Strengthening Constitutional Self-Government

No Left Turns

Economy

The Worst Kind of Anti-Business

Ezra Klein's suggestion that President Obama is pro-business reminds me of this classic exchange in When Harry Met Sally:

Harry Burns: There are two kinds of women: high maintenance and low maintenance.

Sally Albright: Which one am I?

Harry Burns: You're the worst kind; you're high maintenance but you think you're low maintenance.

Sally Albright: I don't see that.

Harry Burns: You don't see that? Waiter, I'll begin with a house salad, but I don't want the regular dressing. I'll have the balsamic vinegar and oil, but on the side. And then the salmon with the mustard sauce, but I want the mustard sauce on the side. "On the side" is a very big thing for you.

Sally Albright: Well, I just want it the way I want it.

Harry Burns: I know; high maintenance.

So too does the President want business to do things his way.  He's happy to work with big businesses if they play ball.  But that's not what the market economony, or economic liberty is.

Categories > Economy

Discussions - 14 Comments

First and foremost, Obama is pro-Obama. All else is secondary.

Second, current corporate profits are based in large measure on slashed expenses. Most of that has been in the form of reduced workforce and a working down of inventory. The stock market would be responding more to signs of real corporate growth. The market is at best slightly up, but very choppy.

Finally, there is way too much structural uncertainty -- uncertainty over marginal tax rates; uncertainty over regulatory impact; uncertainty over the effects of government and consumer debt; uncertainty over political issues such as Iran and instability elsewhere.

Liberals do not like to attribute much effect to uncertain risk ... probably because in general liberals tend to seek out enclaves that protect them from such things: universities, government, foundations, etc. In short, they don't really know much about uncertainty of risk.

When there develops a sense of predictability to risks, then things will open up. Risks can be managed to if the risks are understood. Risks that are perceived but not understood create a natural tendency to retrench and protect.

I love to see under the numbers of the uptick in corporate spending. My sense is it's based mostly on a rebuilding of inventory "just in case". In short, it's moderate insurance policy against missing a true recovery.

True investment? Not yet. I don't sense that at all.

I think Klein is absolutely right. She is right that Obama has came out with tax cuts. She is right that business equity has come back. She is also probably right that employment is not comming back anytime soon. So she is right that conservatives can run a sort of populist theme about the economy. Big Business is back, but the gap between big business sentiment and small business sentiment has never been bigger. I think Obama has been good to the auto industry. I think his stimulus has reinflated the oil market, and put airlines who hedged in a decent shorterm position. I also think some of the uptick in corporate spending has been orders for new planes from Boeing, or more diesel engines from Cummins. Rising oil+Obama's words are worth a higher p.e. multiple in the "green" plays. Obama is also really good for the gun industry, fear that guns will be banned has helped to spur demand.

The truth of Obama being good for business I think is best understood by bullish folks like Jim Cramer. His motto: There is always a bull market somewhere, my job is to help you find it.

Sector by sector Cramer has opinions and his view of BAC(Bank of America) and F(Ford) at $4 were positive. He is still cautious bullishly (thinks you should certainly ring the register and take some profit if you were in Bank of America or Ford at $4.)

Harvard educated, but a generally likable guy especially for a democrat it is always interesting to hear his take on the market followed by that of Kudlow.

Technically I wish Kudlow and Cramer still had a show(because I never watched it but would now)

Cramer has actually articulated two different Obama's a negative anti-business populist Obama, and a positive pro-business optimistic Obama.

In Obama's defense I think most folks intutively know that Obama himself can't praise the economy and defend his policies as ones that worked in part because the unemployment and general macro-picture is lousy, and folks are pissed. Bush ran into a lot of problems with this whenever he praised the economy (and it really was no good after 2001), while at least under Bush the employment picture was better, a lot of folks figured he was out of touch. I really don't know what kind of tone Obama can strike that won't sound out of touch especially with his base. I really think Obama is in trouble in part because while I can appreciate Cramer I don't know many democrats who aren't in the sort of Obama is pro-business he betrayed us type mentality. That is if you read Klein you can agree with him, and if you are pissed off at the economy conclude that jobs are gone but 1.37 trillion in profits this quarter and 2 trillion lying around represent evidence of a betrayal.

