Where’s Corporate America?
Here’s what I don’t understand about either the politics or the policy of the bailout failure. If the situation is as dire as Kevin Drum says then where’s corporate America? That swathe of American business that isn’t in the finance and housing sectors. ExxonMobil, Wal-Mart, Proctor & Gamble, Johnson & Johnson, Microsoft, Google, Chevron, etc. I mean this as a genuine question, not as an “aha! one lonely blogger has used his powers to prove that there’s no crisis.” But, seriously, where?
A lot of the underlying discussion here seems to take the view that it’s just super difficult to get House Republicans to cast unpopular votes. But it’s not difficult at all! Whenever the House takes up the subject of a minimum wage increase, the majority of House Republicans buck public opinion and vote “no.” In part, that’s a vote of conscience, and in part it’s because there are business lobbies that scream bloody murder about the looming demise of the US economy whenever such a vote is on the table. So where are those lobbies now? Suppose the House were debating the Employee Free Choice Act. We’d be hearing, I think, from the Chamber of Commerce. And from the National Federation of Independent Businesses. And just to keep things bipartisan, not only do conservative legislators regularly cast unpopular votes on behalf of business lobbies, progressive legislators sometimes cast such votes too and also sometimes cast unpopular votes on behalf of union lobbies. And surely if the economy goes into a steep recession that’s no better for Big Labor than it is for Big Business.
But especially on the right, normally when there’s an issue that’s perceived to be important to American business, corporate America makes its views known and conservative legislators, when asked to jump, say “how high?” I mean, when was the last time House conservatives bucked the interests of large oil companies? And wouldn’t a steep recession be much worse for large oil companies than an offshore drilling moratorium? It’s very difficult to get congress to act when the heavy hitters don’t want to put any skin in the game. I think that is in many ways the big story here. Meanwhile, the failure of this sort of effective lobbying scheme to materialize just feeds left-wing suspicions about the bailout deal — it looks and feels very funny to be saying this bailout serves interests beyond Wall Street when political leaders can’t produce concrete non-Wall Street interests clamoring for it. None of Arizona’s members of congress (four Democrats and four Republicans) voted for the bill, for example. But surely if large Arizona employers like US Airlines, Honeywell, Intel, and Raytheon were on the phones with these guys saying their businesses were going to tank unless they voted “yes” some minds would change.
40 Responses to “Where’s Corporate America?”
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September 30th, 2008 at 9:22 am
I really don’t get Kevin’s reaction — comparing this to 9/11. I mean, 9/11 irrevocably slaughtered thousands, and, it was clear even at the time, sent this country into insanity.
Here, there was a one-time failure to pass a bad bill that many think would be better than nothing. I don’t get it.
In a post last week, Kevin listed the status of the big investment banks and asked, “so who is the $700 billion for?” He never answered that, just fell to “Armageddon.”
September 30th, 2008 at 9:23 am
The Chamber of Commerce has been pimping for the bailout (http://www.uschamber.com/issues/letters/2008/080929_financial.htm).
And members of Congress did oppose the business lobby — on immigration.
September 30th, 2008 at 9:24 am
They’re doing fine:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAHCiRX_cqUo
September 30th, 2008 at 9:25 am
I have to say, this is the most thought-provoking thing I’ve read on the bailout. Mostly because I don’t have any easy answers.
I wonder if the larger corporations just see great opportunities in the bond market?
September 30th, 2008 at 9:26 am
Where are all these businesses on health care reform? Why aren’t they out there making these phone calls that magically change the minds of congressional members…
September 30th, 2008 at 9:28 am
Matt,
You need to get it through your head that you are watching the breakup of the Republican coalition.
Of course the big business lobby has made its views on the bailout clear, and those views were heard by business-oriented Democrats, the White House, and John McCain. But what we just saw is that even the combination of a sitting GOP President and the current GOP candidate for President was not enough to swing the House GOP behind the deal.
Now that fact alone should tell you the GOP is in a major internal crisis. And the fault line of the day is precisely between the Big Business GOP (represented in this case by Bush, McCain, the Senate Republicans, Boehner, and so forth) and the Culture War GOP (represented by Pence, Gingrich, and so forth). And thanks to the 2006 election, the Culture War GOP has the upper hand among the remaining GOP members of the House–and from the latest ad, maybe the RNC as well.
In short, corporate America DID push the panic button, and President Bush and his remaining congressional allies tried to get the GOP to do what corporate America wanted. They just failed, because the GOP is no longer acting as a cohesive unit.
September 30th, 2008 at 9:31 am
I don’t have a good answer to your question, Matt, but it suggests to me that the House Republicans are not as in the pocket of big business as liberal populists have thought they were. In the end, the yahoo talk-radio crowd is calling the shots.
