into the other. Maybe he does. I just never heard him mention anything other than taxes.

I have also spent a good amount of time with a very nice fellow who I will call Fred. Fred doesn’t hold himself out to be a site selection consultant per se, but his commercial real estate firm calls it a specialty area.  Not surprisingly, the emphasis is real estate and making transactions happen on a building or a piece of dirt, of which Fred gets a commission.

There is no doubt in my mind that Fred is accomplished at what he does, but I’m not so sure if he focuses much on any factors beyond  real estate in his work.  His experience has been making real estate deals happen, which is all very good, but he lacks a depth of knowledge in other site selection considerations, like workforce, logistics and transportation, utilities, taxes, and on and on.

Certainly, what has become clear to me over the years is that you can choose some very nice, attractive real estate in a very wrong location, which can and will come back to bite you. And while real estate itself typically does not figure in as a major cost factor in the lifespan of a business operation, picking real estate in the wrong place can have you paying out the nose for years in terms of higher and sometimes unexpected operational costs.

Now I do not hold myself up to being the all-knowing Poobah on what constitutes everything that is right and everything that is wrong with site selection consulting. I can tell you that it is a rather fractured arena populated by some veterans who provide great service and by some wannabees who really don’t have a clue. I guess that is probably true with just about every profession and craft. You live and learn.

Some consultants, such as the ones that I have mentioned, have focused areas of expertise, where they really know their stuff, whether it be taxes or real estate or logistics. As I prefer a more holistic approach to site selection, I like to put together special ops teams, in which I can bring in  highly-knowledgeable specialists to perform their needed function or job, depending on the needs of the client company.

The fact is that nobody knows it all, so assembling a team on a project-by -project basis makes a lot of sense for everyone concerned.

But recently, I got thrown a curve ball, from a person who thought (erroneously) that I did know it all. You see, I got this phone call from a fellow in New York, who apparently had some decent corporate contacts and had dabbled in commercial real estate. In short, he wanted me to give him the skinny on how he, too, could become a bona fide site selection consultant.

I was kind of flabbergasted and stumped at the same time, as the question just struck me as being so naïve. You have heard the old saying, “that that there is no such thing as a stupid question.” Well, I beg differ. I have asked many a stupid question in my life (I was a newspaperman for 20 years), and I have received more than a few myself.

But you try to be gracious. I attempted to explain that what he was asking about was what I saw as a long journey that could rightfully takes years of experience to develop, with a laser-like focus of providing true value to a client. I am certain that my answer sounded muddled at best. I could only imagine someone else asking the same of a brain surgeon.

Respondent: Hello, this is Dr. Smartso.

Caller: Dr. Smartso, my name is Henry Driftless, and I wanted to ask you how to become a brain surgeon.

Respondent: What?

Caller: You are Julius Smartso, the world famous brain surgeon who transplanted a hamster’s brain into a U.S. Congressman’s head?

Respondent:  Well, yes.

Caller: Good, so I was hoping you would tell me how I might go about becoming a brain surgeon. I’m pretty good with my hands.

Respondent: This is a joke, right?

To be sure, site selection consulting is not brain surgery, but it does entail specialized knowledge that comes with experience about how certain things are and how certain things work. Having some interest and insight in manufacturing has certainly provided me somewhat of an advantage, but I do not know if there is a single pathway to becoming the all-knowing, sage-like consultant.

As with most things, you learn by doing it, gaining knowledge by working intimately with companies and understanding the drivers involved. The way I see it, with my background and experience, if I do my job right, I should be able to save a company millions of dollars in finding the right fitting place. (Which is the primary reason why most companies shouldn’t go it alone. Kids, don’t try this at home!)

I’m not Dr. Smartso, but I might be smart enough to know that there are times when quick and simple answers just do not suffice. I stumbled with that phone call from the fellow from New York. So how do I do site selection?

