American business attacks generous hand that feeds it
Corporate profits have ballooned on Obama's watch but executives still are not happy
David J. Lynch
Tom Donohue, the president of the US Chamber of Commerce, said last week that higher taxes and a "flood of new regulations" would damage an already subpar economy.
"In many ways, we're going backwards," he said.
Such complaints, echoed by corporate executives throughout President Barack Obama's first term, obscure one fact: American business has never had it so good.
US firms' after-tax profits have grown 171 per cent under Obama, more than under any president since the second world war, and are now at their highest level relative to the size of the economy since the government began keeping records in 1947.
Business leaders cite low labour costs in an era of high unemployment, the Federal Reserve's easy-money policies, and their own management savvy for the profit boom. Prosperity has come in spite of the president, not because of him, they say.
"I don't think he deserves any credit," said John Engler, president of the Business Roundtable, a Washington-based association of chief executives.
Economists disagree. In a survey in February, 80 per cent of senior economics professors said unemployment was lower at the end of 2010 than it would have been without Obama's stimulus spending. A July 2010 study by former Federal Reserve vice-chairman Alan Blinder and Mark Zandi of Moody's Analytics said the stimulus, bank rescues and Fed policy "probably averted what could have been called Great Depression 2.0".
For four years, American business has seen the Democratic president as a tax-and-spend advocate of big government who was intent on imposing red tape. Some criticised him for a lack of experience in business.
In the presidential campaign, business groups spent millions of dollars on Republican candidates in a bid to unseat Obama.
Still, executives dislike the prospect of economic volatility even more than they dislike the president. So they've become reluctant White House allies in the battle over raising the nation's US$16.4 trillion borrowing limit, which the government could hit as early as next month.
"We don't want to reach the point where our government, in some fashion, is unable to make interest payments or is unable to pay our vendors," Engler said. He called the debt limit "a clumsy instrument" to force spending discipline.
Business leaders say a prolonged political showdown could dent consumer confidence or unsettle equity investors.
In 2011, the Standard & Poor's 500 Index fell almost 17 per cent in the 11 trading sessions following the breakdown of debt-reduction talks between the White House and congressional Republicans. The Conference Board's consumer confidence reading dropped to its lowest level in more than two years.
Washington dysfunction threatens to scuttle a period of high profitability and rising share prices. Across the economy, firms posted stellar profits in their third-quarter earnings reports.
The S&P 500 index has risen more than 80 per cent since Obama was sworn in on January 20, 2009. That's the biggest gain under any president since at least the second world war.
At a news conference on Monday, Obama called default a "self-inflicted wound" that could trigger a new recession, and called on Republicans "to pay America's bills on time".
"Investors around the world will ask if the United States of America is in fact a safe bet," the president said.
"Markets could go haywire, interest rates would spike for anybody who borrows money."
Companies are holding more than US$1.7 trillion in liquid assets, reflecting uncertainty over future policies.
"We're in the curious position where businesses are net savers," said Paul Ashworth, chief US economist at Capital Economics. It is a problem "because businesses are too cautious", he said.
Lai See is on holiday