Amer­i­cans are bash­ing Big Busi­ness. Why won’t it fight back?

Can cor­po­ra­tions con­tinue to get their way in Wash­ing­ton if the pub­lic—and pres­i­den­tial wannabes—line up against them?

Bloomberg Businessweek (Europe) - - FRONT PAGE - By Peter Coy

This is a dif­fer­ent kind of elec­tion year, full of con­tempt for Big Busi­ness. Bil­lion­aire flamethrower Don­ald Trump, who leads the Repub­li­can field, has gone af­ter Ford Mo­tor, Kraft Foods, and Ap­ple, among oth­ers, for mak­ing things out­side the U.S. Ted Cruz presents him­self as the neme­sis of cor­po­rate wel­fare and crony cap­i­tal­ism. And demo­cratic so­cial­ist Bernie San­ders has built an en­tire cam­paign around the re­frain that Wall Street is guilty of “greed, fraud, dis­hon­esty, and ar­ro­gance.”

You might have ex­pected busi­ness to mount a vig­or­ous de­fense. But cor­po­rate Amer­ica has re­sponded to the charges with mur­murs. In this gladiators’ match, one side sim­ply hasn’t shown up. Many chief ex­ec­u­tive of­fi­cers be­lieve that af­ter the elec­tion is over and the noise of the cam­paign dies down, it will be busi­ness as usual for busi­ness. For now, they are turn­ing the other cheek. When Trump ripped Ford for its plans to build a big fac­tory in Mex­ico, the com­pany’s CEO, Mark Fields, wrote Trump a pleas­ant note ex­plain­ing that the car­maker was also adding jobs in the U.S. JPMor­gan Chase CEO Jamie Di­mon, who’s known for flashes of anger, calmly told

CNN Money in Novem­ber that he thinks he could talk San­ders out of break­ing up the big banks. “I don’t think Bernie’s go­ing to win,” he said. “I’m not that wor­ried.”

The non­cha­lance can come across as pa­tron­iz­ing: Thomas Dono­hue, pres­i­dent of the U.S. Cham­ber of Com­merce, dis­misses as a cam­paign tac­tic Hil­lary Clin­ton’s op­po­si­tion to the 12-na­tion Trans-Pa­cific Part­ner­ship (TPP) trade deal in its cur­rent form. “If she were to get nom­i­nated, if she were to be elected, I have a hunch that what runs in the fam­ily is you get a lit­tle prac­ti­cal if you get the job,” he told Bloomberg TV.

Up un­til now, the hun­ker- down strat­egy has worked re­mark­ably well. Con­sid­er­ing the vit­riol di­rected to­ward Big Busi­ness on the cam­paign trail, it’s scored one vic­tory af­ter an­other in Wash­ing­ton. Last year, Congress gave Pres­i­dent Obama the au­thor­ity he sought to put trade deals on a “fast track,” in­creas­ing the chances for rat­i­fi­ca­tion of the TPP. It made the re­search and de­vel­op­ment tax credit per­ma­nent. It sus­pended the debt limit un­til 2017, re­mov­ing the risk of a de­fault cri­sis. It ex­tended a tax break on cap­i­tal spend­ing through 2019. And it passed a fiveyear, $305 bil­lion trans­porta­tion bill that Big Busi­ness had lob­bied for. At­tached to the bill was a re­newal of the char­ter of the Ex­port-Im­port Bank, which Cruz and oth­ers had de­rided as crony cap­i­tal­ism.

That last vic­tory was es­pe­cially sweet. Three Repub­li­can sen­a­tors who were cam­paign­ing for pres­i­dent and had their fin­gers on the pub­lic’s fu­ri­ous pulse— Cruz, Marco Ru­bio, and Rand Paul—voted nay. The bill sailed through the Se­nate on Dec. 3 de­spite them, 83 to 16. “That was a bruis­ing bat­tle that we were able to punch through,” says Bill Miller, the top lob­by­ist of the Busi­ness Roundtable, whose chief ex­ec­u­tives run com­pa­nies with com­bined an­nual rev­enue of more than $7 tril­lion.

