Businesses need predictability to plan, invest and expand. Is this a theoretical understanding of how businesses work? No -- it comes from the reality of practice.
While earning an MBA in finance and the Chartered Financial Analyst designation, I learned the theories of corporate finance and investing. With this solid foundation, I worked for more than a decade in operational, corporate finance, deciding when to hire, when to fire, when to invest in additional capital equipment and when to sever financial obligations due to uncertainty.
From my first job during business school valuing businesses to my most recent financial position heading up corporate financial planning for a $3 billion business, I learned that there is one thing that corporate finance likes: stability. This allows businesses to plan, to hire and to create contracts.
We're all looking for economic growth, especially the 14.8 million people currently unemployed (according to Bureau of Labor Statistics, Nov. 5 release). In addition, 9.2 million part-time workers would prefer to have full-time jobs. Another 2.6 million people are not counted among the unemployed because they have given up looking.
Add up the unemployed, the part-time who would like to be full-time and the discouraged workers, and you find 26.6 million people are either unemployed or underemployed.
This is an enormous national resource that is being wasted. The vast majorities of these people want to work but cannot find jobs. There is ample supply but little demand.
The Obama administration attempted to solve this unemployment problem by passing stimulus spending, projecting that the injection of $787 billion of government spending (from borrowed funds) would prevent the unemployment rate from exceeding 8 percent.
We're at almost 10 percent.
So much for government micromanagement.
If government can't create jobs, who can?
Businesses. Businesses that create products and services that provide value to consumers produce revenue. They, in turn, hire new employees to produce more products and services for their customers, producing more and more revenue.
That takes us back to where we started. What do businesses think about when hiring? Stability, certainty, the ability to plan for costs and benefits of hiring.
What do businesses hate? Uncertainty.
Today, with the Obama tax hikes in play (these were the Bush tax cuts), a possible repeal of Obamacare (and if it is not repealed, uncertainly of what it means to businesses when phased in) and the recent Federal Reserve injection of monetary stimulus to the tune of $600 billion, the business climate is anything but certain.
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