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Obama’s Hold on Big Business

The president has Corporate America right where he wants it.

Two weeks after a mid-term election in which the U.S. Chamber of Commerce helped thwart Barack Obama and the Democrats, the group’s CEO, Tom Donohue, gave a speech that read like a doubling down of sorts. “We cannot allow this nation to move from a government of the people to a government of the regulators,”he said. “Regulation is the vehicle by which some seek to control our economy, our businesses, and our lives.” Nor did Donohue leave any doubt about how he intended to prosecute this fight: “The Chamber will mount a vigorous defense and aggressive offense in support of the right to lobby, communicate with voters … and to do so without government harassment or undue restriction.” In other words, Donohue plans to spend gobs more money on lobbyists and ads to undermine Obama.

But, if you look at what Donohue had to say in a less scripted moment, it’s not clear that he and the Chamber feel quite as triumphal as they’d have you believe. Asked about Republicans’ mounting criticism of the Federal Reserve, Donohue sounded positively frustrated. “The Fed has over many, many, many years been particularly helpful to this government and to this country,” he lectured reporters. “We must maintain the independence of the Fed and be very, very careful not to louse that up on Capitol Hill.”

Oops! Having spent tens of millions of dollars defeating Democrats while explicitly touting the Tea Party movement, the Chamber is waking up to the fact that its brand new Congress may be a touch better in theory than in practice. Not only are many recently elected GOPers hostile to the Fed, they also oppose infrastructure spending, corporate subsidies, expanded free trade, and pretty much anything Wall Street favors—all top Chamber priorities.

Which is why the White House shouldn’t be in an especially conciliatory mood when dealing with the Chamber and its allies. Big business may talk a good game these days. But, in a world where the Tea Parties are about to get the keys to the Capitol, Corporate America needs adults like Barack Obama much more than he needs it.

There’s always been something slightly preposterous about the idea that Obama has been bad for business. This is, after all, an administration that bailed out GM and Chrysler and propped up Wall Street at tremendous political cost, then withdrew from these sectors faster than anyone thought possible. It resisted pressure to break up big banks, re-nominated a Republican Fed chairman, and has proposed a series of business-friendly tax changes. Oh, and it just presided over the best quarter of corporate profits on record.

Nonetheless, groups like the Chamber and the Business Roundtable have glommed onto two arguments over the last year. The more impressive-sounding is that Obama’s agenda has created investment-repelling and job-killing “uncertainty.” The uncertainty argument isn’t so much wrong as criminally misleading, as many others have pointed out. (You can read my own take here.) Yes, uncertainty has weighed on hiring and investment. But it’s overwhelmingly been economic uncertainty, not political: Businesses haven’t been spending because they’re unsure about future demand for their goods and services, not because of anything Washington has done.

Asked to elaborate on the uncertainty critique and corporate honchos usually kvetch about all the new regulations Obama has saddled them with. And it’s true that some of Obama’s regulatory changes—like financial reform—would crimp profits. But that’s very different from creating uncertainty. In fact, the whole point is to replace the recent boom and bust cycle (highly uncertain) with slower, more stable growth—the true measure of prosperity. Apparently the only place this tradeoff is unappreciated is in the corporate executive suite.

Well, that and a handful of pundit precincts. Expounding on the Obama-is-bad-for-business meme in The Washington Post this summer, Amity Shlaes, the minister of information for the country-club-industrial-complex, reminded us how Lamott Du Pont (of those Du Ponts) once observed that the New Deal was creating a “fog of uncertainty” and crippling business. Shlaes somehow interprets this as a lesson to overzealous regulators. In fact, it’s a lesson in the dangers of spouting off nonsensically when your family papers are destined for an archive. As it happens, the New Deal regulatory regime paved the way for one of the most prosperous generations in human history.

That leaves the second, far vaguer argument, the gist of which is that Obama and his senior aides simply don’t appreciate business. As Time’s Fareed Zakaria summarized the critique after canvassing a handful of CEOs: “[T]hey pointed to the fact that Obama has almost no private-sector experience, that he’s made clear he thinks government and nonprofit work are superior to the private sector.” Even if true, is there any way this could possibly matter independently of his policies (which are hardly anti-business)?