To the right crowd Klein can sell Obama as not anti-business, but if I am the right crowd for finding that argument quasi-sensible then it doesn't help him much with more proggressive democrats who actually want more furry at BP and Goldman Sachs and corporations generally. If Klein is right about what the recovery will look like then his argument doesn't help much. I mean it is impossible to argue Klein and the moderate Jim Cramer position while channeling Ragin Cajun Caville. the trouble is being tugged to try. I mean, "its the economy stupid" but try to flesh that out and I think you find democrats like Sally. I have no clue how Obama should or will deal with Sally.

While I side with Cramer in a more ideological way I think Kudlow is right to continue singing the Milton Friedman "Obama is anti-business" line. In this sense you are also right that that's not what the market economony, or economic liberty is.

Milton Friedman can't really speak on Obama directly, but Kudlow often speaks for him. Here is what he says in an article entitled "The social responsibility of business is to increase its profits"

"When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system”, I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are — or would be if they or anyone else took them seriously -preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades."


Interestingly the for profit-education system has as a sector had a nice bull run, but is back to temporary disfavor. Nevertheless perhaps in part because its product is education, its business school(U of Pheonix) like many other MBA programs advertizes social responsibility.

The plausibility of Obama being pro-business depends in part upon accepting this vision for business that folks like Friedman(Kudlow) would consider to be socialism.

John Lewis, can you please boil down again why you think President Obama is pro-business? I gather: the stimulus, "tax cuts", auto industry bailout, and the tongue-in-cheek gun industry uptick.

You seem to be serious. However, profitability went up because businesses cut employees while productivity rose, not because the economy is good (I believe the GDP had 1% growth this past quarter). No one will hire because of a) the gathering storm of tax hikes (Bush tax cuts will expire, possible cap-and-trade legislation, tax hikes on wealthiest 1 - 2%, etc), b) the mysteries of Obamacare (which, admittedly, passed before anyone knew what it entailed - "We have to pass the bill so you can find out what is in it") and which has caused employers - especially small businesses - to freeze hiring lest they suddenly have to buy their 2 dozen employees a health care plan, etc), c) the utter unpredictability of an administration which arbitrarily bails out some businesses and not others, illegally favors unions over shareholders, and postulates aloud about doing it again for other industries.

I would really like to hear your explanation as to why the handling of the GM bailout was a positive good. I purposely over-simplify, but I assume it's something like: GM going backrupt = bad, therefore GM bailout = good.

And for the record, the "pro-business" record of this administration, which you admit men like Friedman would consider socialism, is the same type of "pro-business", government-big business coziness that Hayek saw in National Socialism.

P.S. Great scene. "When Harry Met Sally" is the is the second greatest romantic comedy of all time.

Why do we care more about free markets than free men?

What's the difference (seriously)?

You refer to Klein as "she." However, Ezra is a masculine name. Check the Bible. In any event, Ezra Klein is a man.

You also need a line editor. Maybe you could split the cost with Pete Spiliakos.

You are right. I suppose it makes my bible literacy worse to admit that I confuse Ezra and Esther. I didn't bother to read the article carefully or else the picture would have been a dead giveaway. I probably also hurt his vanity in agreeing with him and not knowing or really careing about his sex.

You know Obama, she is good for business.

Michelle Obama that is, her choice of dresses on The View certainly helped Donna Rico.

Oprah is good for business in the same way, you catch the attention of Oprah and things are good.

A large part of the Obama good for business or bad for business debate is a matter of tone. On this front it is something I am more tongue in cheek about.

GM going bankrupt would have had massive spread effects, parts suppliers, welfare rolls in Michigan, home values. In a sort of purist way the GM bailout was bad, but when you figure in the welfare system and safety net shock, it looks different. Also maybe Ford goes under without a GM bailout(because of decreased economies of scale from parts suppliers)

I think it was good for the state of Michigan. I actually think you could drop a lot of stimulus in Michigan without causing inflation. What is good for Michigan is probably good for Indiana and Ohio. I think deflation is still a concern in Michigan and Ohio and Indiana.