Well, I focus on the goal – taking them (my corporate clients) where they need to be in an honest and objective manner based on detailed and weighted criteria that I work out with them. That is not an easy thing to do in any economic environment, but luckily, I can then focus on the details with the help of some very talented people with specialized knowledge, who understand how things are and how they can work.

Again, forming these special ops teams (which may be a trend in many consulting fields) makes a great deal of sense for site selection and economic development consulting work, because nobody knows it all. Anybody who claims they do, watch out and grab your wallet.

And that’s no joke. Now, I got to find that business card for the man who specializes in zombie eradication. I got a community that needs help.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

Cutting Loose in Appalachia

It was time to reboot, revamp, recharge and revitalize. So I took my first vacation in three years  (which is the reason you have not been hearing from me of late), and I came back home refreshed and ready to tackle the challenges at hand.

But when I was behind the wheel for the nearly 3,000 miles that I drove with a pop-up camper in tow, I will admit to pangs of guilt about taking off. You see, when you are self-employed as I am, there will always be that nagging feeling that you are missing out on something big.

So I tried to split the difference to some degree, knowing full well that it would be hard for me to separate myself totally from work. Along the way in my eastern trek from Texas to Appalachia, I met with clients and potential clients, even showing up in a suit for some meetings.  Never mind that out in the parking lot was my camper,  beckoning for my return.

Most of the time, I confided with my corporate contacts that I was mixing business with pleasure and was on my way to attend a music festival in West Virginia. Invariably, that would prompt the question if I played a musical instrument and that’s where things would get dicey.

Exec: So what instrument do you play?

Me: Hey, I see that you have expanded your operations at this plant and that you are considering re-shoring more production back to the states.

Exec: So what do you play?

Me:  You know, I couldn’t help but notice the pictures on your desk. You have a beautiful family.

Exec: Yes, I do. I am very blessed. Now what instrument do you play, Dean?

Me: Well, you know, it’s a stringed instrument.

Exec:  Yes?

Me: You wouldn’t be interested. Hey, I wanted to ask you about your new distribution center on the east coast.

Exec: Dean, I would very much like to know what instrument you play.

Me: Uh, yea, well you see, uh, it’s the, hmm, you know, the …. the banjo.

Exec:  Gosh, that’s great, Dean. Good to see you. Thanks for dropping by. Hope you have a great trip.

Me: You know, I really believe that I could save your company millions of dollars in operational costs by helping you find the right place when you are ready to expand.

Exec: Yes, we do need to talk about that, but now is not the time. I have an important meeting that I must attend shortly.

Me:  I was hoping for a plant tour.

Exec:  Next time, Dean. Next time, I promise.

Me:  Did I tell you I played the guitar, too?

Exec: That’s wonderful. I bet you play it well, too.  Now you drive safe. Take care.

But if the banjo does not sell well in the corporate suites, it does serve as a shining star at the Appalachian String Band Festival near the tiny village of Clifftop, WV., which was my final destination. There, I got at least a modicum of respect.

And there in the mountains, 20 miles from the nearest town, I relaxed and had fun with a bunch of musician friends from all over the country. And then something very good happened.

My not so smart phone died. Just quit working. There would be no phone calls, no emails. I was isolated and removed from the pressures of my work and somehow I came to love it. For that time and place, business be damned.

But I’m not totally stupid. I did get word to my boss, aka the wife, through a friend’s cell phone on how to reach me in case of emergency.

Still, I felt cut loose. Indeed, I cut the noose. There is something about getting away, escaping from normal routine of work and life, that simply does the body and mind good. Numerous studies seem to support this notion that long breaks do replenish job performance.

“The impact that taking a vacation has on one’s mental health is profound,” said Francine Lederer, a clinical psychologist in Los Angeles in speaking to ABC News. “Most people have better life perspective and are more motivated to achieve their goals after a vacation, even if it is a 24-hour time-out.”