September 30th, 2008 at 9:35 am
McCain is getting flak from the Left for gumming up the works on this bill. What if it is genuinely unwise and unnecessary? Once (if?) the economy somehow pulls out of its nosedive without the benefit of a massive bailout McCain will rush to the podium proclaiming his foot on the legislative brake served the country’s needs. Yes, that’s unlikely to come to pass in just 5 weeks before the election but I can see McCain perverting and misrepresenting everything he’s done as having had some sort of beneficial effect on the process. With Republicans it’s always heads I win, tails you lose.
September 30th, 2008 at 9:45 am
The normal behavior of Republicans is to be completely in the
tank for corporate interests for 22 months of each cycle, then
run as culture-war populists for the 2 months before each
election. This crisis happened in the brief populist phase -
especially strong this cycle because everyone can read the
polls on Bush’s worse-than-Nixon popularity numbers.
After the election, the calculus will be completely different.
Which is why I favor an uncontentious stop-gap now - boosting
FDIC insurance to $250K - and then a comprehensive stimulus
package later - help for homeowners, infrastructure spending
(especially for electricity grid, solar/wind energy, and
rail/transit subsidies), financial industry reform and regulation (the credit and derivatives markets need central
institutions like the NYSE).
Taking the time to consult professional economists wouldn’t
hurt either - Dems are going to be running the show, we claim
to believe in science and data and analysis, now’s the time
to prove that.
September 30th, 2008 at 9:45 am
steve duncan,
But all the evidence of McCain claiming he was going to Washington to get a deal done is on the record, and generally no one is buying McCain’s BS anymore (which, by the way, shows it may not be a great idea to squander your credibility on things like “Lipstick on a Pig” and “Sex Ed for Kindergarteners”).
September 30th, 2008 at 9:46 am
While at the same time claiming credit for the bill. He can’t run against it now.
September 30th, 2008 at 9:46 am
DTM: the failure of this cannot be attributed to political schisms. Corporate America didn’t make its views clear because their concerns are more limited to their stock prices than their credit worthiness. Non financial corporate America, for the most part flush with cash and not dealing with derivatives extensively, can still access credit on good terms. Consumers are still buying, employees are still working…surprise, the real economy is still pumping. Matt has put his finger on the pulse of the story here. This crisis is fictive for the near term, and no-one can make a compelling case for why it will spread to the real economy, i.e. corporate America.
September 30th, 2008 at 9:48 am
“McCain is getting flak from the Left for gumming up the works on this bill. What if it is genuinely unwise and unnecessary?”
Yeah, but McCain kinda sorta claims to be in favor of the bill
(though he doesn’t seem to have the slightest knowledge of the
nature of the crisis, nor the various proposals to solve it).
I suspect the House Republicans would have torpedoed it even
without McCain’s involvement. But it’s pretty clear that he
had the opportunity to take a strong stand against their
idiotic proposal, and he didn’t do it. On this issue he’s a
midget.
September 30th, 2008 at 10:01 am
You need to get it through your head that you are watching the breakup of the Republican coalition.
DTM’s got it right. The Republicans may have lost the business community with this.
September 30th, 2008 at 10:04 am
To all those claiming McCain cannot claim to both support and abandon a bill within just a few days and get away with it on the campaign trail I say: AIG. McCain sat for an interview and made it clear he was not in favor of helping AIG. Less than 48 hours later he did a 180° pivot and said he favored government help. He derides citizens asking his VP choice questions in a public setting as “gotcha” sound bites yet slams Obama for not taking questions in a town hall forum. I’d add the other 100 routinely noted examples of McCain saying something on a Tuesday and saying the opposite on Wednesday morning but we all know them too well. Yet his bus rambles on down the American highway proudly emblazoned with “Straight Talk Express” plastered here and there and the public eats it up like popcorn at the movies. If circumstances arise wherein claiming opposition to the bailout bill was his true, patriotic position all along he’ll get away with adding it to his stump speech. Addressing fawning cretins rarely results in a penalty for employing brazen dishonesty.
September 30th, 2008 at 10:07 am
If the economy does not nosedive before election day and no bailout bill passes, or even a much smaller bailout bill passes, then the only thing that will save Obama and the democrats is that the left wing is more able to set the national consensus now.
The Republicans stopped the bill, and if there is no nosedive, the Republicans prevented $700 billion unnecessary dollars from being committed to Paulson.
Fortunately for the Democrats, Paulson sponsored the bill, Bush advocated it and McCain endorsed it - so the left wing echo chamber has something to hold onto to pin the bill on the Republicans. And it should work, even though it wouldn’t have worked in 1998.
But Pelosi buying into Paulson’s hysteria and Obama joining her were disgraceful. Borderline disgusting. Of course, McCain panicked worse, even trying to cancel the debates, so that mitigates the electoral damage to Obama.
We’re stuck with Obama, the way we were stuck with Clinton when he was in office, but Pelosi is putting herself into “gotta go” territory.
And in future primaries, close association with the Obama brand will be what loses the Democratic nomination.