I don't mean to step in between the Phillips Curve Keynesians who say that high unemployement reduces inflation and the monetary school that says that inflation is caused by too much money chasing too few goods. But it seems to me that the GM bailout helped the unemployment problem and also offset this by putting out more goods that money could chase.

On the "social ends" front GM is comming out with the Chevy Volt.

Ultimately the energy department and the government is saying that spending on electric is good. So the Obama administration is good for TSLA. You put in republicans or deficit hawks and the correct play is to short the stock, because this is a company that is going to need sizeable government help for a while.

So some part of Obama being good for business is simply a question of identifying what sorts of bubbles his "social ends" business agenda is inflating.

I mean to say that Obama is good for business in the same way that you could say that Bush was good for business.

Here is Bush in 2002: "You see, we want everybody in America to own their own home. That’s what we want. This is — an ownership society is a compassionate society."

Predicatably from 2002-2007 you have the Bush induced housing bubble. Its really interesting to look at Case Shiller, but really you get more feel if you look down to how things are different in different areas.

What the heck is happening in San Jose up 17% this month? Silicon Valley is certainly a bright spot in the economy.

When I try to think of Obama being good for Business I try to think of what he is re-inflating.

In terms of the Hayward post on Detroit vs. Las Vegas I want credit for picking Detroit(which in addition to case shiller improvement is one of the few places also seeing increased retail sales.) You can find spots in the US economy that Obama is reinflating, so you can I think say that Obama is pro-business.

I think you can also look to areas that Bush inflated that Obama is not de-inflating, and these are a lot of the military plays. Basically right now Obama is doing everything in his power to inflate certain sectors in the green sector, in technology and in areas that will contribute to increasing exports. Albeit a lot of state and local governments that inflated in the Bush years are deinflating, and Obama and democrat mouthpieces like Krugman want to keep them inflated. Every cop and teacher you keep hired is someone who spends money and boosts demand. It is a morgage payment made, a 401k contributed to, a new car purchase...excetera.

You want to own a store in a city where the employees are not being cut(public or private) So if you are in San Jose you are happy...If you are in Orlando FL you are miserable. To the business owner public employee money spends the same as private employee money.

So if you agree with Dick Cheney that deficits don't matter...it is also not a stretch to think that Obama is pro-business, and by pro-business you really end up meaning pro-deficit, pro-stimulus.

I also think that from a pro-stimulus perspective Obama shouldn't let the tax cuts expire. This is certainly anti-business. More money in the hands of the people is certainly pro-business in the same way that bailing out public sector employees on the state and local level is. One difference being that the state and local employees have to work for it (and no matter what the incompetence or waste level is...generally we agree that more teachers and police=good). At this point in time the under-employment from high marginal tax rates while real doesn't seem as credible.

The problem is that we know that the pro-business Bush or the pro-business Obama are going to spawn the real anti-business politicians of the future.

This is what Pete knows and why he is cynical about the political prospects for an anti-business Paul Ryan. He knows republicans can't sell it.

Under Ryan we will have a VAT tax which will cut consumer demand, while offsetting this partially by preserving something that looks like the bush tax cuts, but Pete is also worried because Paul Ryan will deflate healthcare.

What we know about ObamaCare is that it will be expensive...but also that it is pro-business in that it artificially inflates demand(healthcare sector) The effect of the The Ryan Plan will be to deinflate demand. In the short run folks will be dumped by employers, and have to make a personal decision about how much to buy(they will buy less)

That is the anti-business politician will be the one who cuts the deficit and puts on austerity measures that work to deflate everything that was previously artificially inflated. He will raise taxes and cut spending, and seek to eliminate waste and moral hazzard. He will point out that 60% of americans pay less in federal income taxes than they receive and thus were pre-VAT beneficiaries of a bubble.

In the world of a Robert Reich, or a Krugman, it has to be Paul Ryan who is anti-business and Obama who is pro-business.

