Tue, Feb 8, 2011, 2:48PM EST - U.S. Markets close in 1 hr 12 mins
On Monday, President Obama, continuing his efforts at rapprochement with the business community, spoke to the U.S. Chamber of Commerce. In the speech, he asked businesses to please, please start hiring Americans and spoke about regulatory and tax reform. "If there's a reason you don't believe that this is the time to get off the sidelines "“- to hire and to invest -"“ I want to know about it. I want to fix it."
In the accompanying video, Aaron Task and I, and James Pethokoukis of ThomsonReuters, discussed the speech and ponder whether it was a good idea for President Obama to pander to the Chamber of Commerce, and whether a deal can be done between business lobbyists and the Republicans and Democrats on Capitol Hill.
Many on the left found it odd that President Obama is love-bombing a group that spent so much money to help defeat Congressional Democrats. But you don't have to be a hard left partisan to question the wisdom of making common cause with the Chamber of Commerce. Comb through the contents of U.S. Chamber Magazine and you'll find material that will anger everyone from deficit hawks (it supported the controversial, budget-busting stimulus plan without any offsetting spending cuts, as well as the recent tax cut deal) to environmentalists (last March, it pushed Congress to do away with limits on offshore drilling), from Cuba hawks (it opposes the continuing embargo of Cuba) to immigration restrictionists (it favors programs that allow foreigners to come work in the U.S.)
But the visit begs the larger question. Does the Washington-based U.S. Chamber of Commerce, which is essentially a lobbying group for large businesses, really know what mix of policies and regulations are best for the U.S. economy and the markets? Do we get the best results by slavishly following their recipe of light regulation, free trade, and low taxes, being tough on organized labor, and avoiding big government mandates for health care?
Consider what has happened in the U.S. economy over the last dozen years., a period that spans Democratic and Republican presidential administrations and Congresses. Big business and the Chamber of Commerce have generally got what it wanted: free trade agreements, deregulation of the financial sector, cuts on capital gains and dividends. Many industries (including the financial industry) were allowed essentially to write their own regulations. The labor unions that are a bane to its members grew progressively weaker. In 2010, just 7.7 percent of the private-sector workforce was unionized, down from about 10 percent in 2000. The field was clearly tilted in favor of big business, big corporations, and away from workers and the smaller entities the Chamber claims to represent. The Chamber, while relentlessly advocating for issues and measures that didn't pass "“ tort reform, more free trade deals "“ by and large got what it wanted from Washington over the past decade.
What did we get for enacting the agenda of big business? A lost decade in the economy and the markets that ended in a tremendous debacle. CEOs and top management generally did well during the oughts, but growth didn't translate into broadly-shared gains. Check out the most recent report from the Census Bureau on income. (Click here, and look at Table A1 on page 33). Median household income in 2009, at $49.777 was below what it was in 1998 ($51,100). In real terms, the typical family hasn't seen its take-home pay grow in 11 years. The poverty rate (same document, table B-1), which stood at 11.3 percent in 2000, drifted steadily higher during the expansion that ran from November 2001 through December 2007 (to 12.5 percent in 2007), and then spiked higher during the recession, to 14.3 percent in 2009.
If only the regulatory burdened were reduced and taxes on capital were lower, the Chamber has long argued, lots of jobs would be created. But here again, big business failed to deliver after big cuts in capital gains and dividend taxes. Total private sector job creation "“ go here and click in "total private" and "seasonally adjusted" "“ has been pathetic over the past ten years. In January 2001, there were 111.6 million private sector jobs. Private sector payroll jobs continued to fall for nearly two years after the recession ended in November 2001. Since peaking at 115.6 million in January 2008, payroll jobs fell sharply during the recession and began growing again last March. As of January 2011, there were 108.03 million private-sector payroll jobs in the U.S. These jobs, meanwhile, were less likely to come with benefits. Table C-1 in the same Census report shows that the percentage of the population covered by private, employment-based health insurance has fallen every year since 2000, from 64.2 percent to 55.8 percent in 2009.
In theory, what's bad for workers (less bargaining power, lower wages, fewer people receiving benefits) should be good for the owners. But again, despite the friendly tax environment, stocks haven't performed particularly well in recent years. As this long-term chart shows, the S&P 500, is still below where it was in April 1999.
There are lots of reasons for the U.S. economy's poor performance over the past decade "“ the rise of China, globalization, poor monetary policy, incompetent regulators, lazy workers, greedy bosses. Take your pick. But the reality is this: by and large, big business has gotten its way in Washington for most of the past twenty years. And the results have been less than optimal. It's common to hear representatives of big business warn that, if Washington fails to enact its agenda, the U.S. could suffer a Japan-style lost decade. The reality: the U.S. has already had its lost decade.
Daniel Gross is economics editor and columnist at Yahoo! Finance. Follow him on Twitter: @grossdm. Email him at grossdaniel@yahoo.com. His columns can be seen here.
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