So far, the vot­ers’ fury seems as harm­less as waves break­ing on a jetty. “Over the last 12 months, the man­u­fac­tur­ing com­mu­nity has been ex­traor­di­nar­ily suc­cess­ful in im­ple­ment­ing its leg­isla­tive pri­or­i­ties,” says Aric Ne­w­house, the chief lob­by­ist of the Na­tional As­so­ci­a­tion of Man­u­fac­tur­ers, which rep­re­sents big and small man­u­fac­tur­ers.

That could soon change. One good year on the leg­isla­tive front is just one good year. It could even back­fire. Each

The big guys al­ways want free­bies. -John Ka­sich

I do not ac­cept the be­lief that the United States of Amer­ica and our govern­ment can’t stand up to the rip-offs of the phar­ma­ceu­ti­cal in­dus­try. -Hil­lary Clin­ton

I’ll never eat an­other Oreo again. Ever. Ever! -Don­ald Trump

sur­pris­ing leg­isla­tive vic­tory that busi­ness chalks up is fur­ther stok­ing the re­sent­ment of vot­ers who de­test the in­flu­ence of cor­po­ra­tions on pol­i­tics. Af­ter Congress passed fast-track last sum­mer, the AFL-CIO put out a state­ment say­ing “global en­ter­prises … must no longer be the ar­chi­tects of U.S. trade pol­icy.”

Anti-es­tab­lish­ment can­di­dates are surg­ing in the polls be­cause vot­ers sense that they’re just crazy enough to blow things up. Trump, the pop­ulist, scares busi­ness be­cause he prom­ises to re­strict im­mi­gra­tion and put up tar­iff walls; Cruz, the free-mar­ket purist, fright­ens it be­cause he wants to kill the Ex-Im Bank and hem in the Fed­eral Re­serve. Even the more main­stream can­di­dates, such as Ru­bio and Clin­ton, have ap­pealed to vot­ers with busi­ness-un­friendly po­si­tions that will be hard to walk back if they reach the White House. Un­der pres­sure from San­ders, Clin­ton came out last year against the Keystone XL pipe­line (page 29), which the Cham­ber of Com­merce called a “bell­wether in­di­ca­tor of whether Amer­ica will be open for busi­ness.” And Ru­bio has been back­ing away from his pre­vi­ous agree­ment with the Big Busi­ness lobby on the TPP and im­mi­gra­tion re­form.

Cut­ting taxes would seem to be one is­sue where Big Busi­ness and the lead­ing Repub­li­cans are on the same page. Not re­ally, though. The cuts promised by Trump, Cruz, and Ru­bio are so big that they would drive up the na­tional debt in the ab­sence of ei­ther huge spend­ing re­duc­tions or white-hot eco­nomic growth, both of which are un­likely. What Big Busi­ness re­ally wants is cor­po­rate tax re­form, but that keeps get­ting side­lined by crowd-pleas­ing pro­pos­als for steep cuts in per­sonal tax rates. “Some can­di­dates who have been most de­tailed in what they would do are now on the side­lines, and those who have said the least seem to be in the strong­est po­si­tion,” com­plains John En­gler, the for­mer Repub­li­can gov­er­nor of Michi­gan who is pres­i­dent of the Busi­ness Roundtable.

Fairly or not, Big Busi­ness is tak­ing heat for the stag­na­tion of liv­ing stan­dards and the widen­ing gap be­tween rich and poor. Cor­po­rate lead­ers are earn­ing high op­er­at­ing prof­its but spend­ing them on stock buy­backs and higher div­i­dends, which en­rich share­hold­ers, rather than on cap­i­tal in­vest­ment. Com­pa­nies say high taxes and reg­u­la­tory un­cer­tainty are to blame for their re­luc­tance to ex­pand, but the prac­ti­cal ef­fect of un­der­in­vest­ment in plants, equip­ment, and soft­ware is to sup­press pro­duc­tiv­ity and job growth, harm­ing the middle class. Mean­while, the lib­er­tar­ian Cato In­sti­tute is gain­ing trac­tion with its claim that crony cap­i­tal­ism costs tax­pay­ers $100 bil­lion a year and con­sumers hun­dreds of bil­lions more in higher prices. “There’s a tremen­dous amount of frus­tra­tion on the right and the left,” says Levi Rus­sell, di­rec­tor of pub­lic affairs for Amer­i­cans for Pros­per­ity, which is backed by lib­er­tar­ian bil­lion­aires Charles and David Koch.

