Executive Insights | October 2012 | By Mary Avant

The Fight for America

Industry insiders weigh in on how the presidential candidates stack up in November’s ultimate showdown.

President Obama and challenger Mitt Romney square off in presidential election.
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With gloves off and the days ticking down to November 6, the two contenders for the most powerful position in the world—reigning President Barack Obama in one corner and challenger Mitt Romney in the other—are prepped and ready to compete in the battle of a lifetime.

Obama, charged with getting the economy back on its feet during his first term, has implemented a number of game-changing pieces of legislation during his four years in office. These include the controversial health-care reform in 2010 and a major FDA overhaul in 2011, which increased the FDA’s ability to monitor the nation’s food supply and take stronger action when food safety issues arise. Now Romney, the former governor of Massachusetts and cofounder of financial services company Bain Capital, is attempting to unseat Obama with pro-business stances on everything from unions to trade.

The mudslinging started soon after Romney secured the nomination in the spring. The president has accused Romney of anti-middle-class sentiments, while Romney has criticized Obama’s job creation efforts and tax plan. What’s the truth behind these claims? QSR examines four major issues, where the candidates stand on each, and what all of this could mean for your brand.

Jobs and the Economy

If voters have heard it once, they’ve heard it a million times: The economy, and the job numbers that go with it, is still struggling to claw itself out of the seemingly bottomless hole it’s been in since 2007. Fortunately for businesses and citizens alike, both candidates claim to have the solution.

For President Obama, the focus has largely rested on a number of short-term fixes meant to spur job creation and, in turn, economic growth. The president’s most notable and recent jobs initiative, the American Jobs Act, surfaced in September 2011, proposing solutions like payroll tax cuts, direct aid to states to prevent public-sector layoffs, and job retraining. The proposal, which was voted down in the Senate, would provide incentives such as tax breaks for companies hiring new workers and a $4,000 tax credit to anyone hiring people unemployed for more than six months.

Romney’s mission is to first improve the business climate—with lower corporate taxes, increased labor flexibility, and emphasis on energy production—with the belief that jobs will naturally follow. Romney has also championed nixing several Obama-era regulations that act as “red tape,” which he claims burden the economy and halt job creation. Many in the restaurant industry have supported Romney in these endeavors.

“As anyone with business experience intuitively understands, the cumulative cost of [these regulations]—recently estimated by the federal government at more than $10,000 per employee for small firms—far outweighs the benefits. The result is a significantly lower appetite for hiring on the part of most employers,” writes CKE Restaurants CEO Andy Puzder on Romney’s campaign website. “Ultimately, government must choose between getting in the way and getting out of the way.”

Though many Republicans and businessmen like Puzder say that the president’s administration is regulation-friendly, Obama and his team spent less on regulations in their first two years in office than George Bush did in 2007 and 2008. And in January, the president signed an executive order to reduce regulatory costs and save as much as $10 billion over the next five years.

The Obama regime is also quick to point out its jobs track record over the last four years—namely that, as of June, the private sector has experienced job growth for 28 straight months, resulting in an addition of 4.4 million payroll jobs during that period.

Scott DeFife, executive vice president of policy and government affairs for the National Restaurant Association (NRA), says policy makers should understand that restaurants are generating their fair share of jobs, too—jobs that aren’t exported, but remain in the backyards of communities across the country.

“People don’t understand the full breadth of the restaurant industry’s economic impact and the number of jobs we have,” he says, adding that the industry employs 13 million workers. To reward the industry for its contributions to the economy, DeFife says the future administration must provide operators a positive business climate, strong consumer confidence, and an energized economy.

Taxes

Perhaps Romney’s extensive experience in the private sector is what spurred the candidate to recommend cutting the federal corporate tax rate to 25 percent, a major decrease from the current 35 percent rate (which, combined with state rates, makes it the highest corporate tax rate of any nation in the world).

Romney’s tax plan also involves strengthening and making permanent the R&D Tax Credit, as well as allowing companies to write off technological research like the development of new product flavors. In addition, he wants to switch to a territorial tax system, in which only income earned in America is taxed by the U.S. government, and repeal the corporate Alternative Minimum Tax, a tax originally designed to prevent wealthier Americans from using loopholes to avoid paying taxes.

President Obama’s tax proposal, meanwhile, focuses on keeping rates low for individuals and small businesses by rolling back the Bush-era tax cuts on individuals making more than $200,000 and households (including small businesses) earning more than $250,000. Obama says he wants to return to tax rates last seen during the Clinton administration (raising the top marginal rate from 36 to 39.6 percent), an era during which the nation created more than 22 million jobs.

No matter which candidate secures the presidency in November, the restaurant industry desperately requires a simpler tax code with a broader base and less uncertainty, says Rob Green, executive director of the National Council of Chain Restaurants (NCCR).

The NRA’s DeFife reiterates this need for certainty. “If there was more of a permanent fix, restaurant operators could plan with more certainty about their investment decisions and make more long-term hiring decisions,” he says. He also adds that a lower corporate rate will spur job creation, while higher tax rates will ultimately hinder business expansion.

Green says a focus on near-term priorities like the Work Opportunity Tax Credit (WOTC) and depreciation schedules is imperative for the industry. Both issues—the former incentivizes restaurants to hire individuals who have greater challenges entering the workforce, and the latter allows for a faster improvement and deduction schedule for renovation and construction—have expired, and foodservice industry advocates are pushing to renew them.

Jamie Richardson, vice president of government, shareholder, and community relations at White Castle, says both individual and corporate tax reforms need to be considered in the debate. He says bad tax policy on the individual level causes more concern over income and spending, resulting in fewer restaurant visits.

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