David R. Henderson  

Obama's Criminalization of Business

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I'm visiting a friend who does due diligence for his private equity fund's investments in various U.S. companies. As a result, he talks to businessmen every week. For many months now, he has found businessmen complaining about the Obama administration's criminalization of various failures, many of them small, to comply with detailed regulations. What Charley Hooper and I wrote about on Forbes.com recently applies, it turns out, not just to the pharmaceutical industry but also to other industries. See this recent Associated Press story for more. On top of that, the Obama administration is producing a huge volume of new regulations, many of them not finalized. Look at this graphic on Dodd-Frank, for example. And of course, there's Obamacare: whether you'll be under it will depend on whether you can get a waiver and who knows who can get a waiver or by what standard waivers are granted? When people fear that their investments will be for naught because they won't be allowed to operate, that has a chilling effect on investment. I think we are in a period like that of the mid-1930s in that sense. Robert Higgs has written about the regime uncertainty under FDR because businessmen and investors weren't quite sure about the rules. I think the same thing is happening now.

This suggests a strategy for Republicans. Quit talking about taxes. You've won the tax issue and taxes are unlikely to fall further in the next ten years and, most likely, the next 30 years. Instead, talk about the Obama administration's hostility to business. Use the kinds of stories Ronald Reagan used in his talks to employees of General Electric in the 1950s. Get your stories completely straight--well fact-checked, not casual.


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The author at PointOfLaw Forum in a related article titled Around the web, June 24 writes:
    West Virginia Supreme Court upholds non-economic damages caps in med-mal cases, correctly noting that it's not the role of the judiciary to second-guess the policy decisions of the legislature. [LNL; opinion at Torts Prof blog] Can Republicans make an ... [Tracked on June 24, 2011 11:34 AM]
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Effem writes:

A big part of the issue is that the population has become more anti-business of late due to bank bailouts and low corporate taxation. The corporate tax rate (using actual taxes paid, not statuatory rate) is at a record low. When people compare that to their own situation (tax rate nowhwhere near a recrod low) it is not surprising that they conclude business is being given an unfair advantage to the tune of hundreds of $billions annually. I say fix the tax system (cut loopholes basically) and that will restore a sense of fairness - at which point the population will be more willing to help business in other areas.

David C writes:

The problem with Republicans taking that tactic is that they supported Dodd-Frank and many other regulations. The Heritage Foundation publishes an article on this every year, previously in March, but in October last year. Republicans are supposedly the party of small government, but there's little correlation between which party is in charge and the number of new regulations per year. 2010's regulations were mostly related to the EPA. We'll have to wait and see about 2011.

http://www.heritage.org/research/reports/2010/10/red-tape-rising-obamas-torrent-of-new-regulation

Jeffry Erickson writes:

I agree that talking about the administration's hostility toward business is a good tack. It puzzles why the Republican's knee-jerk reaction to being accused of being in the pocket of business has been to talk about business as if it is some monolithic thing or as if it is somehow a separate actor on the stage. In this way they fall into the trap laid by liberals: Big bad business must be controlled. Why don't they talk about the fact that if we really cared about the little guy we would try to *improve* the climate for businesses of all sizes, shapes, and flavors for it is businesses that provide jobs, it is businesses that provide the things we buy, eat, ride in, consume. You cannot be for the common man and be against business and stay logically consistent. Most of the jobs in the country are in businesses (at least as long as we keep working at keeping government small). Make life tough for them and you make life tough for employees.

Also, liberals talk as if a dollar of profit earned by corporations is somehow lost to the common man. Where do they think that money ends up? Stuffed under a rich man's mattress? Not likely. They spend it. They spend it on things made by companies that employ the common man. The money gets recirculated back into the economy and in to the pockets of the common man.

And another thing, it is not a zero sum game ... but I'll stop here.

Fred Stone writes:

Seems those executives don't have to do business with the government if they don't like the terms. The government, as a purchaser of goods and services, has the right to refuse to do business with someone. And if they're ripping people off, or violating the law, then charge 'em.

Justin R. writes:

"When people fear that their investments will be for naught because they won't be allowed to operate, that has a chilling effect on investment."

Not that I disagree, but Krugman, et. al. have been arguing that businesses are not holding back on investment due to any government "chilling" factor, pointing to the fact that non-residential, private fixed investment has been going up.

How does this play with your argument? Have we not yet seen the full force of "the chill"? My thought is that there should have been a larger bounce in fixed investment given the low base from which we were starting.

Uiaj writes:

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rustyrustbelt writes:

I am both a Republican and a business guy and this argument is a dead loser.

People of all political persuasions throughout the middle and lower classes are convinced that Wall Street looted the country, corporate executives get bonuses for destroying jobs and looting pension plans, and that neither the Bush or Obama administration has done much about this.

The evidence appears such that the folks out here are correct.

If the GOP tries this argument it will be a spectacular failure. People do read their 401(k) account statements.

Charlie writes:

The AP story you linked to is about punishing people who commit fraud or whose companies repeatedly commit fraud.

Is that hostility to business or just hostility to fraud?

Tom Dougherty writes:

This is a complete winner of an argument. One last step, though. You need to link the anti-business climate to the unemployment rate. If businesses are afraid to invest and expand due to uncertainty in regulations and the tax code for that matter, then businesses are not going to hire at a rate that will bring down the unemployment rate. Businesses hire people. If you cripple businesses you cripple hiring.

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