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Fletcher: Investment needs clearer future

October 9, 2012
The Alpena News

Editor's Note: Last week Stephen Fletcher began investigating why investments aren't happening locally. This week he continues that idea about what the future holds.

Last week we began discussions as to why business wasn't investing more to create jobs.

Of course, the short answer is because of economic uncertainty in our country today. The longer, more complicated version, concerns all the regulations and rules enacted by the federal government in recent years that discourages investments, job growth and expansion.

We need to wake up to the fact that our country is entering into a recession again, yet virtually no elected officials are dealing with it, as they all are out on the campaign trail seeking re-election. Politicians seem to want to ignore the fact that our national debt levels are approaching those of the near bankrupt countries of Europe.

Locally, things aren't much more better. ATI and Besser still are at employment levels far less that four years ago and many once familiar names of local businesses have long since closed their doors. The city's recall election adds to the uncertainty of where the city is headed and shuttered motel operations make one wonder about the viability of tourism as an industry for this area.

The question about business investment and job creation is valid, but the economic uncertainty hanging over our heads out there is discouraging long-term investment and at the same time, killing any chance of job expansion.

At Alpena Power, for example, what our board is doing is paying the company's pension obligations and upgrading our system, but we're not changing payroll levels until the economic situation stabilizes. Since I don't know how the investments that I will make in the future will affect the taxes that we must pay, I'm not willing to take on the liability of more employees at this time.

I don't necessarily want a level playing field, but I sure would like to know at least the approximate dimensions of that field. I don't have to know what all 4,500 pages of the tax code looks like but I do have to know the general details. If new restrictions on business are going to be made, I'd like to know which ones are going to impact me.

Shakespeare wrote in "The Tempest," "What's past is prologue" meaning that what's been done sets the stage for the future. Of course, the immediate future is easy to see if the immediate past is not muddled. As we move further out into the future with planning, naturally the risk of decision-making increases. In the utility world, we plan on a long-term horizon of 50 years, which is the approximate service life of an electric pole line or substation.

If government can minimize the economic uncertainty today, then we can plan longer into the future with more clarity. As in all businesses, the future cost of our product depends on good long term planning. Today I'm loathe to build much as the ever-shifting political gridlock adds tremendously to our company's future risk.

I don't think our situation is much different than that of any other business. In economic terms, less capital will be expended and less labor employed in times of structural economic uncertainty because the risk of failure is increased. That's a major reason that businesses aren't hiring.

A guy with an MBA said to me recently: "You have to take care of yourself first."

What he meant by that is "If future returns are about equal, then invest in the lowest risk opportunities first, and, then later if everything is pretty stable, take a small amount of risk if the reward is pretty sure."

Well, all that's good, but the business climate is anything but stable and the reward certainly isn't "pretty sure" these days.



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