Two Former Senators’ Perspectives on Legislation Affecting Business (Or, The Rats in the Maze)

Former Senator George McGovern, Congressional Record, 102nd Congress (1991-1992): “My own business perspective has been limited to that small hotel and restaurant in Stratford, Conn., with an especially difficult lease and a severe recession. But my business associates and I also lived with federal, state and local rules that were all passed with the objective of helping employees, protecting the environment, raising tax dollars for schools, protecting our customers from fire hazards, etc. While I never doubted the worthiness of any of these goals, the concept that most often eludes legislators is: `Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape.’ It is a simple concern that is nonetheless often ignored by legislators.”

Former Senator Christopher Dodd, Forbes, July 26, 2012: “If the legislation doesn’t work and doesn’t do the job well, you change it,” he said. “This isn’t the Ten Commandments.”

Therein lies the issue. Legislators cannot afford to be cavalier about legislation. George McGovern got it, Christopher Dodd did not. But, keep in mind that Senator McGovern did not get it until AFTER he was out of the Senate and became a business owner. Until that point, he sponsored myriad legislation that he subsequently noted he would not have done after having had the challenge of operating a business.

One reason that businesses are reluctant to invest and hire today is because of the uncertainty surrounding the ever-changing legislative, regulatory and tax landscape. Uncertainty is the enemy of capital stewardship. Business craves certainty because capital is a precious resource that cannot be squandered. If you reduce uncertainty, you increase the likelihood of business investment spending, which historically has led to job creation. A dearth of jobs is that which plagues the US economy today as we are all so acutely aware.

Ponder George McGovern’s comments above as there is considerable wisdom in his words and note that he spoke them following the bankruptcy of his enterprise.

All comments and questions are welcomed.

Robert Bilkie, CFA