President Obama’s visit to the Chamber of Commerce always seemed bizarre.
Reaching out to the U.S. Chamber isn’t like reaching out to business. Under the guidance of Tom Donohue, the Chamber has become less a business association than a right-wing lobby operation that makes its money selling its services to entrenched corporate interests (the health insurance companies, Big Oil, the drug companies) that prey on taxpayers and pay dearly to protect their privileges. The Chamber is shedding board members and local affiliates because of its zealotry—most notably in joining the no-nothings on global warming in return for Big Oil contributions.
The president was warmly received by a grateful Donohue eager to revive the threadbare myth that the Chamber represents U.S. business. The president said he was being neighborly and wished he had brought a fruitcake over earlier. That led wags to say, "No worry, the Chamber is already chock full of fruitcakes."
Progressives panned the president for making the visit; the press reported it as a "charm offensive," part of his calibrated "move to the center." And no doubt, the president ladled out the pander, promising to reduce burdensome regulation, reform and lower corporate taxes, pass corporate trade accords, and do whatever is needed to help business compete.
In fairness, the president also made the case for his agenda. He urged his audience to support his call for investment in infrastructure, education and training, research and development, all vital to America’s future, all scorned by the Republican legislators as "big government spending." He made the case for his health care reforms, noting that they would save businesses money. He defended financial reform and environmental and consumer protections (no mention of labor law reform).
More importantly, he repeated a centerpiece of his economic analysis—that we can’t recover from the Great Recession and go back to the old economy because that economy didn’t work for most Americans.
If we’re fighting to… help you compete, the benefits can’t just translate into greater profits and bonuses for those at the top. They should be shared by American workers… We cannot go back to the kind of economy—and culture—we saw in the years leading up to the recession, where growth and gains in productivity just didn’t translate into rising incomes and opportunity for the middle class.
But this central insight was the occasion for utter incoherence, from a president too smart to be confused.
The incoherence sets in
The fact is that we ARE returning to the old economy. The big banks are more concentrated than ever, with bonuses at record levels. Companies are making record profits, but workers are not sharing in the bounty. Good jobs are being lost, pay and benefits cut, while companies accelerate their off shoring of production and employment. The trade deficit is back over $1 billion a day. The surplus countries—China, Germany—are continuing their dependence on export-led growth. If anything, the Chinese have hardened their mercantilist policies, eliciting complaints even from normally-servile U.S. companies in China.
If current trends continue, we’ll have another jobless recovery, this one even longer than the previous, with employment not recovering and most Americans losing ground. The president’s celebrated new energy industries will be built abroad, largely by the Chinese. Gilded Age concentration of wealth and income will grow worse. The financial casino will reopen, affirming JP Morgan Chase’s Jamie Dimon’s definition of a financial crisis as something that happens every five years. America’s decline will continue.
So to what does the president attribute this foreboding reality? Not to wrong-headed public policy, but to "technology," "globalization," "forces as stoppable as they are powerful." No mention of Chinese mercantilist policies that remorselessly target industries, trample global rules, hijack intellectual property and control their currency to capture global markets. No mention of Germany’s success in developing policies that make it a global export superpower, while its workers enjoy pay and benefits that American workers can only dream of.
What do we do about this foreboding reality? The president is clear:
We know what it will take for America to win the future. We need to out-innovate, out-educate, and out-build our competitors. We need an economy that’s based not on what we consume and borrow from other nations, but what we make and sell around the world. We need to make America the best place on earth to do business.
This is terrific, focus-grouped, dial-tested language. It "moved the dials," as they say, in the president’s State of the Union address. The president then goes on to make the case for his investment agenda—in 21st-century infrastructure, in education and training, in research and development. All good stuff, but then the incoherence sets in.
The president seeks support for major investments in these areas while promising a five-year freeze on domestic spending, saving $400 billion over the next decade, and bringing this spending "down to the lowest share of our economy since Eisenhower was president." But a concerted drive to rebuild our decrepit and increasingly deadly infrastructure will cost trillions merely to bring it up to code, and that doesn’t include 21st-century renovations. In areas where our public schools are failing, we’re not even doing the basics —pre-K, small classes in early grades, skilled teachers, after-school programs—and that would cost hundreds of billions to rectify. The president’s budget allows for demonstration projects, testing, and gimmicks like "Race To the Top." And Republicans will cut much of that.
