Casino magnate Steve Wynn caused a stir yesterday during a conference call with investors when, while answering during an analyst’s question, blasted the Obama administration for being “the greatest wet blanket to business, progress, and job creation in my lifetime.” The rebuke comes not from a member of the vast right wing conspiracy, but from a self described “Democratic businessman”, strong supporter of Senate Majority Leader Harry Reid, and someone who maxed out to the presidential campaign of Vice President Joe Biden.
Wynn went on what The Politico calls an “extended rant against Obama and his policies”, decrying the lack of certainty in taxes, regulation, and health care in the current U.S. business environment, blaming the climate for businesses sitting on cash rather than investing to create jobs. Wynn knows a few things about creating jobs. His company, Wynn Resorts International, was founded less than a decade ago yet has over 20,000 employees and has about $3 Billion in revenues.
The only things said to be certain in life are death and taxes, and neither frustrated businessmen nor policymakers are looking to the government to provide a perfect environment where all answers are pre-determined. Yet the constant rule changes, tax changes, and evolving requirements for employers have created an economic environment where uncertainty increases risk. Increased risk mandates an increased return on proposed investments. If higher returns are not feasible, an investor is wise to sit and wait for a better investment, or for more certainty to minimize the risk level appropriate to the return offered.
A national climate where the two major political parties are sharply divided on economic policy and trade majorities every 2 to 4 years does not help the problem. Employers forecasting heath care costs have no idea how Heath Care Reform will actually be implemented, or if it will be ruled unconstitutional or repealed by a future Congress. The debt ceiling debate has cast doubt on the short term and long term stability of financial markets. And both parties are beginning to discuss “comprehensive tax code reform” though neither side is close to an agreement of what that concept would look like in reality. There are a lot of reasons a prudent investor with capital to invest will sit on the sidelines and wait.
On a more local level, economic uncertainty also drives local investment decisions. Gulfstream and its 10,000 Savannah based employees await whether tax code changes to make rich folks pay more will actually impact working Georgians who have enjoyed more aircraft orders to complete since aircraft purchase stimulus was added. Companies looking at investing in a $50 Million private jet will certainly stall signing their order until they can fully understand how much of the burden they will bear for the great compromise that will inevitably come from Washington.
State decisions and inaction contribute to Georgia’s uncertain business climate as well. Georgia Power is still attempting to seek final approvals and cost recapture methods on its two new nuclear reactors at plant Votgle, yet has also announced that it will decommission 3 coal powered plants in the next few years because upgrading to changing regulations passed down from D.C. are cost prohibitive. Georgia has long had one of the most reliable electric grids with the cheapest rates, helpful in attracting large industry. With this not necessarily an economic certainty, recruitment of businesses dependent on large amounts of electric power requires extra effort for added uncertainty.
Georgia’s transportation infrastructure remains on the verge of gridlock around Atlanta, yet state leaders chose to punt the decisions on what projects to build and how to pay for them to voters, adding years on inaction to the process, and creating a system where even the ratification of the plan is in serious doubt. It is significantly less than certain that Atlanta’s traffic grid will be facing significant improvements come winter of 2013, and companies seeking to re-locate here will be taking note.
With any private sector investment, there will always be an element of risk. Government, meanwhile, should not be focused on creating jobs, but creating a stable climate which minimizes uncertainty and fosters a climate of risk. When a man who has become a billionaire in less than a decade as a casino operator says there’s too much risk, the country should listen. After all, you can’t have Steve Wynn’s record of success without understanding what is and what is not a safe bet.