Obama could be more pro-business, he could agree to extend the Bush tax cuts, but if he does so he is just forcing a future Paul Ryan to be more anti-business. Anyone who reads the CBO knows that at some point we will have higher taxes and less spending. At that point we will really have an anti-business president, but then it will be the fault of pro business Bush and Obama.

You really need to condense your thoughts . . .

I'm not sure where you're getting your information on Paul Ryan. Could you please provide a link? I'm interested to see who wrote it and why they think he's anti-business and what's going on with the VAT tax you mentioned. I know they Republicans are not backing his plan just yet, so I'd be interested to hear more about it.

I think the GM bailout was horrible for Michigan, the country, and ultimately for GM. A company with the infrastructure and industry know-how of GM doesn't simply cease to exist when they go bankrupt, and believing that is surprisingly naive. The problem with GM is that their cost of doing business is ridiculously high thanks to their legacy costs and the unrealistic wages they pay to their employees. Bankruptcy would have allowed them to restructure, re-negotiate their union contracts (or just rid themselves of the UAW), and become a competitive auto-maker once again. Here's an article on the Volt:

http://www.slate.com/id/2262229

Like GM, the Volt will only survive on government handouts provided by American taxpayers (to include GM's competitors - hurray Land of Opportunity!).

I'm very surprised to see you so open to an economic policy at the heart of which is government spending. I took your for a sort of economic libertarian. What you're praising is a sort of shadow economy which exists outside of and at the expense of our once great free enterprise economy. Green energy projects, universal health care, GM, Fannie Mae and Freddie Mac, etc can only exist at the expense of others - they're unproductive sink holes of money.

The current situation is untenable: eventually all these silly vampiric projects of the Left will choke out the small business owners who create 70% of new jobs. The major problem with this, as Hayek identified, was that an economy is too vast and complex for a small group of men to run.

The Obama Administration is not pro-business because they continually bail-out businesses and institutions like GM, FannieMae and FreddieMac, the mortgage market, etc; they're anti-business because they impose a stiffling amount of expenses, regulations, and costs on small businesses and healthy large businesses, while tapping into those same institutions to keep the failures afloat.

Read Pete's links for more information on Ryan.

“The problem we have had as a party is we have often confused being pro-market with being pro-business."-Paul Ryan.

Over at the John Locke Foundation I found a Dr. Roy Cordato who says it best:

"I've been hearing a lot of discussion by talking heads about whether or not Obama is anti-business. He is not. He is anti-free market, anti-personal liberty and anti-entrepreneurship, but not anti-business. Progressives never have been anti business. In fact, they have always been in favor of a cozy relationship between big business and the government--a "you scratch my back and I'll scratch your back" kind of relationship. This is the definition of economic progressivism. Hasn't anyone noticed that he has been subsidizing some of the biggest businesses in the country if not the world since the day he took office? You don't subsidize what you're against. If anything his actions have proven him to be anti-consumer not anti-business."

So if you want the condensed proposition you will get it elsewhere.

The problem is that focusing upon the ways Obama is pro-business and anti-market makes too much of a partisan distinction. On a pragmatic level I would rather simply identify the things that Obama has subsidized and inflated.

An additional problem when it comes to the abstractions necessary to describe markets, is that it is more realistic to speak of actual market: Wall Street, or a concrete business that Obama(rather the energy department) is pro: Tesla.

That is in a real world where american capitalism is somewhat crony...the extent largely being dependent upon the sector.

That is it is easier in some ways to talk of the ways government is pro-business. I don't know how you can look at the airline industry for example...It might never have existed without world war I or world war II, war in Iraq and Afghanistan feeds the defense and aeronautics industry. We aren't exactly following the Europeans with Airbus. But it is incredibly naive and unrealistic to think that government spending and demand doesn't work to create economies of scale and support entire industries that may or may not exist otherwise. I mean if we look at what Bush accomplished with the Air Transportation Safety and System Stabilization Act. The Treasury didn't lose on this deal we got money back on the loans, but (we never got back the tax cut.)