Even if we were making the investments, why would the jobs land up here? The president started his administration by gaining a consensus at the G-20 that the trade imbalances in the global economy were unsustainable and dangerous, and that surplus countries as well as deficit countries had to change course. His administration then called on the Chinese to stop manipulating their currency as a trade weapon. The Chinese, Japanese, Germans and other export nations basically told him to fly a kite. America’s global corporations—with significant investment in global supply chains—dubbed him "anti-business." The Chamber cleaned up attacking him.
The president’s response, apparently, has been to fold. He now champions the same corporate trade accords that were part of driving us into this hole. Instead, he calls on business executives to be patriotic and hire Americans:
As we work with you to make America a better place to do business, ask yourselves what you can do for America. Ask yourselves what you can do to hire American workers, to support the American economy, and to invest in this nation. That’s what I want to talk about today—the responsibilities we all have to secure the future we all share.
This sounds great, but Obama knows it is pap. Company CEOs responded that they aren’t investing because there is inadequate demand for their products, a position one would assume a Democratic president would adopt. Meanwhile, CEOs are pocketing lavish pay offshoring jobs, sitting on capital, while slashing pay and benefits. They have neither the luxury nor the mandate to be patriotic when it comes to where they locate plants. The president isn’t clueless, preceding the remarks above by saying, "Now, I understand the challenges you face. I understand that you’re under incredible pressure to cut costs and keep your margins up. I understand the significance of your obligations to your shareholders. I get it."
In his speech, he nostalgically evoked companies that used to invent things and then manufacture them at home:
"The key to our success has never been just developing new ideas; it’s also been making new products. Intel pioneers the microchip, and puts thousands to work building them in Silicon Valley."
He failed to mention that the former chair of Intel, the legendary Andy Grove, now bemoans the fact that there are fewer workers manufacturing computers in Silicon Valley now then there were before they built the first PC in 1975. Grove, worried about where his grandchildren will work, calls for a dramatic change in public policy to protect jobs here in America.
The policies we need
The president closed by invoking World War II, when business leaders who loathed Roosevelt responded to his call and helped turn America into the arsenal for democracy. He failed to mention that the wartime mobilization enlisted companies into a national plan, and ran up the national debt to a record 120 percent of GDP. Roosevelt didn’t rely on the patriotism of executives, and he didn’t fight the war by focusing on reducing the deficit. He transformed public policy and mobilized the country to meet the challenge.
And there is the rub. The president knows that the old economy didn’t work, but his efforts to change it have roused the entrenched interests with a huge stake in the old order. Wall Street mobilized to fend off real financial reform. The multinationals made adherence to the old trade policy a measure of being "good to business." China and Germany scorned the administration’s pleas for global rebalancing. Big oil and the health insurance companies enlisted the Chambe,r among others, to weaken health care reform and block the move to new energy.
With rising energy prices and the Chinese squeeze on foreign business, it might not take much to have a significant effect on corporate decisions on where to site their plants. Make the transition to new energy a matter of national security and enforce domestic content measures. Call on states and localities to enforce "buy America" in all procurement decisions. Create an infrastructure bank, let the Federal Reserve do quantitative easing by buying its bonds, and launch a concerted drive to rebuild America. Give tax breaks for companies that create jobs here and limit them for those who ship them abroad. Inform the Chinese that we will treat their exports exactly as they treat ours, adjusting for currency manipulation.
America is still a big market, and a good place to do business in a world of increasing insecurity. Send a clear signal that we are going to balance our trade—and that companies better plan for that—and show the muscle to prove you mean it. Then lead a campaign to crack down on executive compensation schemes and use every mechanism of government to defend the right of workers to organize. The howls from the business community and from lobby fronts like the Chamber would be deafening. But it is hard to image a more popular mix of policies—and ones that might make a difference.
Instead, the president is in strategic retreat. He’s embraced the old trade policies, backed away from confronting China, brought in JP Morgan Chase’s chief lobbyist into the White House as chief of staff, and GE’s CEO as leading economic adviser. The old economy is reasserting itself, with little but pleas to corporate patriotism to change it.
This insures the 2012 election will come with high unemployment, stagnant wages and benefits, and little sense of what might change. Presumably, Obama hopes that the faltering recovery will gather enough steam to sell, and that the Republican zealots will help drive their nominee to wingnut extremes. This might be a good bet. But it won’t address the challenges this country faces.