The Main Street Prez?

George W., forged in Midland, is putting corporate concerns on the back burner

It was love at first sight when George W. Bush announced that he was running for President on a platform that blended compassion with capitalist fervor. Corporate executives opened their hearts--and wallets--convinced that Bush would end an era of rising tax rates, antitrust activism, and regulatory zeal. Big Business bankrolled the Texas governor's record $100 million primary campaign, and when the fall election went into overtime, it provided the battalions of lawyers who secured Florida's key electoral votes.

But if corporate types thought their reward would be an automatic embrace of the Big Business agenda, they reckoned wrong. While Bush is sympathetic to the concerns of businesspeople, his policies thus far seem to be directed more at Main Street and small entrepreneurs than Wall Street and the denizens of corporate boardrooms. It makes sense: Bush's background as an independent oilman makes him more sympatico with individual investors--and a bit suspicious of corporate giantism. Says one associate: "He's a populist at heart. Bush doesn't like bigness."

Well, not exactly. No one would mistake George W. for the wildcatting James Dean character in the movie Giant. And his little-guy image is the result of a carefully crafted strategy devised by White House politico Karl Rove. Bush's uber-strategist thinks portraying his boss as a Sunbelt populist--rather than a tool of Eastern elites--helps voters see Dubya as a "different kind of Republican." Notes Thomas J. Donohue, president of the U.S. Chamber of Commerce: "You don't make a lot of political hay by saying: `The first thing I'll do is take care of the 10 biggest companies in America."

White House Chief of Staff Andrew H. Card Jr., a former auto lobbyist, almost pops his pinstripes when he hears talk of a Bush payoff to corporate benefactors. "This idea of a `return on investment' is outrageous," he says. "Anybody who knows Bush knows he is not in the bag for anybody. He will be good for Big Business--and great for small business." Bush's view, adds White House economist Lawrence B. Lindsey, is as stark as the Midland (Tex.) skyline: "Big Business can take care of itself. Small business and individuals can't."

This may explain why the White House is pushing tax cuts for individuals, estate-tax relief for small-business owners--and zip for corporations. Bush feels that after a 10-year boom, Corporate America doesn't need tax breaks.

The President's early regulatory decisions also cheer business small-fry. He backed Hill GOP efforts to overturn the Clinton Administration's work-place-ergonomic regulations. Major corporations could live with the rules, but small-business owners claim they would bankrupt mom-and-pop outfits. The White House's opposition to affirmative action also has a small-business aspect. Big corporations long ago learned to live with workplace-diversity guidelines, leaving most of the grousing about paperwork and compliance to smaller fry.

Whether it comes out of cold calculation or deep-seated belief, Bush's stance has disarmed conservative hardliners who saw Dubya as a rhinestone cowboy out of Kennebunkport, Maine. "I thought there would be a corporatist mindset in this Administration," says Stephen Moore, president of the Club for Growth, a group that backs smaller government. "I have been pleasantly surprised."

Unlike his father, an Eastern Brahmin who hobnobbed with the corporate elite, the younger Bush is more at ease shooting the breeze with self-made men. True, he enlisted former Alcoa Inc. CEO Paul H. O'Neill as Treasury Secretary and ex-Halliburton Co. CEO Richard B. Cheney as Veep. But those buttoned-down types were mainly tapped for their management skills. After hours, George W. prefers the company of Commerce Secretary Donald L. Evans, a fellow oilman who struck it rich, and White House Personnel Director Clay Johnson, a college pal who made millions in the catalog business before signing on as Bush's Austin appointments director. "Midland is a town of entrepreneurs and risk takers," says Evans. "It is a different mindset than a large corporation." Adds Indianapolis chemical executive Al Hubbard, an old Bush chum, "George is a small business guy, not someone who thinks bigger is necessarily better."

Now in Washington, Bush has no qualms deviating from the Big Business game plan. Despite howls from exporters, his budget slashes Export-Import Bank funding and other "corporate welfare" subsidies that help large exporters. And Bush's tax cut, which is aimed at individuals, passes up such corporate goodies as a reduction in the capital-gains rate or accelerated depreciation. In fact, Bush has told corporate lobbyists to knock off plans to load up his bill with special breaks, insisting that a "second tax bill" may prove a better vehicle for industry-specific proposals.

Bush's cuts in marginal rates would be a boon to entrepreneurs, especially partnerships and Subchapter S corporations, in which shareholders are taxed at individual rates (chart). And his fight to repeal the inheritance tax--never a burning concern of big-time CEOs--represents the Holy Grail of the small-business lobby. Under this keep-more-of-what-you-earn philosophy, "small businesses can put more in their pockets or invest more in their business or hire more personnel," says Jeffrey S. Senney, a Dayton (Ohio) attorney with a small-business clientele.

Big Business, of course, remains ecstatic that Bush is in the White House. That's true even though Rove & Co. have pressured some 200 business organizations into forming an ad hoc lobbying arm to fight for a Bush tax bill that contains little for them. Dubbed the Tax Relief Coalition, the group has raised $300,000 so far for a planned ad campaign and has targeted 60 congressional districts for arm-twisting. Corporate leaders "understand there are going to be a series of tax cuts to come," says Grover G. Norquist, president of Americans for Tax Reform, a conservative group.

Bush vows to push free trade, battle trial lawyers, and help utilities build more plants and pipelines, all of which sends a signal to boardrooms: He's one of us. But is he really? Some lobbyists fret that with Bush's $1.6 trillion tax cut sucking up most available revenue, that second business-oriented tax cut may never come. And while Boeing Co. (BA ) and other exporters are in a dogfight with subsidized foreign competition, Bush wants a 25% cut in lending by the Ex-Im Bank and similar reductions in other corporate-aid programs. "This is going to hurt companies, hurt employment, and have a real negative effect," laments John W. Douglass, CEO of the Aerospace Industries Assn.

Weapons makers are also experiencing Bush-shock. Many thought that his campaign vow to the troops--"Help is on the way"--would herald a raft of new contracts. Instead, he passed up a big Pentagon hike pending results of a "strategic review." That could ax some big-ticket programs.

COST-BENEFIT TEST. If Bush can't provide immediate gratification for Big Business, what can he do? Analysts say regulatory relief will be the area where he provides the most concrete aid to his corporate backers. Office of Management & Budget Director Mitch Daniels plans a tough review of proposed regulations based on stringent cost-benefit analysis. That could slow many new regulations to a crawl.

But even when it comes to deregulation, Bush may not always be a Big Business ally. Already, the Environmental Protection Agency has stunned refiners by passing up a chance to roll back Clinton requirements for cleaner diesel emissions. EPA chief Christine Todd Whitman has also upset many utilities by suggesting that CO2 gas from power plants needs tighter control. "The President rejects the reflexive `Let's regulate' attitude," says Lindsey. "But he wants to protect the environment and public health. If Big Business is on the wrong side of the cost-benefit equation, it will be disappointed."

That disappointment hasn't yet set in because Bush hasn't yet shown his hand. But there's already a dawning realization among Big Business that the new President isn't going to be the answer to all of their prayers. That's why some corporate reps are revising their view of the man running Bush Inc. He has gone from savior to friend of the family--the kind who sometimes shows up for dinner and sometimes leaves an empty chair.

By Paul Magnusson, Lorraine Woellert, and Lee Walczak, with John Carey, Stan Crock, and Richard S. Dunham in Washington with Ann Therese Palmer in Chicago

    Before it's here, it's on the Bloomberg Terminal.