The White House’s charm offensive toward the business community could have used a representative in Sun Valley last week. While President Obama, Chief of Staff Rahm Emanuel, and Treasury Secretary Timothy Geithner all talked up the economy and the positive impact of the administration’s policies in interviews last week, their words were viewed suspiciously by the titans of media, technology, and finance assembled for Allen & Co.’s annual conference in the sleepy resort town nestled in the crevices of Idaho’s Pioneer Mountains. The most generous comment about the current state of the economy came from Google CEO Eric Schmidt, who serves as an adviser to the president on science and technology, and even then the best he could muster was that, “Everybody is in a sort of funk.”
In both on- and off-the-record conversations with The Daily Beast, many of the other moguls in attendance—who collectively control hundreds of billions, if not trillions of dollars, of the country’s gross domestic product—were less diplomatic, expressing serious concern about the administration’s motives and openly worrying that its policies will cause sustained damage not just to their consumer-facing businesses, but also to the long-term health of the country.
“To start to have negative relationships with the banks hurts our economy because we depend on them,” said former Yahoo and Warner Bros. CEO Terry Semel. “It would really help if we can get both sides [government and business] to feel good about each other because what’s more important than the short term crisis is the status of our economic power several years from now and how that affects the younger population and our children.”
Added John Hendricks, founder of Discovery Communications: “Government needs to focus on how to incentivize companies because we in business are the ones who create jobs. I’d like to see them come around and be more proactive about free enterprise and this wonderful system we have.”
Despite a 12 percentage point swing in top line growth over the last six months—from negative six percent in last year’s fourth quarter to positive six percent in the first quarter of this year—none of the moguls we spoke with believe the economy is headed for a full recovery. Indeed, the administration’s response to the global economic crisis cast a pall over what should have been a more upbeat conference than in recent years when the credit market collapse, advertising recession, and continued disintermediation of their businesses from technology caused media company stock prices and deal activity to fall to unprecedented lows. Heading into the conference, stock prices were up about a third from where they were a year ago, after all.
Instead of deal-making, however, there was only dourness.
“No one is being really expansive,” said Sir Martin Sorrell, CEO of WPP Group, the the world's largest advertising company. “There’s been a sea change in people from being highly energized to pretty demotivated.”
There are a myriad of factors contributing to the uncertainty, from the expiration of the Bush administration’s tax cuts and looming tax increases on overseas profits to persistent joblessness and unmanageable deficits in both the U.S. and Europe. The economic contagion spreading across Europe is particularly germane to the U.S., with our recovery being stretched out into a long period of slow growth and slight dips. Hendricks, for instance, predicts that a full recovery could still be another two years away. (Continues here)