Business Times - 29 Oct 2010
Business the real winner in US polls?
Midterm election's expected outcome should be seen as ideal from the perspective of Wall St, Corporate America
By LEON HADAR
THIS could be another example of dialectical thinking running amok: Political and social change moving in one direction ends up moving the system towards the exact opposite direction.
Like when the current US election season dominated by the populist rage of angry voters protesting against Washington and Wall Street - you know, those ruling political and financial elites who were responsible for the financial mess - is ending with members of these very same elites poised to gain even more power on Capitol Hill.
As a result, American business elites are actually in a stronger position to hold back any major challenge to despised status quo.
Sounds bizarre? Welcome to the 2010 midterm election that even the more optimistic Democrat and enthusiastic Obamaniac agrees is going to tilt the balance of power on Capitol Hill in favour of the Republicans after next week's vote. The current White House occupant found it very difficult to win support in a Congress dominated by a Democratic majority for very modest and business-friendly reforms in the healthcare insurance and financial regulatory systems - and could not gain support for similar market-oriented environmental legislation. Imagine now the constraints on him when the Republicans win control of the House of Representatives and perhaps even the Senate.
But wait a moment. Isn't this Republican insurgency being driven by the Tea Party movement whose members have denounced Washington's bailout of Wall Street and the Obama administration's rescue of the car industry? After all, these Tea Partiers were supposed to be the 'Real Americans' from Main Street who pledged to rid Washington of all the those lawyers and PR types lobbying for Big Business and its interest groups.
And you are now telling us that these lobbyists will be smiling and giving each other high fives next Tuesday evening? In fact, these lobbyists have been smiling for quite a while.
During a brief period of panic that followed the collapse of Lehman Brothers, the heads of Wall Street and corporate America were worried that angry political backlash would help the political left mobilise public support for European-style social democratic policies - a Sweden on the Potomac. But it became quite clear that President Barack Obama was not going to be a new Wall Street-bashing FDR (Franklin D Roosevelt). His top economic aides who were the product of the pro-globalisation Clinton administration did their best to prop up the financial system without asking too much in return.
The healthcare reforms proposed by Mr Obama were an almost exact replica of a similar programme that businessman and former Republican presidential candidate Mitt Romney enacted in Massachusetts while serving as its governor. Similarly, the much-anticipated financial regulatory reform advanced by Mr Obama failed to change the way business was done on Wall Street and ensured that the rules of the games would be written by the government regulators and the lobbyists representing the financial industry.
And a coalition of Republicans and conservative Democrats succeeded in blocking any effort to get Congress approve a cap-and-trade energy bill that was supported in the past by many Republicans and business groups - with the exception of the politically powerful energy companies which would have been forced to do some of the financial uplifting under the legislation.
In short, even under the current balance of power on Capitol Hill, much of the policy and legislative process continued to favour the influence-peddling business interests. But if you were listening to some of the complaints coming from some business executives - day-dreaming about the good old days of tax cuts and the regulation-free Bush era - Mr Obama was ready to destroy American-style capitalism. Hence investor Stephen Schwarzman, co-founder of the Blackstone Group and one of America's richest businessmen, compared Mr Obama's plan to raise taxes on carried interest (the share of profits paid to heads of successful hedge funds) to Hitler's invasion of Poland in 1939.
And Republican lawmakers decried the 'persecution' of BP by the White House (which negotiated with the company a financial package to compensate the victims of the oil spill in the Gulf of Mexico).
Enter the Tea Party. A grassroots movement that initially seemed to reflect the genuine anxieties and an economically distressed middle class, some of its groups have been taken over by right-wing populists, ranting and raving about Mr Obama's race and religion, and then co-opted by advocacy groups that call for limited government and free markets.
These groups are funded by private energy conglomerate Koch Industries and other corporations that were interested in seeing the cap-and-trade legislation and the other regulatory measures proposed by Mr Obama and the Democrats being modified, if not killed.
There is no doubt that the efforts by this peculiar entity - a populist movement funded by powerful corporate interests as well by the Fox News-led political media complex - has played a critical role in tarnishing the image of the Obama administration and in helping Republican candidates gain huge political momentum. That momentum has been accelerated thanks to the financial support from outside groups allied with the Republican Party that helped neutralise the financial edge enjoyed by the Democratic Party over the Republican Party.
Indeed, US business interests have been a major source of much of about US$1 billion that has been raised and is being spent in this year's midterm election campaign by the Republicans.
In particular, Republicans have benefited from new Supreme Court ruling that allows political parties to raise money from undisclosed corporate contributors. In that context, the US Chamber of Commerce, the powerful lobbying arm of American corporations, is expected to raise and spend around US$75 million, most of it coming from undisclosed business donors.
Similarly, American Crossroads, a Conservative-leaning group founded with help from Karl Rove the Bush-era political operator, has raised more or less the same amount from undisclosed business interests. These and other groups are investing in critical House and Senate races, hoping that elected Republicans will be in a position to scuttle any attempt by Mr Obama and the Democrats to regulate and tax American businesses; ensuring, for example, that the new Congress extends the tax cuts enacted during the Bush presidency, rejects a cap-and-trade climate bill, approves a series of free trade agreements (FTA), and makes the healthcare and financial regulations reforms even more business friendly.
Interestingly enough, there are some tensions between the leaders of Tea Party movement and the business interests that have contributed money to organisations such as the US Chamber of Commerce and American Crossroads. Many of the companies that want to see Republicans get elected this year agree with the Tea Partiers about the need for smaller government, less regulation and lower taxes.
But they do not share the more extreme positions of those Tea Partiers who, for example, want to see the Federal Reserve being abolished (and the gold standard reinstated) or to block proposed free trade agreements (which they see as part of a conspiracy to establish a 'world government'). At the same time, unlike the Tea Partiers, many leading business executives support increasing government spending on education and infrastructure as well as on subsidies for small businesses and 'strategic' industries (like the car companies) that are facing intense competition from Asia and emerging markets.
In fact, while the business community supports approval of the FTAs with South Korea and Colombia, it is counting on the US government backing in resisting investment and trade restrictions by foreign governments.
But at the end of the day (next Tuesday, that is), the expected outcome of the midterm elections - an internationalist and business-friendly Democratic president constrained by the even more business-friendly Congressional Republican leaders who will be able to resist the more nutty proposals advanced by Tea Party-backed lawmakers - should be seen as ideal from the perspective of Corporate America and Wall Street, ensuring that - to paraphrase former president Calving Coolidge - the business of America will continue to be, well, business.
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