Business shouldn't blame Obama

Clive Crook, Financial Times

Published 10:00 AM, 13 Jul 2010 Last update 10:04 AM, 13 Jul 2010

FT.com

Heads of US businesses who once thought well of President Barack Obama have turned to grumbling. These days they come not to praise, but to accuse him of over-reaching and indecision. The outlook for taxes and regulation worries them, they say. There is too much uncertainty. This is holding back investment and growth.

These themes came to prominence after Ivan Seidenberg, boss of Verizon, gave a speech last month as chairman of the Business Roundtable, a club of US company leaders. “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,” he said. He had previously been viewed as an Obama ally.

Jeffrey Immelt, head of General Electric, also sounds disillusioned. The US “has to become an industrial powerhouse again but you don’t do this when government and entrepreneurs are not in synch”, he told an audience recently.

It is hard to find a chief executive with a good word for the president. Do their complaints make sense? Is Obama an anti-business president?

The idea is not groundless. Like most liberals, Obama is suspicious of the profit motive, and wants the government to play a bigger role; the need for stronger regulation is a constant theme. But what did the CEOs expect of a Democratic president? Measured against what might have happened, their charges seem unfair and even absurd. They should be thanking Obama for his restraint.

As he came into office, the country stood on the brink of a new Great Depression. The primary causes were private-sector incompetence and irresponsibility, compounded by lax regulation. Even if Obama had been so inclined, this was no time to laud private enterprise.

Massive assistance to the financial system was necessary and Obama delivered – despite the unpopularity of these measures with voters. Many would have liked to see the heads of big financial firms on pikes, yet the administration came through with enormous support. This is anti-business?

The financial regulation bill now before Congress, similar to an earlier White House design, is hardly draconian. Despite flaws and omissions, the reforms are a step forward – but no fair-minded observer could call them punitive, though punishment is what public opinion still demands. So far as finance is concerned Obama has worked to moderate anti-business sentiment, not inflame it.

Of course, financial reform is just one issue. Other things are going on, too. Perhaps CEOs thought that the oil spill in the Gulf was a good moment for Obama to praise private enterprise and defend light-touch regulation.

As you may have noticed, the president has been roundly criticised in the US for being too soft on BP. As with the financial collapse, and relative to the political demands placed upon him, the president has been restrained. He has done enough – and barely enough, at that – to assuage public anger. Had he done less, the populist backlash might have been worse. The truth is, in these emergencies, Obama has been a friend to business.

A third major challenge has been healthcare reform. Here, it makes more sense to fault Obama – for muddled thinking about the roles of government and business, and for rhetorical indecision. The healthcare law he signed maintains a mostly private system. Yet he invariably speaks disdainfully about insurance companies and their selfish motives, as if agreeing with many Democrats that healthcare is too important to leave to the market or taint with profit.

Obama would doubtless prefer a government-run system but saw that the country would not go there. He was wise to accept this and settle for what was possible. Yet he cannot bring himself to champion the advantages that private insurance companies, if properly regulated, can bring to the provision of healthcare. His remarks on the issue have indeed had an anti-business tinge. This was a political error, because it made Obama an ineffective advocate for his own reform – which, as a result, half of all voters continue to oppose.

Many CEOs are concerned about what healthcare reform might cost their companies. They add this uncertainty to others they blame on the White House: uncertainties about taxes, especially energy taxes; about financial regulation (because the new law will leave regulators with a lot of discretion); about trade policy; about the outlook for public debt; and so on.

They have a point. Uncertainty is bad. But one must ask how much of this is Obama’s fault.

In the end Congress – not the president – makes these decisions. Congress – not the president – is the main cause of the delays and uncertainties. In domestic policy, Obama can advocate but he cannot decree. Judge him against what he can do.

I wish the president was a more forceful advocate for medium-term fiscal control, for a carbon tax, for liberal trade and for his own healthcare reform. But under the circumstances, Obama has not been unkind to business, rather the opposite.

And you cannot help noticing that CEOs have little constructive to say on any of those policy issues. According to Seidenberg, for instance, they want a smaller budget deficit – plus lower taxes and more investment in infrastructure and education. If you want to dispel uncertainty, you have to do better than that.