As the political battle over the nation’s finances rumbled on last week in Washington, The Atlanta Journal-Constitution asked chief executives of two of metro Atlanta’s multinational companies for their views on its impact.
Marty Flanagan is CEO of Invesco, Atlanta’s largest money management firm, with $745 billion in assets and operations in the United States and Europe. Flanagan, 53, has been outspoken in calling for the government to simplify the tax code and cut tax rates and spending.
Martin Richenhagen is CEO of Duluth-based AGCO, the world’s third-largest farm equipment manufacturer, with factories in North and South America, Europe and Asia. A German native and U.S. citizen since 2009, Richenhagen, 61, also heads the German American Chamber of Commerce for the Southern United States.
Here are their views, edited for length and clarity:
On what’s been at stake
Flanagan: The leaders in Washington have an absolutely incredible opportunity to create an acceptable approach to our fiscal concerns, which will, if they get it right, stimulate (economic) spending. It will grow the economy, not just here in the United States but economies around the world. It will encourage businesses to hire, to make capital investments, to get into strategic mergers and acquisitions. All this would be great for employment, growth in the country, equity returns. Huge amounts of retirement savings (are) in the market, so that matters a lot.
Richenhagen: I think (a federal debt default would have) initiated a global breakdown of the capitalist system. It would be the second time that America does cause a problem to the world after the financial crisis. I think that would be very bad.
On what needs to be done in the future
Flanagan: (Politicians need time to) get around the table, to be very thoughtful, to create a comprehensive approach to a pro-growth reform that includes tax reform, entitlement reform and (reduction of) government expenditures. If this is the catalyst for them to truly look out for the economy, and the constituents in the United States, and to leave the political partisanship behind, I would say that would be a win.
Richenhagen: What I cannot understand is how a big organization (like) the U.S. government can be operated without a budget. It's very difficult to explain to people outside of America. The problem is when you do not have a budget, you also are not in a position to manage your costs.
On how the standoff in Washington has affected the nation’s reputation overseas
Flanagan: I was in the (United Kingdom) two weeks ago and it was the first week of the government being closed. I was talking to an individual. Tongue in cheek, this is what the person said: "Is this really what the leaders of the free world do?"
I think it is chipping away at the inherent confidence in the United States. That said, we can turn it on a dime. If we could just get out of our own way, the economic expansion could be incredibly robust — like something we’ve not seen for decades.
Richenhagen: Two weeks ago, I had a dinner in Argentina with President (Cristina Fernandez de) Kirchner and she asked me the question, "How does (the federal budget process) work in America?" I couldn't explain it.
Everybody is very concerned about (political gridlock in Washington). We suffer from a huge image problem. From being world powerhouse No. 1 military-wise, but also business-wise, we are now a patient who suffers from various diseases, with doctors who can’t really treat him. Because rather than getting him into treatment, they debate whether he is sick or dead.
On how the standoff affected their companies
Flanagan: We have not changed our actions. That said, we do get a number of calls from our retail clients. We've seen some clients actually leave the equity market to go to cash. And those are actions you just don't want to have. It's not a wave of that, but it's just not healthy. They need to have the confidence to invest for the long-term.
Richenhagen: Farm income is very strong and we are in another record year, the fourth record year in a row. So AGCO is doing very well. But when it comes to (the company's) exports from America, it certainly doesn't help to export from a country where people look down to.
I like the idea of a strong America that stands for quality, for service, for performance, for good reliability of product, rather than starting every discussion with a customer or a dealer or supplier by explaining what’s going on in America. That takes attention away and certainly doesn’t strengthen the position of American business.
On how this is affecting Americans
Flanagan: When people are not confident about the future they react in ways, rightfully, to take care of themselves. You tend to spend less money. It's a vicious circle. Businesses won't invest if they're not confident. If they don't invest they won't buy things. If they don't buy things, it doesn't create growth. It doesn't create jobs.
Other things happen. You need to plan for retirement. But when there’s no confidence what do people do? They hoard cash. They think they’re doing the right thing, but they’re actually hurting themselves.
Richenhagen: What I see is that people are less proud to be Americans than they have been, maybe, ten years ago. They're uncertain. They struggle. Many people I know have financial issues. Life is not as easy in America as it has been.
On what they would tell Washington’s politicians if they were boss:
Flanagan: Everybody needs to stop playing to the extremes and sit down and be very thoughtful and create a comprehensive tax reform, entitlement reform and appropriate policies. Let's get back to the fundamentals of who we are as a country. That's what everybody's looking for.
Richenhagen: I would force them into coming up with a proper plan and a budget. It's easy to understand what the problems are. We have too much debt. We do not have enough income. Our costs are too high. Unfortunately, we have too many politicians who complain all the time and they don't come up with solutions. Instead, they talk about all the side issues or they don't talk at all.
On who’s to blame:
Flanagan: Equal doses all around. I am exhausted by everyone pointing fingers.
Richenhagen: The first guy who is blamed for a problem in a major organization or company is the CEO. So for me, the No. 1 person responsible for the mess is the president. I think you could manage the tea party people if you would talk to them or integrate them a little bit.
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