The bottom line is that breaks are good for the brain. If you care about your own productivity and your decision making, take off and go work on your golf game. Or in my case, finding solace in the glorious banjo with fiddle players and guitar players in the mountain wilds of West Virginia.

Yes, folks, it’s true (at least for me) — hillbilly music heals.

Things I Thought About While on the Road,

Driving from Texas to West Virginia and back provides you plenty of time to think about things. The wondrous landscapes that I saw in North Carolina, Virginia, West Virginia and Tennessee, confirmed in me that there must be a higher power at work, a Creator. The moonshine that I tasted also confirmed that these mountain people knew a few things about creation, too.

I marvel and give thanks to the fact that we have an interstate highway system in this country that permitted me to make 500 miles a day, rather easily, with a trailer in tow.

In terms of interstate commerce, that is huge. Most produce in this country moves by truck. President Eisenhower didn’t conceive the Interstate System, but his support led to enactment of the Federal-Aid Highway Act of 1956, which established the program for funding and building it.

President Obama signed a $105 billion transportation bill into law on July 6, bringing to an end a three-year battle over road and transit spending. The bill passed by a vote of 373-52 in the House of Representatives and 74-19 in the Senate, revealing that Congress can actually get something done if it only tries.

The new law supposedly will streamline the lengthy project approval process, consolidate or eliminate federal programs, and ensure that states have more flexibility to direct limited resources to high-priority needs. Let us hope.

The U.S. freight economy, particularly for trucking, is projected to grow significantly despite current economic conditions. The American Trucking Association, IHS Global Insight and Martin Labbe Associates forecast total freight tonnage to grow 21 percent by 2023, with revenue for the freight transportation industry rising 59 percent during the same period.

Trucking’s share of the tonnage market will rise more than 2 percentage points to 69.6 percent by 2023, while the industry’s share of freight revenues will rise from 80.9 percent to 81.7 percent. And having driven in some pretty remote areas of late, I can believe the claim by the ATA that 80 percent of U.S. communities receive their goods exclusively by truck. That is certainly true in the mountains.

In short, expect more and maybe even bigger trucks on the road in the future, which will only underscore the need for roadway improvements.

Having an interstate network is this country is central to the movement of people and goods, but having driven nearly 3,000 miles in the last couple of weeks tells me that there are stretches that are in need of upgrading. A focused strategy to upgrade our transportation infrastructure would put legions of people back to work who would be building new highways, upgrading existing roadways, replacing aged (and even dangerous) bridges.

This is a matter of economic development that should transcend party affiliation and political philosophy. This is a matter of economic housekeeping with an eye toward the future.

I’ve always believed that you have to spend money to make money. Investing in ourselves enables industry to better compete on a world stage. And whether we like it or not, that’s the stage that we are on.

Open for Anything?

Economic developers are infatuated with this whole concept of brand. Brand is what we want people to think of us or associate us as being. Personally, I kinda like the bumper stickers and the T-shirts that I have seen to “Keep Austin Weird,” although most chamber types would probably cringe at the thought.

But so many brand attempts play off the obvious and the superficial to such a degree that you can only conclude that those coming up with these ideas must take us for idiots. In the recently released movie “The Campaign”, Will Ferrell portrays an incumbent congressman seeking re-election who shamelessly resorts to stringing the words “America, Jesus and Freedom” together for effect.

Now how many communities, how many states, how many times am I going to hear that a place is “Open for Business?” And what does that really mean? Does that mean you are open for any kind of business under the sun to come to your community? Really? Well, if that is the case, it doesn’t speak much for you.

Sometimes it’s what others say about you that has more weight than what you say about yourself. Think about that. My advice – resist the obvious clichéd slogans. Focus on what makes sense not only for you but for your customer. In short, think fit and solution and resist the smarmy slogans.

When I was a teenager only dreaming about my first car, I remember reading the classified ads in a major northeastern newspaper. There was one used car dealer who would always describe the car being advertised as a “real creampuff.”

Believe it or not, I was even skeptical then.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com