Busi­ness lob­by­ists know they have a prob­lem. “Eco­nomic pop­ulist rhetoric” is height­en­ing un­cer­tainty, which “can cre­ate a drag on jobs and growth,” Cham­ber of Com­merce spokesman My­ron Bril­liant wrote in an e-mail. Says En­gler: “We need to end this class warfare and get busy go­ing back to a fun­da­men­tal eco­nomic rule, that a ris­ing tide re­ally will lift all boats.”

Most work done by lob­by­ists hap­pens be­hind the scenes. “Lob­by­ists, like mush­rooms, thrive in low light,” says Richard Hasen, a law pro­fes­sor at the Univer­sity of Cal­i­for­nia at Irvine and au­thor of a new book, Plu­to­crats

United. The last thing CEOs want to do is get into a Twit­ter war with Trump or pro­vide San­ders with red meat for his next de­nun­ci­a­tion of bankers. They are di­plo­mats by na­ture who an­swer to mul­ti­ple bosses: their boards, ac­tivist share­hold­ers, cus­tomers, em­ploy­ees, and govern­ment.

Few chief ex­ec­u­tives will stick their necks out the way Ap­ple CEO Tim Cook has in de­fy­ing the govern­ment’s de­mand for ac­cess to the con­tents of the iPhone of one of the San Bernardino killers.

The busi­ness model of Wall Street is fraud. It’s fraud. I be­lieve that cor­rup­tion is ram­pant. -Bernie San­ders One of the big­gest lies in pol­i­tics is the lie that the Repub­li­cans are the party of Big Busi­ness. -Ted Cruz

Too of­ten, Repub­li­cans al­low them­selves to be a party that’s not for growth but that’s for Big Busi­ness. -Marco Ru­bio

Fewer still go out of their way to court con­tro­versy in the style of Trump. It’s telling that the only prom­i­nent busi­nessper­son to have en­dorsed Trump so far is Carl Ic­ahn, an­other brash and in­de­pen­dent bil­lion­aire.

How long can an un­der-the-radar strat­egy by cor­po­ra­tions con­tinue to be ef­fec­tive? The bruis­ing fight for re­newal of the Ex­port-Im­port Bank demon­strates both the po­ten­tial and the lim­i­ta­tions of how the busi­ness lobby op­er­ates. The Cham­ber of Com­merce and the Busi­ness Roundtable, among oth­ers, pushed hard for re­viv­ing the Ex-Im Bank, which gives loans and loan guar­an­tees to aid U.S. ex­porters. Boe­ing Chair­man Jim McNer­ney, who is ac­tive in both groups, qui­etly warned that Boe­ing might have to move work abroad if it didn’t have Ex-Im’s help. That alarmed mod­er­ate mem­bers of Congress, who were al­ready hav­ing doubts about let­ting the bank die.

It was Stephen Fincher, a farmer and gospel singer from Frog Jump, Tenn., serv­ing his third term as a House Repub­li­can, who made the key move that saved the Ex-Im Bank. Jeb Hen­sar­ling of Texas, who called the bank “cor­po­rate wel­fare,” had the re­newal bot­tled up in the Fi­nan­cial Ser­vices Com­mit­tee he chairs. “We tried and tried to work with Chair­man Hen­sar­ling, and in the end he re­fused to move my bill,” Fincher re­called in Fe­bru­ary in a state­ment re­leased by his of­fice. On Oct. 26 an ex­as­per­ated Fincher used a rare par­lia­men­tary de­vice called a dis­charge pe­ti­tion to bring the re­newal leg­is­la­tion di­rectly to the House floor, where it won ap­proval. That may go down as the sig­na­ture leg­isla­tive achieve­ment of Fincher, who an­nounced on Feb. 1 that at the con­clu­sion of his term he “will be re­turn­ing to Frog Jump.”

