CEOs say bay state health care plan is DOA.

DESPITE HIGH ENERGY COSTS and rising interest rates, business leaders remain positive. The CEO Confidence Index rose 5.9 points this month to 173.4. The current level for the leading economic indicator is just 9 points off its all-time high of 182.4, set back in January. All component indices, used to calculate the main index, rose this month as well.

The gains in May were driven mainly by increases in the Current Confidence and Employment Confidence components, which rose by 9.1 and 8.4 points respectively. Strong first-quarter performance in the economy has been pushing Current Confidence higher. "There is strong demand for manufactured goods right now, and [we have] the ability to start raising prices," reported one respondent. Of CEOs polled, 56.6 percent rate current business conditions as "good."

CEOs are also feeling good about recent employment numbers, which have been strong. "The labor market still looks positive," said Phil Kuhlenbeck, CEO of ScrapItOut.com. Echoing this positive feeling, 53.5 percent of CEO respondents categorized current employment conditions as "good."

However cheery current conditions may seem for CEOs, longer-term prospects are less than stellar. The worst two performing component indices for May were the Business Conditions Index and Future Confidence Index, which rose by 1.2 and 3.9 points respectively. "I feel very little confidence in long-term conditions the way things are currently going," one CEO said of future conditions.

Other concerns included rising energy costs, currently unstable due to the war on terror, and the recent spate of energy resource nationalizations in South America. Concerns stem from the impact this could have on many sectors of the economy. Voicing the concerns of many, one CEO noted, "Between ... the impact of oil scarcity and high oil prices, I can't see a lot of growth outside of the financial sector."

Investigating other sources of rising costs, CEOs were asked to gauge current health care costs. The top 10 percent of respondents cited costs exceeding $9,000 per employee per year, with some spending more than $15,000 per employee per year. They note that the costs have been rising substantially faster than inflation and seem to be poised to continue their rise in years to come.

With the clear consensus that something must be done, CEOs were asked their opinions of the current legislative developments in Massachusetts, which recently approved a measure requiring universal health care for state citizens. Asked about the impact on the American economy if other states adopted similar laws, 58.1 percent of CEOs indicated the impact of this would be "negative" or "catastrophic," while 32.6 percent felt the impact would be "good" or "excellent." The remaining 9 percent of CEOs felt there would be no impact on the economy. Clearly, business won't be taking health care prescriptions from the Bay State.

RELATED ARTICLE: THE NUMBERS

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Massachusetts legislature recently passed a law requiring universal
health care of state citizens. What will be the effect of universal
health care laws if applied by other states on the American economy?

Catastrophic   6.1
Negative      52
None           9.2
Good          26
Excellent      6.6

Note: Table made from bar graph.

If your state enacted similar laws, how would it affect your hiring?

Increase hiring  12.5%
Decrease hiring  29.2%
No effect        58.3%

Note: Table made from pie chart.