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Steven Strauss

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Big Business Should Stop Ignoring Washington?

Posted: 05/09/2012 7:37 pm

Shown below is an open letter to the authors of a recent Fortune article: "Big Business should stop ignoring Washington." I would welcome your thoughts:

• Do you feel Big Business leaders are ignoring Washington?
• Do you feel Big Business knows best?
• Any thoughts you would like to share with the authors of the Fortune article?
• Any other comments you would like to share?

------------------
Glenn Hutchins, Vice-Chairman of the Board, Brookings Institution
William Galston, Ezra Zilkha Chair in Governance Studies, Brookings Institution

Gentlemen,

I read with interest your recent article "Big Business should stop ignoring Washington," and thank you for highlighting an important set of issues.

You list a number of challenges facing America, and assert we can remove these barriers to growth if: Big Business stops ignoring Washington, and politicians do what Big Business recommends. While I agree with you about many of the challenges we face, I disagree that our problem is "Big Business ignoring Washington."

Based on the evidence, Big Business isn't ignoring Washington. The U.S. Chamber of Commerce (an umbrella group for America's largest companies) spends more than $60 million per year lobbying Washington. General Electric spends more than $25 million per year lobbying Washington. The top 10 industry lobbying clients (the list is shown below) spend more than $200 million per year lobbying Washington. Indeed, Big Business spends around $3 billion per year lobbying Washington, and employs about 20 lobbyists for every member of Congress.

Big Business gets a good return on the time and money it spends on Washington. On average, for every dollar Big Business spends to lobby for targeted tax benefits, it receives back between $6 and $21 (see 1 and 2 below). As the New York Times noted, one reason General Electric pays no U.S. income tax on its $14 billion per year in earnings is its aggressive lobbying.

Most disturbingly, Big Businesses that lobby distort our regulatory and legal systems. By comparison with non-lobbying firms, firms that lobby face significantly slower government enforcement action in fraud cases (See 3 below).

Leaving aside the question of influence -- why, exactly, should Americans trust the competence of America's Big Business leaders? President Bush's economic policies (which brought our economy to near-collapse) were driven by Big Business leaders. Consider Bush's Treasury Secretaries: Hank Paulson (2006-09, former Goldman Sachs Chairman and CEO), John Snow (2003-06, former CSX CEO) and Paul O'Neil (2001-03, former Alcoa Chairman and CEO). Under the guidance of Bush's Big Business leadership team, U.S. unemployment doubled (from percent to 8 percent), and an annual Federal government budget surplus of 1 percent of GDP became a budget deficit of 10 percent of GDP.

Under Bush's Big Business leadership team, the United States significantly reduced bank regulation, trusting our Big Business leaders to take responsibility for their own actions. America's Big Banks took advantage of this lack of supervision to vastly expand their risk-taking. When things went badly, they needed a $700 billion bailout from the Federal Government, and trillions in support from the Federal Reserve (the largest government bailout in America's history). If it hadn't been for Washington's intervention, a number of our largest financial institutions (for example, Citigroup, AIG) would no longer exist to offer Washington their advice.

The American automobile industry was also incompetently managed, and faced liquidation. No Big Business leader offered the vision and financing to restructure the American auto industry. As you may recall, Washington (specifically, the Obama administration's courage and managerial competence) saved the American auto industry.

Big Business' managerial performance in the 2008 financial crisis isn't an inspiring endorsement of advice from, or the managerial competency of, America's largest corporations.

If you feel I'm being unfair to America's Big Business leaders, I'd welcome hearing your thoughts in more detail.

Finally, you comment: "At a recent conference ... one business leader after another expressed deep frustration with our dysfunctional federal government ..."

Perhaps the next time you hear Big Business leaders complaining about "our dysfunctional federal government," ask them how much they spend on lobbying Washington, and whether their vast lobbying dollars help solve America's problems or just further their own private interests? I respectfully suggest that our Big Business leaders' vast spending, on lobbying for their private interests, contributes greatly to making our government dysfunctional.

My point is not that America's Big Business leaders are solely responsible for our current problems -- they aren't. But they've certainly played a role in creating these problems.

To quote President Kennedy: "Ask not what your country can do for you; ask what you can do for your country."

Perhaps it's time America's Big Business leaders stop asking what Washington can do for them, and ask instead what they can do for their country.

I look forward to hearing from you and participating in a constructive discussion about how we can make America a better place.

Regards,

Steven Strauss

About the Author: Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at Harvard University for 2012. He has a Ph.D. in Management from Yale University and more than 20 years private sector work experience. You can follow him on Twitter at: @Steven_Strauss

Sources: All campaign and lobbying data is from www.opensecrets.org, unless otherwise noted. Data on unemployment rates, budget deficits, etc., is from www.wolframalpha.com, unless otherwise specified.

Appendix: Listed below are 2011 lobbying expenditures of the top 10 corporate lobbying clients:

1. US Chamber of Commerce - $66.4 million
2. General Electric - $26.3 million
3. Blue Cross/Blue Shield - $21.0 million
4. ConocoPhillips - $21.0 million
5. American Hospital Assn - $20.5 million
6. AT&T Inc - $20.2 million
7. Comcast Corp - $19.3 million
8. Pharmaceutical Research & Manufacturers of America - $18.9 million
9. National Cable & Telecommunications Assn - $18.5 million
10. Boeing Co - $16.1 million.

 

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