creators.com opinion web
Liberal Opinion Conservative Opinion
Lawrence Kudlow
Lawrence Kudlow
13 Dec 2014
Lower Oil and King Dollar Are Unambiguously Good

We all know that the American energy revolution, led by the new technologies of hydraulic fracturing and … Read More.

29 Nov 2014
Lower Oil Prices Are a Free-Market Victory

Seldom has so much good news been portrayed so negatively. Oil prices continue to fall in the U.S. and around … Read More.

22 Nov 2014
What about the Brainiacs?

Is this immigration game really worth the candle? I think not. And I say this as someone who is an … Read More.

Isn't a Bainful Turnaround What America Needs?

Comment

There's a very troubled company out there called U.S. Government Inc. It's teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring.

A quick look at the income statement of this troubled firm tells the story. Just in the past year (FY 2011), the firm spent $3.7 trillion, but took in only $2.2 trillion in sales revenues. Hence its deficit came to $1.5 trillion.

Just in the first three months of the new year (FY 2012), the firm's troubles continued. Outlays for all purposes came in at $874 billion, but income was only $554 billion. So the shortfall was $320 billion. No hope of a self-imposed turnaround here. Indeed, both the senior management and the board of directors show no signs of making major changes to their business strategy.

Hope for future profits? That's out of the question. The firms only chance of survival is a takeover.

Worldwide employment for U.S. Government Inc. is estimated to be over 2 million, a completely unmanageable number for a venture like this. Total compensation for this company is roughly twice the level of its private-sector counterparts. And its retirement and health-insurance benefits are so large in relation to contributions paid that its benefit plans are careening toward insolvency.

In fact, the total debt of this firm now equals its total income — an unsustainable position that suggests to many observers that future financing needs will not be met.

The product line of this troubled firm has been rejected over and over by growing segments of its customer base. And its product pricing (taxes) is not even remotely competitive. Even worse, heavily unionized work rules and regulations are so onerous that the prospects for even reasonable productivity and efficiency are long gone.

Its credit rating? That's been marked down, with more downgrades expected in the future.

The very troubled U.S.

Government Inc. had long been either number one or in the top three worldwide in terms of economic freedom. But as a result of all these deteriorating conditions, it has fallen four years in a row in this category, slipping all the way to 10th. In fact, over the past 10 years, the firm has barely grown and its share price has been flat. Without the kind of radical change that comes from a takeover and turnaround, more economic slippage is baked in the cake.

Restructuring this company seems a hopeless proposition. But wait a minute. There's a highly regarded private-equity operation located in Boston that has a good (but not perfect) track record in turning around hopeless ventures. Though there have been failures for this firm, notable successes include Staples, The Sports Authority, Domino's Pizza and Steel Dynamics.

Anyone operating in business knows full well that even the smartest reorganizing firms are prone to failure as well as success in our free-market capitalist system. But the customer base of the troubled U.S. Government Inc. seems like it is desperate enough to go the takeover route.

Some are concerned that private-equity specialists are too hard-hearted. But in these tough times, people are willing to take a risk. That even includes the current CEO of the failed U.S. Government Inc., one Barack Obama. He just announced plans to merge the Department of Commerce, the Small Business Administration and the Office of the U.S. Trade Representative. In other words, he's borrowing a private-equity tactic.

Alas, this move is way too small and way too late. Much more radical surgery will be necessary.

At a recent family election in New Hampshire, the former head of the Boston takeover firm, one Mitt Romney, emerged victorious with a sweep of all the key voter segments. Sounding like Ronald Reagan on the evening of his victory, the former turnaround CEO expressed confidence that the troubled U.S. Government Inc. could be saved. He was even optimistic.

But he warned that if family members expected a bidding war for more unpaid-for benefits with excessive price tags, well, he wouldn't be the man for that job. Tough measures would be necessary instead.

So now the question is, will America Inc. ask this former turnaround CEO to prevent the bankruptcy of U.S. Government Inc.? Isn't a Bainful turnaround exactly what America needs?

To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2012 CREATORS.COM



Comments

1 Comments | Post Comment
"The former turn around CEO Romney" of Bain Capital? Romney at Bain Capital 4 biggest purchases ended in bankruptcy.I suppose that is some kind of "turn around".Thank you for advocating the bankrupting of America,that will certainly help us all.
Comment: #1
Posted by: WILLIAM KELLEY
Thu Jan 19, 2012 7:57 PM
Already have an account? Log in.
New Account  
Your Name:
Your E-mail:
Your Password:
Confirm Your Password:

Please allow a few minutes for your comment to be posted.

Enter the numbers to the right:  
Creators.com comments policy
More
Lawrence Kudlow
Dec. `14
Su Mo Tu We Th Fr Sa
30 1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31 1 2 3
About the author About the author
Write the author Write the author
Printer friendly format Printer friendly format
Email to friend Email to friend
View by Month
Authorís Podcast
Marc Dion
Marc DionUpdated 22 Dec 2014
Deb Saunders
Debra J. SaundersUpdated 21 Dec 2014
Steve Chapman
Steve ChapmanUpdated 21 Dec 2014

20 Oct 2012 Is Obama Buying the Election With His Welfare Explosion?

2 Oct 2014 None Can Call It Treason

13 Feb 2010 The Washington, D.C., Disconnect