POLITICS

How Big Business wins

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Photo -  President Barack Obama speaks with General Electric Chief Executive Officer Jeffrey Immelt in the Roosevelt Room at the White House in Washington, Wednesday, May 20, 2009, during a meeting of the President's Economic Recovery Advisory Board. (AP Photo/Charles Dharapak)
President Barack Obama speaks with General Electric Chief Executive Officer Jeffrey Immelt in the Roosevelt Room at the White House in Washington, Wednesday, May 20, 2009, during a meeting of the President's Economic Recovery Advisory Board. (AP Photo/Charles Dharapak)
Politics,Beltway Confidential,Timothy P. Carney

“Mr. Obama views corporate power as a force to bargain with, not an enemy to vanquish.”

Liberal writer Bill Scher has an important essay in the New York Times that can dispel myths held by both sides. Some liberals like to think Obama is the champion of the little guy, battling against Big Business. Some conservatives like to think Obama is the enemy of business, scheming to impose socialism.

Scher writes that instead, Obama works with business to pass progressive legislation. I recommend the essay, but I think it presents an incomplete, and thus misleading picture of what Big Business gets from liberal politicians like FDR, LBJ, and BHO.

In brief, I think Scher’s essay leaves the reader with the impression that what Big Business wants is to be left alone. I think a more accurate portrait would include all the ways in which Big Business profits from Big Government in ways they wouldn’t profit in a freer market.

For instance, Scher writes that business got behind the National Recovery Act because FDR offered “a temporary suspension of antitrust law, so businesses could fix prices….” But I think that mischaracterizes the NRA. The NRA created government-enforced cartels. Tailor Jacob Maged went to jail for breaking the cartel. Kosher grocers were prosecuted for, among other things, charging too little.”

On LBJ, Scher writes: “He created the Transportation Department, in 1966, only after exempting resistant shipping interests from its jurisdiction.” But DOT promised plenty of positive benefits to Big Business. Right around the time Congress created the DOT, for instance, the FAA awarded Boeing and General Electric a contract for a huge “SuperSonic Transport” project. A cabinet department, it was clear at the time, would become a huge treasure trove of government contracts.

And Scher also misses half of the story with HillaryCare. Scher writes:

In 1993, his health care task force largely resisted meeting with insurance lobbyists as it drafted legislation. In turn, the insurers didn’t wait for the legislation to be finalized before embarking on a vicious advertising campaign.

But the insurance industry wasn’t uniformly against the bill until it started to fall apart. At first, Hillary caused a split in the industry. Big insurers — “managed care” companies — sided with Hillary. Smaller and mid-sized insurers opposed the law and fought it.

As the Times explained the market dynamic at the time:

the insurers that already had a large foothold in the HMO business would benefit greatly from the administration’s plans to pay for insurance for the 37 million Americans who are now uninsured. In essence, the Government would pay tens of billions of dollars to create a huge new pool of customers for health insurers….

That prospect has caused a schism in the lobbying effort of health insurers. The five giants recently broke off from the Health Insurance Association of America, their longtime trade group in Washington, to form their own organization, the Coalition for Managed Competition, which is closer to Administration thinking on most issues.

(Notably, the HMO industry gave much more to Clinton in 1996 than to Dole.)

Similarly with ObamaCare. The drug industry didn’t merely “bur[y] a proposal for cheap drug imports.” The industry secured subsidies, mandates, lengthy government-granted exclusivity, and other government favors.

Scher mentions a food-safety bill that got industry backing, because some chemicals were exempted. But it’s also important to remember that regulation itself is often profitable to Big Business because it keeps out competition. This happened with food safety. Thus, Big Business support for Obama’s tobacco regulation and tax-prep regulation.

So when trying understand Obama’s cooperation with Big Business, remember, often they’re both on the side of Big Government.

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