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.
Follow Steven Strauss on Twitter: www.twitter.com/steven_strauss
Charles Gasparino: Why I'll Be Sitting Out the Facebook IPO
Jeff Mason: What States Can Learn from Michigan's Recovery
 |
 |
|
| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
and super pacs illegal. These legislators no longer vote their conscience or even in the interests of their constituents, they vote for the next big campaign contribution.
And can you say exactly what would have happened without TARP? No, you can't. Let them fail.
"As you may recall, Washington saved the American auto industry."
And can you say exactly what would have happened without the auto bailouts? No, you can't. Let them re-organize under existing laws, instead of throwing rule of law to the wolves.
"Big Business gets a good return on the time and money it spends on Washington."
So why don't you put the blame where it belongs, on the bribe-takers? If you're an honest business, and your competition pays off politicians as a means to profit, do you choose to remain honest and go out of business, or do you choose to play the game the corrupt politicians have set up? Corporations are not immoral, they are amoral. Politicians are not amoral, they are immoral.
Perhaps it's time America's politicians stop asking what Big Business leaders can do for them, and ask instead what they can do for their country.
If some corporations reap great rewards by pushing those boundaries, it is up to lawmakers to push back if they don't want bad behavior rewarded. If lawmakers decide instead to FURTHER reward and incentivize bad behavior, does a corporation "commit suicide" by not competing at all, or does it follow the pack, and risk suicide by taking excessive risk?
There are internal mechanisms within corporations to prevent excessive risk. But what if lawmakers provide incentives for profit that are so great, even those internal mechanisms fail? To the extent corporations are like people, they are just as subject to "moral failings" in moments of temptation and weakness.
http://abcnews.go.com/TheLaw/story?id=6021608&page=1#.T6vKJeiJd2A
Who makes the laws? Lawmakers. If lawmakers let the corporations make laws, do you really place blame more greatly on the corporations? If someone slips a cop a hundred to look the other way, and the cop takes it, who is the greater wrongdoer, the one who feels he has nothing to lose, or the one sworn to uphold the law?
We do, however, know in GENERAL what would have happened.
Domestically (in the US) there would have been a vast wave of human suffering.
I'm assuming your in favour of letting that happen.
The whole reason the housing bubble occurred was because the Fed purposely created the conditions for it? Why? Because we didn't want to face whatever suffering was left to endure after the dot-com bubble burst. Putting off pain in the present does not mean it won't return in another form, only worse, at a later time.
We set ourselves up for the failure of Bretton Woods in 1971, predicted over a decade in advance. Since then, we have embarked on monetary and fiscal policy that puts our very currency at risk. (And further enriches the elite, BTW.) Every decision that increases that risk is made in the name of reducing pain NOW. Is it really fair to reduce our own pain by potentially inflicting great pain on future generations?
Washington DC and big business have been orbiting one another in an ever-tightening spiral for longer than I can remember. I shudder to think what will happen if they finally draw into such a tight inward spiral that they merge. To me, that's a nightmare. What's worse, I can't think of a way to stop it. The only alternative to corporate power that I can think of is the power of organized labor in the form that it once existed. Regrettably, that force no longer exists, and in it's abscence, I can't think of anything other than a mob of villagers with torches and pitchforks that could stop the inevitable fusion.
Our Political system is dysfunctional because of all the corporate lobbyist and Citizens United campaign money going into our political system.
Secretary Hank Paulson as Ceo of Goldman Sachs is a perfect example. In 2004 when he was the Ceo of Goldman Sachs he was able to get the SEC to agree to release the major Wall Street investment houses from the “net capital rule; this rule required brokerages to hold reserve capital that limited their leverage and risk exposure.
Then in 2006 Hank Paulson accepts the Sec.of Treasury position.
So, with the 1999 deregulation on the banks and no net capital rules, the stage is set for a very big crash in 2008.
Yes, it is time for them to start asking what they can do for their country. It's called being a good corporate citizen.
When one may pay out over two million dollars to presidential and Congressional campaigns, the U.S. government is virtually up for sale.
John W. Gardner