Barack Obama spoke to the Chamber of Commerce today, part of his push to repair ties with the business community after two years of rapid regulatory expansion and hostility from the White House. How did he do? It depends on whether the Chamber expected conciliation from Obama, or more haughty dictates on how they should spend and invest their money. If they came for the latter, well, they weren’t disappointed. The first clip from the Associated Press hits a couple of money quotes from Obama’s speech (full text here):
But as we work with you to make America a better place to do business, ask yourselves what you can do for America. Ask yourselves what you can do to hire American workers, to support the American economy, and to invest in this nation. That’s what I want to talk about today – the responsibilities we all have to secure the future we all share. …
The last barriers we’re trying to remove are outdated and unnecessary regulations. I’ve ordered a government-wide review, and if there are rules on the books that are needlessly stifling job creation and economic growth, we will fix them. Already we’re dramatically cutting down on the paperwork that saddles businesses with huge administrative costs. We’re improving the way FDA evaluates things like medical devices, to get innovative and life-saving treatments to market faster. And the EPA, based on the need for further scientific analysis, delayed the greenhouse gas permitting rules for biomass. I’ve also ordered agencies to find ways to make regulations more flexible for small businesses. And we’ve turned a tangle of fuel economy regulations and pending lawsuits into a single standard that will reduce our dependence on foreign oil, save consumers money at the pump, and give car companies the certainty they need.
Obama got a little more direct in this clip from Real Clear Politics:
Of course, your responsibility goes beyond recognizing the need for certain standards and safeguards. If we’re fighting to reform the tax code and increase exports to help you compete, the benefits can’t just translate into greater profits and bonuses for those at the top. They should be shared by American workers, who need to know that expanding trade and opening markets will lift their standard of living as well as your bottom line. We cannot go back to the kind of economy – and culture – we saw in the years leading up to the recession, where growth and gains in productivity just didn’t translate into rising incomes and opportunity for the middle class.
Wasn’t that the economy that created 5% unemployment? The one that created jobs in a deluge after the relatively mild post-9/11 recession? Speaking of gains in productivity, it has “unexpectedly increased” in Obama’s own recovery, according to Bloomberg, thanks to pressures from unemployment. On one hand, that’s good news for the jobless, as it may mean that US businesses are on the cusp of a new hiring effort — or it just might mean that high unemployment allows businesses to demand more productivity for the salaries paid.
The “must be shared” line misses the point. First, many businesses have profit-sharing and stock-purchase plans in place, and the defined-contribution retirement plans that most private-sector workers have rely on company contributions, which also rely on profitability. But even more so, the purpose of business is to make money for its investors, not to act as full-employment laboratories to make politicians look good. If government makes the cost to hire too high through regulatory expansion, the private sector will respond with fewer jobs and tighter productivity. That’s not a moral failure but simply the consequence of free markets and investor choice.
The problem in America isn’t a lack of desire to create jobs, or greedy misers hoarding gold coins in a home vault. Obama’s Scrooge McDuck assumptions are flat-out wrong. Investors make money when they can invest and take risks with at least some hope of reward; they want to invest and create new enterprises, products, revenue, and as a consequence jobs. Overregulation reduces the chances of success and therefore lowers the appetite for risk — at least in the American market.