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Stimulating the Economy

May 17, 2012

Iowa Governor Terry Branstad told an AICPA audience that he decided to return to the governor’s mansion in order to fix the economy in his home state.

Speaking during a panel discussion Wednesday at the Institute’s Spring Meeting of Council and 125th anniversary, he admitted that he encountered some resistance close to home. He had served as governor from 1983 to 1999, and then became president of Des Moines University from 2003 to 2009. He was re-elected in 2010.

"My wife’s initial question was, “Are you crazy?” But I love this state. We were in a financial mess. I had a lot of people come to me and say we need your experience and leadership. I worked on a plan to restore fiscal stability. We reduced tax and regulatory liabilities. We inherited a $900 million deficit, and we will have a billion-dollar surplus. We reduced the unemployment rate by over 1 percent.”

Branstad, a Republican governor, sits on the American Institute of CPAs Board, along with former Florida Governor and U.S. Senator Bob Graham, a Democrat. AICPA chairman Greg Anton noted that the two of them are a reliable presence on the board, no matter how busy they are.

“Iowa and Florida came into the union around the same time,” said Graham. “And Terry and I have sat there on the board as public members. What do we do about small business? We should all move to Iowa.”

To help the economy for small business, he suggested that Congress should avoid making changes in the Tax Code, other than maybe every four years. “Our responsibility wasn’t to screw up the Tax Code sufficiently to keep CPAs employed,” he said. “I don’t think anybody can say we didn’t do a great job.”

Graham added that he isn’t in favor of stimulus programs, as they provide only a temporary effect and make some industries winners and others losers, until the stimulus program ends. Then there is a cliff effect when the sales quickly drop off, as with the cash for clunkers program for stimulating the automobile industry.

BKD LLP CEO Neal Spencer said that there is no question that education is critical to the nation’s success, and he put in a good word for community colleges. He sits on the board of Ozarks Technical Community College in Springfield, Mo., where his CPA firm is headquartered. “If you think about the bread and butter of the economy—radiologists, cooks—all being trained in two-year institutions, don’t lose sight of what community colleges can do for the economy.”

A successful entrepreneur, Traci Lynn, CEO of Traci Lynn Fashion Jewelry, said her company has been hiring thousands of laid off people who act as consultants selling her jewelry.

“I represent the entrepreneurial spirit,” she said. “So many people are hungry to make a change. Because of the economy and the recession, so many women are looking for an opportunity to turn their life around. We have had such an influx of people leaving corporate America who have been downsized, rightsized and capsized. The economy has boosted our direct sales, but we rely on our accounting firm to make sure we’re compliant.”

Spencer said that BKD was forced to cut its workforce during the recession, and many of his clients also needed to cut their workforce. The remaining employees at downsized businesses are forced to work harder than they have ever worked, and not just in public accounting. “They need some certainty and some stability,” said Spencer. “We don’t want to go through what we did three years ago, which is to drop the workforce.”

Baker Tilly Virchow Krause CEO Timothy Christen said the government needs to make it easier for the banks to lend money to small businesses. “Make it not be a crime to be successful,” he said. “A lot of entrepreneurs are feeling unhappy about the perception of being persecuted.”

Iowa Governor Branstad would like to see less uncertainty in the Tax Code. “All of this stuff that’s temporary and expires adds to the uncertainty,” he said. “That’s one of the reasons why we haven’t seen the vibrant comeback from this recession. The uncertainty makes people unwilling to take risks.”

He also warned that unless the U.S. takes steps to get its debt and deficit under control, it could find itself in a similar position to Greece. “When you borrow money you have to pay it back with interest,” he said. “They don’t seem to see that in Greece. The further you get into it and the longer you put it off, the tougher the medicine has to be. Some people don’t want to accept the absolute reality. If you’re willing to make that sacrifice, good things can happen. People want to have everything immediately and have instant gratification. That’s not to say it’s always going to go right.”

“The question comes out of a history where the United States was the great power and had the ability to influence actions around the world,” said Graham. “While we are still a great power, others have moved up. The challenge for the United States is to learn from their experience and then ask the question of ourselves how does the United States continue to have a high standard of living and the quality of life to which we have become accustomed?”

Comments (1)
This panel was very insightful and balanced between the Governor, Senator, entrepreneur, and large firm CEO. Tim Christian was hilarious adding fun along with his perspective. My takeaway was the need for sustainability and predictability.

First, sustainability. We need our federal and state governments to work on a sustainable economic model based on a balanced approach to revenue and spending. As our Comptroller, Peter Franchot says, you can't have a social agenda without a strong economy.

Second, predictability. The. last few years have brought massive uncertainty with major legislation, much of it, tax-based. The debate over the Bush tax cuts that comes up every year at the last minute is a perfect example of unpredictability for the business sector. Our own Maryland General Assembly and the latest 'secret' special session made tax increases retroactive on Marylanders. Add healthcare and Dodd-Frank and you have a federal regualtory and tax platform that no business can rely on when making future business plans.

What can we do to to help add sustainability and predictability back into the system?
Posted by Tom H | Sunday, May 20 2012 at 9:12AM ET
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