January 28, 2013

Consultant Gene Marks looks at Obama 2.0

Marks

Columnist, author and small business owner Gene Marks was in town Friday to talk to AGC of Washington members about what to expect during President Obama’s second term.

Marks owns and operates Pennsylvania-based Marks Group PC, a 10-person technology and consulting services firm targeting small- and medium-sized businesses. He has written for The New York Times, Forbes, The Huffington Post, Inc. Magazine and Fox Business. He also has written several books on business management specifically geared towards small- and medium-sized companies.

The DJC asked him a few questions about how the next few years will unfold.

Q: How will Obama’s second term differ from his first?

A: I expect more of an emphasis on social programs and less on the economy. I don’t expect him to make any headway on the deficit or national debt. I don’t expect any sweeping economic reforms, tax increases or spending cuts. I don’t expect any grand changes to our tax system. At least through 2014. If the Democrats win the House and keep the Senate then this will change.

Q: What can we expect if the Democrats win the House and keep the Senate?

A: Honestly, I can’t answer that today. Ask me in the summer of 2014.

Q: What can we do to reduce the federal deficit without hurting the economy?

A: Unfortunately — nothing that won’t cause pain. Cutting our annual deficits and reducing our national debt will take a combination of tax increases and spending cuts. The Canadians did this with success in the 1990s. But it will hurt the economy initially. The consequence of not doing this is Greece.

Q: Are we headed toward higher inflation and interest rates?

A: While (most) of the Fed Board believe inflation is under control I am concerned that interest and inflation will rise over the next 24 months. For starters, rates are at their all-time historical lows so there’s very little place to go but up. Secondly, the Fed’s balance sheet (amounts available for banks to lend) is at never-seen-before levels due to TARP and other stimulus actions. If the economy heats up more than expected, inflation and interest risks will be heightened.

Q: Some say a little inflation is good for the economy. Do you agree?

A: Yes — inflation, in moderation, is a good thing. It signifies growth. It elevates income levels. It encourages more savings as interest rates are usually closely tied. It helps property appreciate.

Q: Are you more optimistic about the economy now than six months ago?

A: Personally, the economy is flat. And it will continue to be so in 2013. But not for everyone — if you’re in energy or healthcare or certain areas of technology you may have a great year. It amazes me how resilient American business is that we can still create growth, although very slow growth, despite all the uncertainty that we face.

Q: How will the construction industry fare?

A: Depends on where they are — construction in North Dakota is gangbusters. In Washington state, construction will continue its recovery in 2013. Higher interest rates could affect this, but I don’t predict it will be significant enough to curtail. Housing starts are up and the commercial markets have fought their way back from 2007. The contractors who will succeed will be those who keep overhead low, keep a close eye on what’s going on in Washington, and manage their people and expenses effectively.

Q: How does China figure into our economic picture?

A: For the typical contractor in the state of Washington, not a whole lot. It’s only an indirect effect. More trade with China means more business and growth for the contractor’s customers, which can benefit the contractor. But this is not in his/her control.

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