Par­lia­men­tary fi­nesse worked this time. It also helped that John Boehner, who re­signed as House speaker on Oct. 29, had stopped try­ing to ap­pease his party’s right wing. In the long run, though, Big Busi­ness will strug­gle to win if it’s per­ceived as just an­other spe­cial in­ter­est that’s skilled in work­ing the sys­tem.

One thing work­ing against big busi­nesses is that they’re, you know, big. They don’t get credit for be­ing small busi­nesses that suc­ceeded. Small busi­ness is twice as pop­u­lar as Big Busi­ness, ac­cord­ing to a sur­vey by Pew Re­search Cen­ter con­ducted last fall. In a Gallup Poll in Jan­uary, 63 per­cent of re­spon­dents said they were dis­sat­is­fied with “the size and in­flu­ence of ma­jor cor­po­ra­tions.” We’re a long way from 1925, when Pres­i­dent Calvin Coolidge could say that “the chief busi­ness of the Amer­i­can peo­ple is busi­ness.” Now, it seems, the chief busi­ness of the Amer­i­can peo­ple is com­plain­ing about busi­ness.

Dave Camp, a Michi­gan Repub­li­can who was chair­man of the House’s tax-set­ting Com­mit­tee on Ways and Means un­til early last year, says busi­ness needs to do a bet­ter job of mak­ing clear that its pri­or­i­ties—freer trade, less regulation, etc.—will ben­e­fit the pub­lic. That’s not easy to con­vey to an­gry vot­ers, con­cedes Camp, now a se­nior pol­icy ad­viser to ac­count­ing and con­sult­ing firm PwC. In the pri­vate sec­tor, he says, “you re­al­ize that a lot of the things that are nu­anced vic­to­ries in Wash­ing­ton don’t re­ally trans­late as you get out and around. It takes a lot to move the nee­dle on pub­lic opin­ion.”

There are sim­i­lar­i­ties be­tween to­day and the years im­me­di­ately af­ter the Great De­pres­sion. Econ­o­mists and politi­cians wor­ried then that the U.S. would lapse back into a slump when war spend­ing ended. Top busi­ness ex­ec­u­tives re­sponded in 1942 by form­ing the non­par­ti­san Com­mit­tee for Eco­nomic De­vel­op­ment. It built sup­port for the Bret­ton Woods agree­ment of 1944, which led to the for­ma­tion of the In­ter­na­tional Mon­e­tary Fund and the World Bank. It was also in­volved in the Mar­shall Plan of 1948, which helped re­build Europe. It went on to cham­pion other causes such as free trade, pre-K education, and cam­paign-fi­nance re­form.

Once again a large seg­ment of the pub­lic is ques­tion­ing the vi­tal­ity of the Amer­i­can sys­tem, whether it’s Trump vot­ers glom­ming on to “we don’t win any­more” or San­ders sup­port­ers cheer­ing his dec­la­ra­tion that Wall Street’s busi­ness model is fraud. Says Joseph Mi­narik, the re­search di­rec­tor of the Com­mit­tee for Eco­nomic De­vel­op­ment: “This is al­most the first echo of the at­ti­tudes that were in place in the late years of the Great De­pres­sion.” The dif­fer­ence is that busi­ness is less out­wardly fo­cused this time around. The Com­mit­tee for Eco­nomic De­vel­op­ment is di­min­ished; since last year it’s been an arm of the Con­fer­ence Board. “Very few busi­ness lead­ers be­lieve they have the im­pri­matur from their boards to en­gage in pub­lic-is­sue-type ac­tiv­i­ties th­ese days,” Mi­narik says. For now, the peo­ple with the pitch­forks are con­trol­ling the nar­ra­tive. As Cruz said on Feb. 20 af­ter the Repub­li­can pri­mary in South Carolina, “The scream­ing you hear now from across the Po­tomac is the Wash­ing­ton car­tel in full ter­ror that the con­ser­va­tive grass roots are ris­ing up.” <BW>

I have re­fused to lick the boots of bil­lion­aires and beg them for their re­sources. -Ben Car­son

We need to clean house, and it must start by elim­i­nat­ing the crony cap­i­tal­ism that is per­va­sive through­out the fed­eral govern­ment.gov­ernm -Jeb Bush The last thing CEOs want to do is get into a Twit­ter war with Don­ald Trump

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