President Barack Obama rejected calls last year to nationalize the big banks, opting instead for market-based stress tests and injecting more private capital; he disappointed liberals by turning down a government-run national health-care program, and assists the struggling U.S. automobile industry to survive as a private enterprise.
In the face of the worst economic crisis since the Depression, corporate profits since Obama took office have soared 40 percent, and the stock market, despite the recent slump, has risen more than 27 percent.
Still, corporate chieftains complain the Obama administration is anti-business and crushing free enterprise with the heavy hand of government. “By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses,” recently charged Ivan Seidenberg, the chairman of New York-based Verizon Communications Inc., speaking for the Business Roundtable, the major big-business group in Washington.
This criticism rankles Obama. After Seidenberg’s broadside, the president instructed National Economic Council Director Lawrence Summers to complain to him. One of the White House rejoinders is that none of the top economic advisers -- Summers, Treasury Secretary Timothy Geithner or White House Chief of Staff Rahm Emanuel -- is considered anti-business or a liberal ideologue; they have instead incurred the enmity of the political left for being too centrist, too friendly to business interests.
When business leaders complain about occasional populist rhetoric, the White House reminds them of history: Franklin Roosevelt’s broadsides against the “money changers,” or John F. Kennedy, who after the steel industry raised prices in 1962, said: “I asked each American to consider what he would do for his country, and I asked the steel companies. In the last 24 hours we had their answer.”
Last year, one of the most sophisticated Wall Street leaders privately complained about anti-banking demagoguery in Washington; he exempted the president, though he said Obama should rein in Democratic lawmakers the way Lyndon B. Johnson did. That’s a misreading of history as well as contemporary politics.
There also is a healthy dose of hypocrisy. Seidenberg complained about huge budget deficits and at the same time advocated a myriad of corporate tax cuts that would add billions to the shortfall.
Corporate Tax Rate
The U.S. corporate tax rate is the second-highest among major industrial countries, the Verizon CEO correctly noted. He neglected to point out that the effective marginal rate paid by corporations, according to a study by the administration of President George W. Bush, is within the average of these countries because of all the loopholes championed by business interests.
Among Seidenberg’s other complaints was a provision in the financial-regulation bill on proxy voting for corporate boards that he said goes “a step too far.” This would allow stockholders who meet a high threshold to offer candidates for the board for a shareholder vote; currently, some directors get their posts with as little as one-third of the shareholder votes. More democracy for owners of companies doesn’t seem anti-business.
For more than 30 years, much of the business community has gotten accustomed to more deregulation than regulation from Washington, even under Democratic Presidents Jimmy Carter and Bill Clinton. Those days are over, with the financial crisis, collapses of mines and the BP Plc oil spill. Big business can simply carp about this or try to fashion middle ground with a White House that has shown a willingness to take on some of its party’s special interests, such as teachers’ unions.
More than a few nonpartisan business leaders have reservations about the health-care and financial-regulation initiatives without the exaggerated charges. There’s a solid business case to be made against the administration for dragging its feet on trade, tempered only by the recent embrace of the accord with South Korea.
And there are important signals the president should be sending or changing. In appearances before the Business Roundtable, he gave canned speeches and then declined to take questions. The business leaders resent that; they have a point.
CEO in Cabinet
Moreover, this is the first administration in memory not to have a corporate CEO in its senior ranks. Geithner and Summers notwithstanding, that sends a message. With the initial Obama economic team breaking up there ought to be a substantive spot for an articulate, credible CEO such as former Xerox Corp. Chairman Anne Mulcahy.
The economic messaging, to business and others, remains muddled. Some prominent business leaders who are Democrats believe the president privately is disdainful of the business community. Even if that isn’t the case -- it probably isn’t -- Obama should realize that’s what he too often conveys.
A healthier, if sometimes adversarial, relationship also requires major changes by business leaders, starting with the Business Roundtable. Their critiques need to be more balanced, including calling out Republicans for charges such as Obama is moving the country toward “secular socialism.”
The looming fiscal crisis offers an opportunity. The Business Roundtable has promised “constructive suggestions” about the need for deficit reduction and entitlement overhaul.
Call for Sacrifice
If the result is simply, let’s reduce the deficit on the backs of the working class while providing more tax breaks to wealthier Americans and corporations, they’ll just be one more group of special pleaders. A more thoughtful, balanced suggestion -- to the political right of where Obama and most Democrats will be -- that entails some sacrifice from their ranks would afford credibility. That’s true, too, for the president, if he tackles tough issues on the entitlement side, like cutting back on the growth of Social Security.
Many Middle Americans really do despise Wall Street, BP and the oil companies and bitterly resent the outsourcing of jobs. That’s not a product of the policies or rhetoric of Obama or Washington politicians. It’s because they genuinely believe that in these difficult times, fat cats are privileged and protected while they’re getting the shaft. It’s in the interests of both the Obama administration and the business community to appreciate and address this reality.
(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)