Big business's hypocritical country-club nonsense
Ivan Seidenberg is chief executive of Verizon Communications and the current chairman of the Business Roundtable, the authoritative voice for big business in the United States. So when he showed up at the Economic Club of Washington this week to blame the Obama administration's economic and regulatory policies for the lack of job growth and business investment, it drew a lot of attention -- and a lot of nodding heads from his big-business buddies.
If you actually read his speech and the accompanying 49-page bill of particulars, however, it would become clear that Seidenberg is anything but the economic statesman he fancies himself to be. Rather, he revealed himself to be nothing more than a corporate hack peddling the much-discredited country-club nonsense that what's good for corporate cash flow is good for America. His presentation was so riddled with hyperbole, junk economics and logical inconsistencies that it will be a long while before anyone in Washington takes him, or the Business Roundtable, seriously again.
It should hardly be a surprise that the business community is feeling a bit put upon these days. After all, it is coming off a glorious decade in which business lobbyists not only set the agenda for the White House and Congress but also headed many of the economic agencies and drafted the most important legislation and regulations. It is only now that the rest of us are having to clean up the mess left behind by this anti-tax and anti-regulatory orgy -- the enormous trade and budget deficits, the financial crisis, the environmental disasters, runaway health spending, and the widening gap between the rich and everyone else.
Rather than applauding the Obama administration for finally stepping up to face these problems, however, Seidenberg served up tired old nostrums about the government "reaching into virtually every sector of economic life" with "one-size-fits-all" regulations designed to "micromanage industry" while saddling business with burdensome new costs. Although he doesn't have the courage to come out and say it, it is clear Seidenberg believes we were better off when the Securities and Exchange Commission could investigate Bernie Madoff and find nothing amiss, when the Office of Thrift Supervision considered it a great innovation when banks began to provide home loans to borrowers with bad credit scores requiring no money down or documentation of income, and when the Minerals Management Service worked so cooperatively with the industry that oil drillers were allowed to fill out their own inspection reports.
One of the themes running through Seidenberg's tirade was that any dollar in taxes collected from any business, or any dollar of increased operating cost required by regulation, is a dollar that would have otherwise been invested in new jobs, new equipment or growth-enhancing research and development. This fallacy is contradicted by economic theory, to say nothing of recent experience.
As any chief executive knows, businesses hire workers when they have profitable work to do and invest when they have profitable investments to make -- right now it is primarily the lack of such opportunity that weighs on the economy, not the prospect of a modest increase in taxation and regulation. In theory, some businesses might be constrained from hiring or investing because they can't find the money, but the latest data indicate that non-financial companies are sitting on record amounts of cash and liquid assets, while their lenders are sitting on record levels of bank reserves.
Moreover, we now have plenty of experience to indicate that even when taxes and regulatory costs are cut, companies are just as apt to use the money to increase compensation for top executives, or pay out higher dividends to investors, or mindlessly bid up the price of other financial assets, as they are to invest in genuine growth-enhancing new products and processes. Nobody should understand that better than Seidenberg, whose industry managed to vaporize hundreds of billions of dollars of other people's money during the telecom bubble of the 1990s.
What's most striking about Seidenberg's rant is how clearly it reveals the self-serving hypocrisy of business leaders.
They demand that budget deficits be controlled but don't offer a single proposal for cutting spending, all while touting a laundry list of tax breaks they want preserved along with big new cuts in corporate taxes.
They demand that something be done about runaway health-care costs but then reject just about every solution that health experts have come up with: limits on the favorable tax treatment of health insurance, a reduction in lab fees or an independent commission that might reduce what Medicare pays for drugs. They even oppose trying to do something about the obesity epidemic through food labeling or a small tax on sodas.
They demand that the government scrap programs designed to prevent foreclosures on homes but want new tax breaks for commercial real estate developers to prevent foreclosures on office building and shopping centers.
They demand a green light for new free-trade treaties but offer no help for workers whose jobs will be lost because of them.
They want greater reliance on market-based solutions but not a cap-and trade system to deal with global warming or congestion pricing to deal with flight delays at busy airports.
They want a sturdier, more transparent financial system but demand that big companies be allowed to continue trading derivatives privately, outside of the regulated exchanges, exempted from margin requirements that are designed to prevent a market collapse.
They claim to run their companies on behalf of shareholders but demand that these same shareholders not be given any right to nominate directors, posting the preposterous argument that it will somehow "reduce efficiency, stifle competition and deter capital formation."
The glaring omission from Ivan Seidenberg's big Washington speech was any acknowledgement that the current economic crisis results from the failure of the business community to wisely allocate capital, protect the interests of investors and consumers, and create a supportive climate for sensible regulation and prudent fiscal policy. Blaming it all on Barack Obama -- that took real chutzpah. Leadership it was not.