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The President's Truce with Business

Obama is out of ammunition – money.

12:00 AM, Jul 17, 2010 • By IRWIN M. STELZER
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President Obama wants to declare a truce in his war on the business community. And, well, he might. For one thing, he has won almost all of the ground attainable between now and the November congressional elections. His health care “reform” is law of the land, and his financial-sector regulation bill was passed by the Senate on Thursday and awaits his signature.

The President's Truce with Business

Although each of these tomes is more than 2,000 pages long, they are mere barebones outlines, to be fleshed out by thousands of regulators. House speaker Nancy Pelosi, a San Francisco Democrat, said of the health care bill, “We have to pass the bill so that you can find out what is in it.” And one of the co-authors of the financial regulation bill (“finreg” in the new jargon), retiring Senator Chris Dodd, a Democrat from Connecticut, added to bankers’ uncertainty by observing, “We won’t know the full results of what we have done until the very institutions we have created, the regulations we have suggested and provided for are actually tested…. All we can do is … hope that good people will be appointed who will attract other good people…”.

The regulatory and administrative bodies will be spewing regulations faster than BP spewed oil into the Gulf of Mexico, and with as damaging an effect on the business environment as the oil spill has had on the natural environment. Legal experts estimate that the good senator’s finreg bill will require eleven different regulatory agencies to write 243 new rules, with the Securities and Exchange Commission accounting for 95 of them. Many of these rules will run more than 100 pages; all will be drafted far from the annoying glare of public scrutiny. A job creation scheme for lawyers, lobbyists, and bureaucrats – not for the American people writ large.

Hardly the sort of thing likely to improve America’s ability to compete with China and other trading partners who last month drove the nation’s trade deficit to its highest level in a year and a half, but just the sort of thing the Obama team will use to make certain that the more draconian provisions that Congress rejected are slipped in through the back door via new rules and regulations. There really isn’t much more ground left for the president to gain between now and November. So why not a truce?

Obama has an even better reason for seeking a truce. He is out of ammunition – money. With the deficit front and center of voters’ concerns as the November congressional elections approach, he is finding it increasingly difficult to pry from a nervous, vote-seeking Congress the extra, deficit-swelling billions his economic advisers are telling him he needs in order to create jobs.  Meanwhile, indebted and frightened consumers are unwilling to step up spending sufficiently to whittle down the unemployment rate.

So, with some 16.7 percent of workers either unemployed, too discouraged to continue looking for work, or involuntarily working only part-time, Obama needs the nation’s businesses, sitting on some $2 trillion in excess cash, to start spending and creating jobs. Unfortunately, the president has not been listening to those of his advisers who have been telling him that his rhetorical assaults on business; the prospect of rising health care and energy costs; the uncertainty created by the finreg bill and the regulations yet to come; and the certain knowledge that taxes on high-earning small businessmen will rise, are combining to discourage job-creating investment.

The president’s new-found desire for a truce on the business front is increased by the fact that businessmen have finally and reluctantly accepted the fact that he is not their friend, and is somewhere between hostile to, and uncomprehending of the role they play in, creating wealth and jobs. Worse still, from Obama’s point of view, business organizations are planning to make their grievances felt where it counts -- at the polls. They are preparing to fund candidates opposing the biggest spending congressional incumbents. Backed by a Supreme Court decision that overturned a law limiting corporations’ rights to express their political views, businesses are in a position to attempt at least partially to offset the massive spending of trade unions in support of left-leaning candidates.

Obama is hoping that he can persuade the business community that he is really on its side. He contends that his $862 billion stimulus package, and measures such as his refinancing of General Motors and Chrysler, created 3.6 million jobs and added 3.2 percent to the second-quarter growth rate, and that his bailout of the banks prevented a financial meltdown. He notes that whereas when he took office the nation was losing 700,000 jobs per month, the private sector has gained jobs in each of the last six months. Instead of destroying capitalism, he has saved it, he contends, in much the same manner as did Franklin Roosevelt when justifying the reforms that were the core of his New Deal.

Note, however, that a truce is not a peace. The president plans to renew his attack on the private sector immediately after the November congressional elections. The defeated congressmen return to Washington for a lame-duck session that runs until the newly elected congress is seated early in January of next year. That gives the president two months to push through bills that his defeated colleagues, perhaps hoping he will find jobs for them in the ever-expanding bureaucracy, can support with impunity: They would have nothing more to lose. Already, the Democratic chairmen of key committees, aware they might lose control of congress, or at least the House, are preparing bills that their fellow Democrats, when seeking reelection, dared not support: more spending; ending the requirement that union-certification elections be conducted by secret ballot; energy legislation; increases in taxes on families earning more than $200,000 per year and in inheritance taxes.       

Meanwhile the economy labors. Growth is slowing, job creation is lagging, unemployment remains high, consumer confidence is plummeting, and the Federal Reserve Board is now guessing that the economy will not recover fully for some five or six years. Obama once said, “I would rather be a really good one-term president than a mediocre two-term president.” Absent some policy corrections, he might turn out to be neither, at great cost to the American economy.   

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