The stupidity of the businessmen

Benjamin Zycher Contributor
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The joys of summer are upon us, foremost among them the approaching Congressional recess in a mere month. As Mark Twain might have put it: Freedom is spelled “Congress out of session”. It is a grim truth that enormous damage still could be done in this remaining time, but the forthcoming departure for home districts and states offers hope that the mischief will be limited and that the elections this fall will restore some measure of sanity to federal policymaking.

And there arise grounds for hope on another front as well: That the business lobby—in particular, the Business Roundtable, a group of smart CEOs who for many years have banded together to schmooze the Beltway power brokers—finally has seen through the empty promises and worthless compromises that define the nation’s capital. The Roundtable last week issued a report complaining about all the Obama/Democratic policies both enacted and under consideration that would “have a dampening effect on economic growth and job creation.”

This, of course, is the same group of bigshots that was perfectly happy last year and much of this one to support the drive toward central planning in health care, to hop onto the global warming regulatory/tax bandwagon, and to remain silent on increased taxation of dividends, on increased trade protectionism, on the card check scam for the unions, on the absence of tort reform, on exploding federal spending and debt.

And for what? Well, they were worried about another White House proposal to increase taxation of U.S. multinational corporations, already subjected to tax rates among the highest in the world. If only they would cooperate with the White House on health care reform and all the rest, they were told, maybe this tax proposal would be dropped.

And cooperate the smart businessmen did. Central planning in health care? A boon for the economy: a sure-fire method with which to control costs, provide relief for the emergency rooms, cover everyone without rationing, and forge public/private “partnerships.” Except for the small detail that all of those nostrums are a mirage, the cost control foremost among them, meaning that the Beltway needs the money—a cool $14 billion—that this “deal” would force spending addicts to forgo.

Fat chance. The health care bill passed, and without breaking stride the administration—specifically, OMB Director Peter Orszag—promptly thanked the smart businessmen for their support and for the $14 billion in higher taxes that, frankly, were needed to help pay the bill for health care reform. Well, did we not have a deal, asked the smart businessmen? Nope. Gee, we never made an explicit promise, said the White House, we can’t control what Congress does in any event, you don’t expect us to veto crucial legislation later this year just because of this one tax provision, do you, and, anyway, the $14 billion will hold the deficit down and make you smart businessmen better off. Be a patriot.

And why should the smart businessmen have expected any other outcome? Henry Waxman and the other Congressional barons had no incentives to honor this deal. And let’s face it: Neither did the White House. Unlike businesses, which lose customers if they renege on their promises, politicians face not customers but instead interest groups, which can be played off against each other; ironically enough, the smart businessmen failed to understand the crucial role of incentives in political decisionmaking. Perhaps now they have come to understand that their best long-run strategy is to stand for principle—the defense of free markets, capitalism, and limited government—even, or especially, in the face of short-term political pressures and the resulting temptations to engage in various machinations.

Or maybe they haven’t. After all, there always is another smart businessman who thinks he’s smarter than those who have gone before. And all those meetings on Capitol Hill, at the White House, perhaps with the President himself: It’s all oh-so intoxicating, it’s better to be at the table than on the menu, and why not be part of the process?

What is fascinating is that the American people, as demonstrated by the polls, have not bought the Obama/Democratic snake oil, even as the smart businessmen rushed to line up for a rubber-glove exam. Given that the promises of politicians are not renowned for reliability, one would have thought that they could have seen all of this coming. And one would have been wrong.

Benjamin Zycher is a senior fellow at the Pacific Research Institute. Email: benzycher@zychereconomics.com.