9-6-17 BUSINESS BY CARLSON

Content provided by Paul Vaaler of the Carlson School

Congratulate yourself, Minnesota. 1.997 (not 2) million people attended the 2017 Minnesota State Fair, a record beating last year’s record. Here’s where you can learn more about the how and why that record got set: http://www.startribune.com/minnesota-state-fair-sets-another-attendance-record/442786333/. Two factors set the stage for both the 2016 and 2017 record attendance numbers: 1) great weather; and 2) a great state economy. That’s right. The Fair does better when we all do better –as I think the late Paul Wellstone would have said it.

But now we are done with the Fair and we are heading into Fall. In the next four months, we’ll do more business than during any other four months in the year. If you are a manufacturer, you’ll make from one half to two thirds of your total annual sales from September-December. If you are a lawyer, you’ll charge from one half to two thirds of your total billable hours. Even Congress is getting back to work, and members have a long list of items to debate and vote on with all deliberate speed. Holidays and the end of the calendar year (and for Congress, next year’s mid-term elections) are now in sight. Various performance incentives –carrots and sticks– are suddenly stronger. In sum, this is the time when Minnesota, like the country more generally, gets down to work.

It’s in this context that US Attorney General Sessions’ announcement today about phasing out the Deferred Action for Childhood Arrivals (DACA) seems out of place. Former President Obama created the DACA program as an executive order back in 2012. It permits nearly 800,000 young (less than 30 years old) undocumented residents participate in our formal economy: work for a firm or start their own as entrepreneurs; go to college, university, and graduate school and gain valuable workforce skills; obtain government documents like a drivers license or a social security card so they can drive a car and pay FICA taxes; buy, sell, and or hold property in the US. Here is where you can learn more about DACA and what it permits beneficiaries to do in the formal economy: https://en.wikipedia.org/wiki/Deferred_Action_for_Childhood_Arrivals. Sessions, President Trump and many other Republicans think Obama’s executive order was executive over-reach into the law-making domain of Congress. So DACA will be phased out over the next six months, which is how long Congress has to pass a legislative alternative that Trump might sign…might. Meanwhile, those 800,000 are now in economic limbo.

Many US business executives have criticized the decision, including Best Buy CEO Hubert Joly, who signed a letter calling for DACA’s continuation unless Congress legislates something similar: http://www.startribune.com/best-buy-ceo-signs-letter-with-other-leaders-supporting-daca/442490973/. Why do so many US business executives take issue with the “business executive” US President? It’s an easy question to answer: US business executives employ DACA beneficiaries and need them to man their stores, their factory assembly lines, their delivery trucks. From the perspective of Joly and other US executives, DACA workers aren’t a substitute for other documented would-be workers. Let me repeat that. Big business says DACA beneficiaries are critical employees now on the edge of economic limbo at a time when we need them most.

Those big business executives also need DACA entrepreneurs as suppliers and customers. About 5% of DACA beneficiaries have started their own business if information from surveys is to be believed: http://money.cnn.com/2017/09/05/news/economy/daca-us-economy/index.html. 5% is higher than the 2.3% rate of business ownership by under-30s in the US generally. So DACA beneficiaries are critical to big business and DACA beneficiaries are more likely to be entrepreneurs so important to small business creation and growth. If Minnesota (the US) is now getting down to work, then Minnesota (the US) needs its 6,000 (800,000) productive DACA beneficiaries. Phasing out DACA without a legislative alternative that provides similar opportunities seems to be a really dumb idea, at least from a business perspective.

Hurricane Harvey’s fury is now spent…and let’s pray that Hurricane Irma’s Category 5 winds and rain don’t add to that past fury. Southeast Texas and Western Louisiana are already in clean-up and reconstruction mode. Our fellow Americans in those states have proven so resilient –it’s incredible, heart-warming to see and support. Here’s one of Harvey’s dark ironies. The +50 inches of precipitation it dumped on Southeast Texas knocked out many of the public water and sewer systems in and around Houston and Beaumont, Texas. For the next several days and then weeks, public water systems may prove fragile to run. Public water quality may be less reliable. But Harvey’s irony may be Minnesota’s opportunity. We have one of the best developed water filtration and purification industries in the world. We’re a veritable Silicon Valley for water technologies: https://www.greatermsp.org/clientuploads/Watertech%20Sell%20Sheet%20Singles.pdf. Marquee companies like Pentair and Ecolab and many other smaller, less well-known Minnesota firms have technologies and service expertise that can help residences and businesses cope with these near-term water issues. I hope we’ll be able to read in 2018 how these Minnesota firms did their part to help Southeast Texas and Western Louisiana communities re-build after Harvey.

As we try to figure out what’s next for the US and global economy, we might look to Lego, the privately-owned Danish toymaker. They’ve seen steady increase in sales and profits in the past 13 years. 13 years! But their winning streak has now ended. Lego said Tuesday that its revenue for the first half of this year fell 5% from a year earlier to $2.4 billion. Net profit fell 3% to $544 million. Lego CEO Jorgen Vig Knudstorp responded by announcing 1400 job cuts –about 8% of the more than 14,000 Lego workers worldwide. Here is where you can learn more about Lego’s lost luster: http://www.latimes.com/business/la-fi-lego-cuts-20170905-story.html. Demand for some of its basic brick toys softened and sales of some newer lines, such as Lego Chima, proved disappointing. The company said some of its other classic lines — including Lego City, Lego Friends and Lego Duplo — remained strong. And the Lego movies have been big winners as is Lego Land in Carlsbad, California (and. I am guessing, the Lego Store at Mall of America). Did Lego simply mess up on new product launches this year or is Lego’s lost luster a sign of economic weakening in the broader economy?Everything is awesome…except if it isn’t.

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