What Really Worries American Business

The President's claim that we have a "crumbling" infrastructure is based on the World Economic Forum's rankings of factors that presumably affect international competitiveness. In reading their latest publication, I learned that their rankings are based on surveys of some 100 businesspersons/experts from each country. In other words, Ethiopians ranking of their infrastructure is compared with the rankings of U.S. businesspersons of U.S. infrastructure. This methodology yields all kinds of odd results, such as U.S. public trust in politicians being below Kazakhstan, Iran ranking better than the U.S. in favoritism of government officials, and so on.

Therefore, I suggest that in general the World Economic Forum's rankings are questionable, putting it  in the most favorable light. In some cases, it is better to ignore their results.

I did find one comparison that made sense and whose results are interesting. U.S. business persons are asked to select the most problematic factors in doing business.  Their answers show the real concerns of American business.  The results also make sense.

As the figure shows, the major concern is financing. Credit has dried up. No one is lending. We already know that; so this result makes sense.

The second greatest concern is bureaucracy. We suspected that, but here it is in numbers.

The next two concerns are tax rates and tax regulation. Again no great surprise. 

Although our inflation is low and the Fed tells us not to worry, concerns about inflation rank high, especially to those facing higher prices of materials.

The next two factors of concern are a poorly educated and motivated work force. 

Not surprisingly, businesses are worried about policy instability. They have been buffeted by too many changes in the last few years.

Two major policy issues -- health care and infrastructure concerns- rank among the lowest of concerns of American business persons.We spent the first three years of the Obama administration fighting about something the business community does not regard as a problem. We will begin a debate on a state infrastructure bank. The business community does not appear concerned about our "crumbling" infrastructure.

Studies such as these suggest we should not shoot from the hip in the upcoming political campaign. We should not assert concerns that are really not there.

The 2012 Election Hinges on Whether Voters Believe in the Free Lunch (The Parable of the Good King and His Wise Men)

Most of us understand that free time-share vacations and free dinners with investment advisers mean harassment, telephone calls at night, and worse. We know: “There is no such thing as a free lunch.” Yet, the “Free Lunch” scam prospers because benefits are clear, the costs are hidden.

The 2012 election may depend on whether voters understand that free lunches are not free. The Democrats version of Medicare “guarantees essential medical services” to senior citizens. The government, not they, pays out of payroll taxes. Medical care, they claim, is a free lunch. The benefits are alluring; the costs are hidden. Like the “free” time-share vacation, senior citizens will understand only when it is too late.

Let me offer a parable to illustrate the Medicare free lunch:

Once upon a time in a faraway kingdom, there lived a good king. Three quarters of his people are young, work, and pay taxes. One quarter is old and no longer work. The kingdom has two royal physicians. The good king decrees that the elderly have a “right” to medical care. He orders his two royal physicians to treat them for free and pays them from the taxes on the young.

The king’s healthy young subjects see the royal physicians once a year. They pay out of their own pocket. The older subjects come ten times a year. They come more partly because they have more illnesses, but also because someone else pays their bill. The average number of visits per year of young and old combined is 3.5.

Time passes in the kingdom. There are fewer babies, and the old people live longer. Now half are young, and half old. The two groups now visit the royal physicians an average of 5.5 times per year – an almost 60 percent increase. Worse, with only half his subjects working, the king collects less in taxes.

The good king tells his royal physicians that they must work 60 percent more, but he must pay them less. After all, he has guaranteed his older subjects free medical care. The royal physicians do not take this news well. Their wives are complaining. They are overworked and poorer. They leave refusing to work more for less.

The agitated good king seeks advice from his Committee of Wise Men. Their answer: “It is simple. We’ll decide who, among the old, deserves treatment. We’ll get the average number of visits back to where it was in the old days.” The king approves, and the Wise Men use wise rules to decide who can see the royal physicians.

Now the elderly come to the good king to complain: The wise men are denying them their rights to medical care. So many good people have died because the wise men did not permit them to see the royal physicians.

The good king weeps. He calls in his royal physicians and orders them to work more for less. Instead of complaining, they should raise their productivity. They are already well paid. They can afford to work for less.

The royal physicians return to work full of resentment against the good king. They unlock their door only for young patients. They open the door for old patients only if they bring live chickens or silver coins. They post signs welcoming foreign visitors passing through the land.

The good king is outraged when he sees lines of old people standing at the locked doors of the royal physicians. He sends the royal constable to threaten arrest unless they follow his orders.

In the night, the frightened physicians pack their bags and leave the kingdom forever.

The king convenes a meeting with his wise men. Surely we can train new physicians quickly, perhaps even five royal physicians? They answer: No one wants to be a royal physician. They can earn more as a butcher or a baker.

And everyone lives unhappily ever after.