In the U.S. airlines are more "deregulated" than they are in other countries. Still you have to kind of broadly think of this industry as subject to government control for economic, political and safety concerns.

In addition you have state and local governments willing to provide corporate welfare to large companies (be pro-business) because they know that these will provide jobs, bring in infrastructure, tax revenue, and provide service to an underserved area. That is if you are big enough you can bargain about your taxes and regulation.

Why are republicans backing away from the Ryan Plan...because it feels drastic, its one thing to talk the libertarian talk and that is fine if you are writting for the John Locke Foundation.

While I think Paul Ryan is comfortable being anti-business in the sense that Obama is pro-business, a lot of republicans are in the tank to certain business realities even ones who didn't go as far as Ted Stevens.

But Paul Ryan along with Jim Jordan and Ron Paul are each in different and potentially "scary" ways pro-market(Chicago or Austrian micro-economics).

The horrible part of all this is that I don't think good things will really happen under an eventual Paul Ryan (a politician who confronts the deficit by taking austerity measures.)

I don't really think you can cut government spending without pain. I am a libertarian who thinks that he lives in an inflated keynesian reality where deficits don't matter. I don't see how you stop being "pro-business" in the proggressive sense without pain.

I just don't know how you can raise taxes and cut spending without causing severe pain... but while the Paul Ryan of today is too "austere" to be embraced by republicans with pro-business and populist worries(The VAT tax will hit the poor, and those who spend with greater velocity and thus prop up demand.) The Paul Ryan of tommorow will have to be even more anti-business.

In this sense Paul Ryan=someone who confronts the deficit.

You see as long as you can run a deficit the "silly vampiric projects" are actually stimulus. They don't choke out small business but actually keep folks in coin so they can spend at small businesses. It is the untenability of the current situation, that makes the projects vampiric.

"Its the deficit stupid."

Its easy really...to be pro-business you have to be pro-spending and anti-taxes, to be anti-business you have to be anti-spending and pro-taxes.

What Paul Ryan wants to do can't be done without pain, and there really aren't bullets that republicans can credibly sell without lying. Ryan will means test and ration medicare. He will hurt the middle class with his VAT tax. If you are hispanic, white, black, elderly you would have to be stupid to vote for Paul Ryan. If you are the 60% of folks who currently pay less for big government than you receive in bennefits you would be an idiot to vote for Paul Ryan.

No Republican wants to be anti-business, anti-deficit.

In the short run given our recession they might be right. I mean if we are going to be Keynesian about it, maybe we can fight the deficit by reducing gov spending and increasing taxes when employment recovers a bit and inflation is a worry.

Also there is the very real possibility that Ryan is already sugar coating and ideologically tilting the deficit problem. It is quite possible that we will need a higher Vat and forget about the Bush tax cuts and on top of this more rationing in all the entitlement programs and subsidies.

Andrew, I'm not saying that the two are unconnected. Only that free markets, in the order of things, seems to be of less significance for several reasons.

In the first place, the terminology doesn't quite capture the hearts and minds of the American man. "Free markets" is an idea which, while it smells good to him, does not seem to come quite so close to home. Snake-oil salesmen can always make the pitch that free markets are not the best economic idea for sale, or that some alternative to free markets would be in his self-interest (whether true or untrue).

But individual freedom both includes and reaches beyond free markets, into the freedom of conscience, of soul, and of body. Fighting for free markets does not assure such freedom; China is a case-in-point. The distinction between economic and political freedom is important, because it is untrue that the latter does, or should, follow from the former. The unfree man sees economic freedom as a kind of base consumerism, and comes to understand freedom itself as such. Unfortunately, there are Americans who think that the ability to buy stuff they want comprises the entire panoply of freedom.

If our labor is spent unwisely because unaware of the difference (as you demonstrate), we may end up with a citizenry content with Caesarism veiled in freedom, i.e., content with material promises.

Leave a Comment

* denotes a required field
 

No TrackBacks
TrackBack URL: http://nlt.ashbrook.org/movabletype/mt-tb.cgi/15543