Uncertainty + Intransigents Could = Politically Induced Recession?

I’ve been debating for a month or so about whether I should write this posting or not but, as the continued dripping of economic data comes out and healthcare has been ruled “legal”, I thought “let’s give our readership the opportunity to comment.”


First, a disclaimer, these comments are not meant with any political overtones as I believe that regardless of whom is in the White House, the outcome could be the same.


The issue is that:

• Business appears to be slowing (and in some markets has really slowed) due to economic uncertainty.  Even though interest rates are at rock-bottom, businesses essentially seem to be saying “business isn’t getting better, I don’t know what governmental policies will be but I know that the low interest rates of today will still be here tomorrow, so I might as well wait”. This is except for mergers & acquisitions where the capital gains tax (and some other taxes such as an element of the health care tax and estate taxes) could impact seller decision making.
• Congress seems intent on waiting till the last minute, if we’re lucky, to address what has become known as the fiscal cliff (tax cuts expiring, tax increases, budget cuts, reduction of unemployment claims, increase in payroll taxes, budget cuts as mandated by last year’s budget compromise, need to increase the debt ceiling, etc…)
• The Affordable Care Act (healthcare law) is still nebulous to most people (maybe Electrical Wholesaling or TED could write some articles to describe how this will impact small, medium and large distributors / manufacturers).
• We have a Congress that is controlled by extremes and is intent on not compromising (but can be willing to “kick the can” down the road).

So, here’s my concern.

Regardless of what happens with the presidency, the House and Senate eventually need to agree on many of these issues.  Will they do anything during a lame duck session (after the election) or will winners want to wait until their brethren are sworn in (January 20)? Will losers be “sore” and be more interested in packing their pages? Is delay inevitable?  And even if the same party is voted into the House and Senate, that doesn’t take effect until January 20.


Essentially, is politics (and specifically Congress) holding the economy hostage?


I don’t profess to know the answer but, some thoughts for electrical distributors:

• If you’re concerned, express your concern to your representative(s) and reinforce to NAED’s Government Affairs group and to NAW that you would like them to share your concerns.
• From a business perspective, you should be preparing to act:

• If you are financially strong and have an extended timeframe, this could represent an opportunity to take market share while others hesitate or lack financial strength.
• Utilize your marketing resources, and your suppliers’ marketing resources, to develop, communicate and promote your competitive edge.  Differentiate yourself.
• Make sure that operationally you are strong
• Strengthen your sales management and price management systems.  Don’t let your salespeople give away the keys to the house when others are making “stupid” pricing decisions.
• Manage your inventory wisely
• Don’t let your receivables stretch any further
• Customer intimacy wins. But make sure they are not only intimate with your salesperson.
• Those who can afford, and train, talent will be prepared for when the politicians get their act together.

For electrical manufacturers, some thoughts

• make sure you’re partnering with tomorrow’s distributors.  Saturation distribution policies may not be the answer to tomorrow’s growth needs
• Technological integration with your distributors is critical to customer retention
• If you’re a commodity, marketing only to the channel is okay. If you’re not, reach out to the decision makers to influence them.  Essentially, follow the money. Consider niche marketing strategies.
• With a market that is stagnant, market research can be key to identifying opportunities

And if you haven’t seen our report “The Changing Landscape of Distribution”, it may share shed light on changes that are, or could be, impacting you. Email us for a copy.


Is there light at the end of the tunnel?  Yes …  The politicians eventually have to address these issues and come to some agreement (otherwise they’d have to shut down the government as they wouldn’t have any revenues).


Thoughts?