OBAMA´S BUSINESS PLAN / THE NEW YORK TIMES OP EDITORIAL ( HIGHLY RECOMMENDED READING )

July 16, 2010

Obama’s Business Plan

By ROGER C. ALTMAN

JUST as Congress finally passed its sweeping financial reform bill last week, a chorus of high-profile chief executives and business lobbying groups were criticizing President Obama and what they see as a new era of big, stifling government and heavy regulation. Ivan Seidenberg, the chief executive of Verizon, delivered a particularly stinging rebuke: In remarks to the Economic Club of Washington, he blamed President Obama for “an increasingly hostile environment for investment and job creation” and lambasted an administration that is “reaching into every sector of American life” and “making it harder to raise capital and create new businesses.”

After the United States Chamber of Commerce then complained that the administration “vilified industries,” the White House advisers Rahm Emanuel and Valerie Jarrett responded with a letter clearly meant for the business community as a whole. They wrote: “The stakes are far too high for us to be working against one another. That is why we were surprised and disappointed at the rhetoric we have heard from some in the business community — rhetoric that fails to acknowledge the important steps this administration has taken every single day to meet our shared objectives.”

Their letter is more than a defense of a president stung by the anti-business label. Given the latest data indicating weak growth and strikingly high unemployment, the administration is rightly concerned that business negativism is suppressing the confidence necessary for increased investment and job growth.

This poisonous dynamic between Washington and business must be fixed. Both sides should make adjustments, but the business community — of which I am a proud member — especially needs to make efforts to mend this relationship. Yes, the administration has made some mistakes. But, on balance, its actions have supported business.

So before leveling such fierce criticism, corporate America should remember the president’s actual record. First, Mr. Obama inherited an economy teetering on the brink of depression. Immediately upon taking office, he forged a $787 billion economic stimulus program, and is wisely trying to expand it now. Was this program perfect? Of course not. But it has been effective. Every serious economic model indicates that it contributed to recovery.
Second, at that same time, the credit markets were in tatters and simply not functioning. The administration submitted the biggest banks to confidence-building stress tests. It skillfully invested in financial institutions, kept the mortgage markets afloat and undertook other creative initiatives to solidify the financial industry. These have worked more quickly and more successfully than anyone predicted. The system is healthy again.

All this has led directly to a turnaround in corporate profits, share prices and liquidity. Profits have increased 41 percent since President Obama was elected. And the Dow Jones Industrial Average has risen 28 percent over the same period. These are strong results.

Third, the president made the courageous decision to put General Motors and Chrysler through bankruptcy. As a result, both survived and, today, G.M. in particular is coming back fast — along with its hundreds of suppliers. Moreover, taxpayers are likely to recover the full value of their investment in the company.

Fourth, Mr. Obama has made big progress toward restoring America’s standing around the world. Two years ago, it stood at a historically low point, and multinationals were encountering resistance in penetrating foreign markets. The president’s reframing of our global priorities and values has returned the United States to pre-eminence — and is starting to ease our way to opening new markets abroad.

A top issue for these business groups, and properly so, is education policy. That’s because a better educated work force is a more productive one. So far, this administration has an unorthodox and outstanding record on education, a notable illustration of this is its Race to the Top initiative, which rewards the most reform-minded states with hundreds of millions of dollars worth of federal grants. Perhaps leading businesses could work with the White House to match these awards at least in part.

Yes, business sees both the health reform and financial reform legislation as establishing burdensome regulatory structures. It is right in this regard. But financial reform was mandatory. And while some on Wall Street naturally don’t like it, most in our community view it as relatively harmless.

What adjustments should President Obama make to repair ties with business? For starters, no important member of his administration has ever met a major payroll. Such an absence of business experience in a presidential administration is unique in recent decades and carries negative connotations; certainly, no other comparable interest group is so unrepresented. This could be remedied by recruiting a senior industry figure for one of the four or five key economic policy positions.

Beyond that, there is skepticism over the president’s commitment to reducing the huge and dangerous budget deficits which America now faces. A strong step toward deficit reduction next year — like undertaking the difficult task of trying to fix Social Security — would earn deeper credibility with business and with all Americans.

Another problem is that the administration’s rhetoric — which too often employs inflammatory words like “reckless” — has the effect of tarring all of business with the same brush. The White House might better distinguish between Wall Street, Big Oil and health insurers, which have all incurred public wrath, and the majority of businesses, which haven’t.
The tension between President Obama and the business community is hurting both sides and may hamper economic recovery. Closing that divide requires the business community to mute its criticism, and the administration to make personnel and policy adjustments. Neither should be hard.

Roger C. Altman, an investment banker, was a deputy secretary of the Treasury during the first Clinton administration.