SOTU Address: The Real Story of Obama and Corporate America

The president isn’t caving to business. He’s co-opting it.
January 26, 2011 |
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I'll admit it: I was worried when the president named Bill Daley as his second chief of staff. True, Daley was a loyal Democrat long before he was a bank executive. But I couldn't shake the feeling that the White House was giving in to months of mau-mauing from the business community. That was distressing not just because the idea of Obama as anti-business is wrong, but also because Obama had a lot more leverage over the business community than he seemed to realize.   

Not quite three weeks later and I feel confident this is not the case. Despite all the talk about Obama's political reinvention as we head into the State of the Union, it's become increasingly clear that Obama isn't caving to business. He's shrewdly co-opting it.

Consider the data points. First, right around the time Obama announced Daley, he also appointed Gene Sperling as head of his National Economic Council. Sperling is exactly the person every Democrat should want in this position: Someone with center-left bona fides who may well possess the best combination of wonkish know-how and political smarts in Washington.

From conversations I've had with administration officials in recent weeks, it's clearly Sperling and not Daley who'll be the key policymaking force in this duo. In fact, Daley was viewed partly as cover for the more liberal Sperling. That's why, in the run-up to these hirings, I'd repeatedly heard that Sperling's only path to the NEC post was as part of a package deal that included a high-profile appointment the business community would embrace. "I don't think there's any way they just do Gene on his own," an administration official told me late last year. "His best chance of getting the job is if it's part of some [pairing]. … I think they recognize they need to send a signal about fresh thinking."

Daley was that signal. And, judging from the reaction in the business community, the signal was received. U.S. Chamber of Commerce president Tom Donohue called the pick "a strong appointment" and praised Daley as "a man of stature and extraordinary experience." Republican fundraiser Fred Malik pronounced him the "the first high-level Obama official who has held a real position in business" and cooed that "[h]e understands the business community." (To be fair, Daley does bring real assets, like a strong managerial hand and genuine political savvy.)

Then, last week, Obama announced an administration-wide review of all federal regulations, promising to eliminate any rule that proved outdated or ineffective. As with the Daley selection, the business community applauded. But, once again, the real story was how little substantive ground Obama was giving. As the White House subsequently made clear, the review won't touch regulations it supported during the health care and financial reform efforts. The only regulations in play are likely to be quite trivial.

Final data point: Last Friday, Obama made an extravagant show of appointing General Electric CEO Jeffrey Immelt to head his Council on Jobs and Competitiveness, traveling all the way to a GE facility in Schenectady, New York to make the announcement. The council is a group of outside economic advisors Obama is assembling to replace the President's Economic Recovery Advisory Board (PERAB), whose only real claim to fame is to have been headed by former Fed Chairman Paul Volcker for the last two years. In fairness, Volcker did enjoy some influence with Obama, most notably with his push for a ban on risky trading by government-insured banks, known as the Volcker Rule. But pretty much all of Volcker's suction arose from his personal relationship with Obama and some of his senior aides (like current Council of Economic Advisers chairman Austan Goolsbee), not from the board itself. Volcker himself sometimes complained that the PERAB was being marginalized.

Like Volcker, Immelt may prove influential despite the bureaucratic obstacles in his way. But I certainly wouldn't count on it. And yet, once again, the business community cheered the appointment. "We thank President Obama for his excellent choice, and we will work closely with Immelt and the rest of the Council to enact the proposals we need to put Americans back to work," Business Roundtable President John Engler said in a statement.

How did big business get outmaneuvered so easily? To understand this, you have to go back to the charges the corporate world began leveling against Obama in the summer of 2009. The first was that his reform agenda was stifling the recovery by creating massive "uncertainty." This was spectacularly dishonest, for reasons my colleagues and I have laid out. But at least it was substantive: Business wanted less regulation and Obama was proposing more.

What the White House eventually realized was that co-opting business didn't require responding to this critique. That's because Corporate America was also leveling a much more superficial charge at the same time: that the president and his aides weren't sufficiently reverential toward business. As Fareed Zakaria summarized it after speaking with several CEOs: "[T]hey pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he's made clear he thinks government and nonprofit work are superior to the private sector."

The genius of the White House was to address this second concern—showering businessmen with love and attention—while mostly ignoring the first. And, because business leaders had merged the two criticisms in their own minds—and because they have a relatively crude understanding of what actually drives White House policymaking—they couldn't immediately discern that Obama had conceded almost nothing of consequence.

For Obama, this is quite a coup. While I never thought big business would uniformly oppose him in 2012—surely many business leaders would have fallen in line even without the charm offensive, given the improving economy and the clownish opposition—it clearly helps to have the corporate world back him enthusiastically. If nothing else, that will deprive the eventual GOP nominee of much needed campaign cash, and will defuse the energy behind the shadowy corporate front groups the GOP deployed so effectively during the midterms.

Long before then, though, the political support of the business community could pay  dividends. One of the arguments the president will make in the State of the Union is about the need for investments in infrastructure and education—which provide stimulus now and boost productivity in the future—even as we rein in the long-term deficit. The early Republican response has been reflexive opposition: Budget cuts now, budget cuts later, budget cuts forever. But business leaders could help Obama advance this agenda on Capitol Hill given their pull with the GOP and their natural affinity for such investments.

Obama's other big goal for the State of the Union (and beyond) is to convince the public he's obsessively focused on job-creation—hence the "competitiveness" theme the president will use to frame his speech. The dirty little secret of macroeconomic policy is that most of the decisions that will influence job growth over the next two years have already been made. The beauty of the rapprochement with business is that it creates the appearance of a president rolling up his sleeves to solve the problem.

And the best part is that it seems to come at little substantive cost. Yes, Obama is likely to pursue corporate tax reform and free trade deals, both business priorities. But these were already on the table before the recent love-in with business, and Obama has said any new corporate tax regime must generate at least as much revenue as the old one. (Also, keep in mind that Sperling and Goolsbee, not Daley or Immelt, will be the White House officials with greatest influence over details.)

The only real question is whether big business will wake up one morning and discover it's been played. "What I told my colleagues on the way to breakfast yesterday was to quit saying what a good deal Daley is going to be for the business community," Donohue recently told the Times. "[I]f business thinks they are going to put their arm around Daley and he's going to do their bidding, they're wrong." At the time, Donohue may have been shrewdly downplaying the significance of the appointment. But, in retrospect, it looks like he was onto something.

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