Tariffs. Business Cycles. Immigration Policy. Infrastructure. Cost of Health Care. These are the issues that were on the minds of senior CEOs convened for a Boston breakfast meeting on September 20, 2018 by the National Association of Corporate Directors-New England Chapter.
Most interesting was the broad philosophical view of CEO participants to the open question: what are you worried about? Thoughtful, policy-oriented responses over broad areas were voiced by Jeff Leiden (CEO of Vertex), Roger Crandall (CEO of MassMutual) and Sheila Marcelo (CEO of Care.com, a public company dedicated to providing home care).
No one liked tariffs. The concern was that over the long run they would increase the cost of goods sold to the U.S. consumer and, in the near term, cost jobs. Further, interference with complex supply chains, worked out over long periods of time, would materially disrupt efficiency of American businesses. Not a good word could be found in favor of the current tariff regime undertaken by the administration.
Next, on the tenth anniversary of the Lehman collapse, did these business leaders foresee the continued bull market? That depends on how you read their tea leaves. There are lots of risks out there (some of them are set forth in other sections of this post). The world is cyclical and the cycle must cut in at some time. We have been at strong growth for a very long time. The economy may be strong but history tells us that readjustments will come. Isn’t it anomalous that interest rates are not higher? What about the risk of the strengthening U.S. dollar; other countries have borrowed huge sums denominated in dollars, and as their currencies deteriorate they are going to have failures in repayment. In the words of one: “the party has gone on too long.” Further, a widening gulf, between those people benefiting from the innovation economy and those people suffering a widening wealth gulf because they do not participate, is increasing in the United States, leading us to look much like Europe (which was described as “flat” in terms of entrepreneurship and invention). Not good signs for the future.
Immigration: We need it to provide low-end support for critical industries such as home care. We need it because we need more people as our population ages. We need it because we are shipping back to our competitor countries the innovators we are assiduously training. By the way, we are also wasting the lives of an overly numerous cadre of incarcerated people, who according to our system are rendered substantially unemployable and un-promotable.
It is not news to learn that the lack of support for infrastructure was roundly decried. Broadband 5G will develop very slowly outside of urban centers. Roads and bridges are a mess. Traffic is terrible. Education is the key to many things in the future, and it is being short-shrifted. “Our social policy is not congruent with our economy.”
Finally, cost of healthcare. Healthcare really is not that expensive in absolute terms given the lives that are being saved and the quality of life being generated. But in absolute dollars, it is increasing substantially and adds to societal burdens. The focus of proposed government intervention is wrongminded. The governmental attack mostly is on the cost of pharmaceuticals. Pharmaceuticals only constitute 10% to 12% of our healthcare costs, and with a profit margin of 2.3%, which is below the inflation rate, if you were to cause drugs to be distributed within the society at bare cost, with no profit whatsoever (which would squelch innovation), you would only reduce healthcare costs minimally. The areas that should be attacked: the systemic misuse of emergency room services by people without adequate access to far less expensive healthcare through distributed healthcare vendors now available in much of the economy; addressing long-term care costs for Alzheimer patients (the Vertex CEO seemed to allege that by the year 2050, the long-term care costs of Alzheimer patients will not only bankrupt the healthcare system but also will exceed the gross domestic product of the entire country); support for innovation which will allow the diagnosis of medical conditions from remote locations, including online from the home.
Overall, a unifying theme was the awareness of these CEOs that the future of their companies is entwined with the health of the economic, political and social fabric within which they function.