After a conspicuous display of political posturing, government dysfunction, brinksmanship, obstinacy, and whining—an extraordinary level of bad behavior, even for Washington, D.C.—the financial markets are roiling and business leaders are boiling.
“I voted for Obama and I’m totally disappointed in him. He is not leading,” New York financier Gilbert Harrison, chairman of the boutique investment bank Financo, told The Daily Beast on Tuesday, echoing the assessments of several corporate executives we invited to conduct an autopsy of the debt-ceiling debacle. It culminated in the shocking downgrade of America’s credit rating and Monday’s loss of more than a trillion dollars in publicly traded stocks (which only partially recovered their value in Tuesday’s session).
“This was a politically created crisis,” said prominent media investor Kenneth Lerer. “What happened in Washington has created this current financial crisis rather than the fundamentals of the economy… We are paying for Republican policies that got us where we are, but I don’t understand why the Democrats haven’t held them accountable.”
Venture capitalist Christopher Stone, the managing director of the Salt Lake City–based EPIC Ventures, painted with a broader brush. “Who is at fault? That’s easy—all of them,” Stone emailed. “They all (Democrats and Republicans) had a huge opportunity to make necessary reforms in entitlements and tax structure, but both parties remain hostage to their respective bases. Obama is leading from behind and the Republicans have their heads in the sand if they think they can balance a budget with tax revenues running at 15 percent of GDP.”
He added: “The problem is very simple. These guys have no clue how to set goals, constraints and tax revenue that doesn’t prevent economic growth. You can’t manage what you can’t measure… The U.S. and the rest of the world are not being served by our appointed and elected leaders.”
Most of the executives, not surprisingly, didn’t fix blame on the Tea Party or House Republicans, who adamantly refused to consider tax hikes as part of a deficit-reduction program that would allow them to vote to raise the federal debt limit by $2.4 trillion—in return for an equal amount in spending cuts over the next decade. With one exception, they didn’t even object to Standard & Poor’s decision to lower the federal government’s credit rating from triple-A to double-A-plus.
Instead, they pointed fingers at Obama and congressional Democrats. “If Lyndon Johnson was still president, he would have knocked heads together and gotten it done,” said Les Berglass, CEO of an executive search firm that places top executives with large consumer-goods companies such as Victoria’s Secret and Land’s End. “If Bill Clinton was president, he would have solved this problem politically in a way that would have avoided the disaster.”
Even though “America remains the safest place to invest,” Berglass applauded the S&P downgrade. “It was a wonderful message being delivered to the politicians of America” to get their act together.
Yet Patrick Byrne, the CEO of Overstock.com, the publicly traded online retailer, isn’t hopeful that this will happen. “I do think the future is bleak for the United States,” Byrne said. “We’re going to go into a Great Depression.” Byrne, an admirer of Texas Rep. Ron Paul, said he’s so worried that he’s formed a contingency plan in case of a total collapse. “We’ve actually stocked up on some gold and silver over the years,” Byrne revealed. “We have sort of a disaster plan for when all of this happens. But there’s only so much you can do to insulate yourself. You can buy yourself a month or two.”
Financo’s Harrison, a longtime friend and supporter of Joe Biden, said he can’t fathom why Obama doesn’t recall Congress into emergency session during the August recess, to avoid another episode of brinksmanship as the so-called supercommittee of House and Senate negotiators waits till the Nov. 23 deadline to submit a deficit-reduction plan for a vote.
“He should be telling them to get together and solve this,” Harrison said. “The business people I know are totally disgusted with what’s going on in Washington. They’re disgusted with everyone. Forget about the November deadline. If your business was in crisis, would you take a month’s vacation before you decided to try to save it?”
A top executive for a global Fortune 500 company, who asked not to be identified because he’s not authorized to speak publicly about politics and government, derided S&P for rendering a verdict completely unsupported by financial realities.
The U.S. and the rest of the world are not being served by our appointed and elected leaders.
“In financial terms, what the rating agency did is nonsensical,” this executive said. “They put a political judgment on the dysfunction in Washington. They downgraded the U.S. government, but at the end of the day, people were fleeing the stock market for Treasury notes. If what they said was accurate, the Treasury notes would have gone down, not up…. S&P really had a tin ear.”
Chris Boyce, CEO of Virgin Health Miles–a subsidiary of Richard Branson’s corporate empire that encourages healthy lifestyles as a way of reducing medical expenses—faulted career politicians who worry more about their own job security than about making decisions, however risky, that will benefit the country. “We’ve got to get out of this entrenched kind of thinking on both sides,” Boyce said. “We got here together and we’ve got to figure this out together. That means there can’t be any sacred cows.”