Dear Mr. President

On November 4, the nation will choose either Democrat Barack Obama or Republican John McCain as its 44^th President. The winner will inherit a mess. Wars in Iraq and Afghanistan, a crisis in the credit markets, a painful housing bust, and soaring energy and commodity prices head the list of thorny problems awaiting the successor to George W. Bush.

How should the next President deal with those problems? When we asked nearly 400 CFOs what advice they would offer, we discovered that they have plenty to say. Moreover, their comments make it clear that, regardless of political affiliation or what color state a CFO may live in, finance executives are following this election very closely. You might even say passionately, given the intensity of many of their responses.

Not surprisingly, most CFOs are deeply concerned about the economy. They want it fixed, and fast, with lower taxes and less regulation the most proffered advice. But they are keenly interested in other issues as well, and far more likely to diverge in their prescriptions. Many want a clearly articulated, multifaceted energy policy, for example, but some emphasize offshore drilling while others prefer incentives for alternative energy. A few call for deporting all illegal immigrants; others want to speed the legalization process.

As for the war in Iraq, many finance chiefs want the next commander-in-chief to withdraw U.S. troops, while others urge him to "damn the torpedoes" and "stay the course." Clearly, there are no easy choices ahead. Perhaps one CFO summed it up best when he simply offered "Good luck."

It's Still the Economy, Stupid
By the time the Democratic and GOP conventions drew to a close, the economy had replaced the Iraq war as the nation's number-one concern. Finance chiefs are quite clear about what specific aspects of the economy merit immediate attention: inflation, the state of credit markets, and tax policy rank as the top three issues facing their businesses. (For more on how CFOs view related economic and credit issues, see "Battered But Not Broken.") Those three economic concerns also number among CFOs' most pressing personal worries, along with the war and homeland security.

The top personal worry for CFOs, however, is energy policy, although there is wide disagreement regarding just what to do about it. Energy policy is also among CFOs' most critical business concerns, with many drawing a clear connection between rising energy costs and the risk of inflation.

"Our input costs have gone up and then our freight costs have gone up. So we pass that on to customers in surcharges," says John Lemmex, controller at Bayer Material Science, a specialty-chemicals company. "But that creates an issue for the overall economy, because those prices are going to ripple." Illustrating how many companies are moving ahead with price increases as they face ongoing margin pressure, Lemmex points to industry giant Dow Chemical, which announced in June that it would boost prices by 20 percent and then followed that hike with a 25 percent increase in July. "It makes it easier for us to go and raise prices when someone is leading like that," Lemmex says.

Kevin Burke, a vice president of finance at Solutia, another specialty-chemicals company, likens rising inflation to a circular reference in an Excel spreadsheet. "The price increase just keeps going around and around," he says. Burke has seen the cost of a key raw material, sulfur, rise in concert with the cost of oil. "It's a byproduct from oil refining and we used to get it more or less for free," he says. "But now it's gone up quite significantly." Burke says he worries about fluctuation in the value of the dollar and its impact on the price of oil, and urges the next President to put pressure on speculators.

To boost the dollar, many finance executives say the next President must tackle the budget deficit. Although more than half of federal spending is devoted to mandatory programs like Medicare and Social Security, CFOs note that the Iraq war, projected to cost more than $1 trillion, has put a serious dent in the budget. "The wars [in Iraq and Afghanistan] area key issue because of the tremendous deficit that is building," says Joe Franzese, head of finance for the Bank of Ireland in the United States. "How do we get out of there in the safest way so that we don't destabilize the region? That would have so many effects on the deficit and the currency."

Even CFOs who have benefited from the low dollar by expanding their businesses into international markets acknowledge that the weak currency's link to inflation is a concern. "Having a deflated currency is not exactly where you want to be," says Rob BonGiovanni, the recently retired CFO of Curtiss-Wright Flow Control.

Austan Goolsbee, a professor of economics at the University of Chicago and a top adviser to the Obama campaign, assigns blame for the weak dollar to the policies of the current Administration. "We've seen flagrant mismanagement of the macroeconomy over the last eight years," he charges. "The apparent lack of care for huge trade imbalances and deficits has put heavy pressure on the dollar, which sets the stage to make the problems of commodity price inflation far worse." Obama, he says, proposes to shrink the budget deficit in part by raising the tax rate on capital gains and dividends to 20 percent from 15 percent for those making more than $250,000 a year.

• 1
• 2
• 3
• 4
• next »