The Entrepreneurial View                                                            

Obama vs. Business

by Raymond J. Keating

The Obama White House claims that it is not anti-business. And in recent weeks, it has reached out to various parts of the business community to say that it wants to hear policy ideas.

For example, according to a Reuter's report, in a recent letter to the Business Roundtable, White House adviser Valerie Jarrett wrote, "While we may disagree on some issues, we have an open door policy and are always willing to consider input and ideas from everyone, including the business community."

In addition, the White House recently announced that it wanted to hear from businesses on ideas for fixing or streamlining federal regulations that serve as obstacles to job creation. As quoted in The Wall Street Journal, White House economic adviser Jared Bernstein said, "We're trying to incentivize and bring private capital in from the sidelines. Ultimately, it's the purview of the private sector to create the job growth that's going to lift us."

That's all nice. But policymaking is not about nice-nice talk. Instead, it's about the economic realities and consequences of the policies proposed and implemented.

So, for business, it is - or at least should be - about the bottom line. It's not about getting invited to the White House. Nor is it about political rhetoric about how important businesses - especially small businesses - are to the economy. Instead, the question is: How does policy actually affect profits, the costs of starting up and running a business, the incentives for investing and creating jobs, and the health of the overall economy?

Indeed, pro-business declarations from this White House are rich in irony. While Bernstein speaks of incentivizing private capital, the actual policies proposed and supported by the Obama administration clearly work against business investment and job creation.

Let's quickly review the big issues.

On taxes, President Obama's budget priorities feature increased personal income, capital gains, and dividends tax rates on upper income earners, as well as advocating re-imposing the death tax after it expired at the start of 2010. Now, how exactly does raising taxes, and thereby reducing the returns on working, investing and entrepreneurship jibe with incentivizing and bringing private capital off the sidelines? Of course, it does not. That is especially the case given that those upper income earners include investors and many small business owners.

Then add into the mix that the historic and massive government spending binge that started under President George W. Bush and has accelerated under President Obama has jacked up federal budget deficit and debt levels to unprecedented levels. The President's tax and budget commissions seem intent on figuring out what taxes can be raised even more or newly imposed, including the imposition of a value-added tax (VAT).

The VAT is a dangerous levy in that it serves as a powerful revenue raiser for the government to a significant degree because it is largely hidden from the eyes of consumers. Those in the business community saying that a VAT should be considered as a possible means for reducing the corporate income tax fail to understand that a VAT would be nothing more than a massive revenue grab by the government, and even if some tweaking of the corporate income tax occurred, businesses and the economy would be saddled with both levies, and both poised to be increased.

If the Obama administration was at the very least neutral towards business, then it obviously would not be advocating or considering such counter-productive tax increases.

As for regulation, the Obama administration has been highly aggressive in proposing and imposing new regulatory costs that affect critical industries, with the fallout hitting the entire business community. Those include passage of ObamaCare, which promises increased costs and reduced choices in the health care marketplace; passage of financial regulation, which will lead to reduced access to credit; and the push for energy/climate legislation that promises increased energy costs.

On the energy front, for example, a new study from the American Council for Capital Formation and the Small Business & Entrepreneurship Council (SBE Council), and done by Science Applications International Corporation, estimated the huge costs associated with "The American Power Act of 2010" (also known as Kerry-Lieberman). That bill would mandate huge reductions in carbon-dioxide emissions, and points in the same direction as the President on the issue. According to the study, for example, over the 18-year period analyzed, the cumulative loss in real GDP could hit $2.1 trillion (in 2009 dollars.) Annual job losses could hit 1.9 million as of 2030, with the bulk of job losses coming in manufacturing. And in 2030, it's projected that retail gasoline prices could jump by 18.1%, residential electricity prices by 42%, industrial electricity prices by 62.3%, residential natural gas prices by 51.2%, and industrial natural gas prices by 77%.

Again, a pro-business administration would not be inflicting such massive regulatory costs on consumers and businesses.

Finally, while trade is critical to the U.S. economy, and the President has served up pro-export rhetoric, the Obama administration has been nonexistent in terms of actually advancing free trade. As the rest of the world moves ahead, U.S. businesses and entrepreneurs get left behind.

Being pro-business means being pro-free-trade.

The Obama White House has proven quite adept at appearing to be open to all points of view, but in terms of actual policy, it is apparent that it has no substantive interest in the views of small, mid-size or large businesses. To the contrary, based on its proposals and actions, the Obama administration is explicitly hostile to entrepreneurship, business, investment and private job creation. Indeed, this is the most hostile White House towards business in decades ... perhaps ever.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.