Tags: corporations | budget | cuts | revenue

Good Thing Obama’s Not a CEO

By Michael Carr   |   Friday, 22 Feb 2013 07:47 AM

Leaders in Corporate America are required to deal with challenges like the sequester all the time and have learned how to survive small decreases in revenue without resorting to massive layoffs. When the government is faced with a similar challenge, we are warned the results will be catastrophic.

President Barack Obama warned that no federal service could survive a $42.5 billion budget cut, excluding defense, without resorting to cutting thousands of jobs and inconveniencing millions of Americans. I, for one, am relieved that the president is not in charge of a company I own stock in.

Government agencies view their budget allocations in the same terms that a company looks at revenue. Sequestration will amount to a budget cut of less than 1.5 percent. Managers of companies must routinely deal with budget cuts imposed by the market.

In the past 12 months, 44 publicly traded companies have seen their revenue fall by 3 percent (twice the amount of sequestration), but managed to increase profits. Another 44 saw profits dip, but they remained profitable in the face of this disastrous budget cut.

Once again, corporations are performing better than Washington is. They are routinely able to withstand small fluctuations in their budgets without wreaking havoc on the economy. Customers would not tolerate serious declines in service like the government-threatened delays at airports.

Smart managers at the Transportation Security Administration, Federal Aviation Administration and other government agencies would be able to absorb small budget cuts without resorting to massive layoffs. Hopefully when reality replaces rhetoric, they will.

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