Business and Barack Obama: The Real Story

Business and Barack Obama: The Real Story

The media have been full in recent weeks of articles and commentary about Barack Obama’s view of business. Is the President pro- or anti-business? Have his actions improved or worsened conditions for American businesses? The Economist 10 days ago ran a cover story on the topic – “No love lost: Corporate America’s complaints about the president keep getting louder” – and also just concluded one of its online debates on the motion “This house believes that the Obama administration has been good for business.” The pro side won, 59% to 41%.

Each side of the argument can marshal an impressive array of facts, though facts quickly are tinged with opinion. President Obama’s car industry bailout was pro-business because it saved several million private sector jobs and two of America’s largest companies. President Obama’s car industry bailout was anti-business because it inserted government into private business in a way antithetical to the operation of free markets. The Obama health care reform imposes a huge financial burden on small businesses. The Obama health care reform makes American businesses more competitive against firms in other countries in which health care is provided by the government. Obama’s energy policy adds to operating costs of American business, making them less competitive. Obama’s energy policy will create millions of new “green” jobs and make American companies more competitive in the huge and growing green technology sector. Obama’s tax policies will reduce the deficit and restore American growth and competitiveness. Obama’s tax policies will strangle the recovery and make American companies even less competitive against firms in other countries where corporate taxes are much lower. The stimulus package saved America from outright Depression. The stimulus package was a colossal waste of money that crowded out private initiative. You get the idea.

Criticism of President Obama for his views of business has become increasingly strident. According to The Economist’s cover story, “Ivan Seidenberg, the chief executive of Verizon…accuse[d] the president of creating an ‘increasingly hostile environment for investment and job creation’, claiming that the administration’s regulatory expansion into ‘every sector of economic life’ is making it ‘harder to raise capital and create new businesses.’ Jeff Immelt, the boss of GE, has said that the administration is not in sync with entrepreneurs. The US Chamber of Commerce, a business lobby, has complained that the Obama administration has “vilified industries”.

Barack Obama, many say, just doesn’t “get” business. Apart from a year as a financial analyst after he graduated from college, and a brief stint in a civil rights law firm, he has never worked in the private sector. He has never had to make payroll. These charges are true, if beside the point. The only President in recent times who ever had to make payroll was Harry S Truman, a notable failure as a businessman. Michelle Obama did touch a nerve when, in a campaign speech, she told young people,  “Don’t go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse. Those are the careers that we need, and we’re encouraging our young people to do that,” and bemoaned the fact that “many of our bright stars are going into corporate law or hedge-fund management.” She cited her and her husband’s example, turning their backs on the corporate world to go into community activism and health care.

Barack Obama, in fact, is similar to most of his recent predecessors as President, as well as to most members of Congress, whatever their party affiliation, in being highly pro business.  He, and they, just doesn’t have much use for or understanding of free markets.

John Kay recently wrote in the Financial Times, “There is a difference between being pro-market and being pro-business. There is also a difference between being pro-business – in the sense of wanting industry to be healthy, profitable and innovative – and being supportive of the interests of particular companies.” Adam Smith, he notes, while recognizing free markets and free trade as the pillars of wealth, did not much care for business people themselves.

The U.S. Government has seldom met a market it has not tried to distort. Mortgage interest deductions, student loans, subsidies for agriculture and corn-based ethanol, tariffs on Chinese tires and Korean steel, tax breaks for oil drilling, defense contracts for Boeing to subsidize its civilian aircraft business, the list goes on and on. Many of these programs go back to the 1930s, and it matters little who is in the White House or who controls Congress: they continue regardless. Many of these measures, it goes without saying, intentionally benefit specific companies or industries

President Obama, just like nearly every other President before him, is perfectly happy to provide subsidies and other benefits to business, and the 111th Congress, just like nearly every one of the 110 Congresses that have preceded it, is more than happy to play along. President Obama may have minimal business experience, but a high-level politician rubs elbows with a lot of high-powered corporate executives, and starts to find their arguments persuasive. In this President Obama is no different from any other politician of any political stripe. Senator Chuck Schumer, an arch-liberal, is the biggest recipient of Wall Street campaign contributions so far this year, even as he praises other Democratic candidates for “fighting Wall Street.”

Established businesses often welcome and actively promote new regulation. Sure, it adds to their costs, but it adds much higher costs, proportionally, to upstart competitors, so serves as a barrier to entry. And if the regulation is accompanied by new or expanded subsidies, so much the better. This is the kind of behavior of which Adam Smith took such a jaundiced view.

So is Barack Obama pro business? Most definitely, and he has proved it time and again. Does he favor free markets? That is a trickier question, to which the answer is probably no. He, like most politicians, is suspicious of anything he can’t control. The President undoubtedly favors tame, domesticated markets. Whether he supports the freer kind is much more doubtful.

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