 It’s hard to see how. Taken at face value, the claim here is that Corporate America, which was sitting on almost $2 trillion in cash as of this summer, needs to feel loved before it’ll spend on manpower, software, and equipment.  But the logic basically refutes itself. If big businesses were so concerned about being loved, they could go on a massive hiring and investing spree tomorrow. The public and the president would shower them with affection. That they refuse to suggests what everyone already knows: Businesses don’t make hiring and investment decisions based on the emotional needs of their CEOs.

Having said all that, the administration isn’t crazy to worry about the perception that it’s anti-business, even if the charge is hugely trumped up. The reason is politics: As the last election demonstrates, big business can deploy hundreds of millions to defeat a president and his party at the polls. It can spend hundreds of millions more lobbying for or against his legislative priorities. Over the next several months, the administration would like to extend unemployment benefits and pass an infrastructure package. It wants progress on immigration and education reform. Business generally favors these measures and would almost certainly support them on some level. But corporations are more likely to round up critical Republican votes if they have a direct financial stake in the outcome.

As with any exercise in political coalition-building, then, these government-business alliances involve quid pro quos. And that brings us back to the question of who has leverage in the relationship these days. If you parse Tom Donohue’s speech, the administration should be sufficiently cowed after the midterms to retreat from key pieces of health care reform, financial reform, and greenhouse-gas regulation in exchange for business support on other issues. Business also wants to extend all the Bush tax cuts and preserve the tax advantage for overseas profits, which the White House opposes.

But it’s actually the administration that now holds the cards. For one thing, the regulations the Chamber is most exercised about also happen to be the most popular. The big banks hate the new consumer financial products agency, but the public strongly supports it. The insurance companies hate not being able to deny coverage to people with pre-existing conditions; the public can’t wait for that provision to take effect. The Chamber would be foolish to go to war over these issues.

More importantly, corporations are suddenly in a much more precarious position than they were prior to the election. That may be counterintuitive given the Republican gains. But, while it’s tempting to assume that the interests of business overlap perfectly with the interests of the Republican Party, that’s simply not the case. The GOP wants to defeat Democrats at all costs. Big business has to make a more sophisticated calculation: It wants to defeat Democrats, since GOP rule typically means lower taxes and fewer regulations. But, unlike the GOP, the shorter-term costs of achieving this goal matter quite a bit to Corporate America. Republicans might accept a double-dip recession as the price of vanquishing Democrats. But, to most corporate managers, such profit-destroying horrors outweigh the benefits of GOP rule.

For that matter, even GOP rule itself doesn’t look nearly as appealing in the Tea Party era. In addition to opposing big business on some of its top priorities, like infrastructure spending and immigration reform, Tea Party pols are prone to dangerous games of brinkmanship. For example, many are drawing a line on raising the nation’s debt limit, which could create a fiscal crisis, leading to a collapse of the dollar and a surge in interest rates. 

During the mid-term campaign, the Chamber breezily dismissed such worries by insisting the Tea Partiers would shed their most extreme positions once in office. "Some of the politics of the Tea Party and legislative practicalities just don't match up," the group’s political director, Bill Miller, told Bloomberg Businessweek in October. But the reality is that the GOP is much more likely to move toward the Tea Party movement than vice versa. That’s because the power of the movement is structural: It has less to do with individual office-holders than with the constant threat of primary challenges against Republicans who drift too far to the center, as occurred this year in Utah, Alaska, Florida, and Delaware.

All of which makes the business community’s greatest source of leverage over Democrats—the threat of ousting them on Election Day—significantly less credible. The more Democrats that Big Business takes out, the closer it comes to consolidating power for the Tea Parties and all the nightmares that entails. If that wasn’t apparent before November 2, it’s almost inescapable now.

Even the Chamber of Commerce seems to be getting the message. In July, it rebuffed the White House over a speaking slot for Valerie Jarrett at the group’s jobs summit. Now, the Chamber is actively petitioning the president to speak at a similar event in January. "The president is always welcome at the Chamber,” a senior Chamber official bleated to CNN last week. “It can be done, frankly, very quickly if they want to do it. We would be very open to that."

You have them where you want them, Mr. President. Don’t let them off easy.

Noam Scheiber is a senior editor for The New Republic and a Schwartz Fellow at The New America Foundation. 

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