September 30th, 2008 at 10:08 am
Chris,
Isaac linked above a statement from the U.S. Chamber of Commerce. Generally, the market for commercial paper has disappeared, lines of credit are increasingly hard to come by, and all this is indeed beginning to affect the day-to-day operations of corporations.
Now one of the reasons people like Matt don’t get what is happening is that he apparently doesn’t understand this is a slow-motion process. For now, businesses still have access to their existing lines of credit, and business running out of cash are increasing their demands from customers for upfront cash deposits, which basically redistributes the problem to whichever businesses do still have credit they can draw down. But without new credit, the existing excess credit will eventually be exhausted, and the predicted recession/depression will begin in earnest.
September 30th, 2008 at 10:10 am
steve duncan,
Your analysis fails at the point you claim “the public eats it up like popcorn at the movies.” Check out the polls (both topline and internals) since the crisis began and McCain started his constant series of reversals. The public isn’t buying it.
September 30th, 2008 at 10:31 am
Soon I expect we’ll be hearing stories of businesses unable to stay in business because their lines of credit have dried up. Small businesses need loans to buy product ahead of their big season, whether it is the holidays or summer, and I think out-of-business signs will be coming to your town in the coming year.
Big business can still get credit so Wal-Mart isn’t worried. And if the mom-and-pop goes under it’s more business for them.
We just spent $2500 on new windows for our house. Hopefully, they’ll be delivered today. In the future I could imagine a scenario where customers give a small business some money as a down payment on windows, or remodeling, or furniture, or whatever, but the business closes before delivery because the down payment itself is not enough to maintain the business until full payment.
So watch out.
September 30th, 2008 at 10:32 am
Kevin Drum is having a massive fear reaction. It makes him cling to Policy and Punditry. Personally I see a perfect example in him of why the Iraq war was passed. Serious people with poor records of honesty and credibility told us Iraq was an imminent threat. Many of us got very scared and pushed for it, because the fear was so strong that we had to do SOMETHING. And the cure was worse than the disease.
This time I did some research and I am not in support of this horrid plan. And I made myself clear to my Senators and Congressman on that subject. At least I can express my own moral compass this time. And to hell with those who want to shut me up.
September 30th, 2008 at 10:56 am
There’s no particular reason that lobbyists for every single company would be more versed in the laws of high-finance than the average voter. If you’re the head of a nurses union, then sure you’ll one day be effected by this, but you don’t know how or when. The economic benefits of “not going into a Depression” are very diffuse, and Matt should know all about the Coasian floor and why that means less lobbying activity.
The groups with a “big picture” view did support the bailout, but operating on their own, with only a weeks notice, and against a popular headwind, there isn’t much they can do.
September 30th, 2008 at 10:58 am
According to The Hill, the Chamber of Commerce, Nat’l Assoc of Manufacturers, Amer Trucking Assoc and Internat’l Franchise Assoc. all lobbied hard for the bailout. The Hill frames it as K-Street losing out to constituents.
September 30th, 2008 at 12:16 pm
“Nice doggy! Want a treat? Here you go, have some evolution taught in classrooms! Now, if you see any bad bad socialists, you bite there nuts off! Look, a Democrat! Kill! Kill! Good doggy, have some anti-gay marriage amendments. Over there, it’s someone trying to regulate the insurance industry! Kill! Maul! Maim! You are such a good dog and I love you SO much!”
[Crisis]
“Hoshit. Now, doggy, this socialistic measure is necessary becau-ARGH! NO DOGGY THAT HURTS YOU’RE BITING MY-”
September 30th, 2008 at 12:19 pm
Arnold Evan, I don’t know if you’ve been keeping up with the stock market, unemployment figures, etc, but the economy has already “nosedived”. The stock market opened lower today than it did on the first day of the Bush administration, eight years ago. I don’t know what to call that other than a nosedive.
September 30th, 2008 at 12:42 pm
As your resident Arizonan commenter, I can tell you we mostly thing the bailout was bullshit. I like to call it the Triple Screwing of Responsible Homeowners Act. Once when our property values crater, twice when we pay taxes for the Feds to buy our mortgages, and a third time when we still owe the same house payments as before.
September 30th, 2008 at 1:01 pm
Microsoft weighs in… they say it is going to hurt
http://www.msnbc.msn.com/id/26957366/
September 30th, 2008 at 2:02 pm
There’s a simple explanation for why the entire Arizona congressional delegation, both Republicans and Democrats, voted against the bailout bill. They know better than anybody how much McCain is completely full of shit.
September 30th, 2008 at 2:39 pm
My wild-ass guess is that the lobbyists for the C-of-C, the NFIB and all the rest, were in from the beginning on the whole Lucy-and-the-football stunt that the GOP was pulling over the past few days: get the Dems to Be Responsible, sucker them into a bad compromise, then pull out, stick them with the blame, and run against them.
They felt safe in assuming a bailout was coming, so they were willing to protect their own, rather than needlessly make them vote for a very unpopular bill.
From The Hill:
As if they knew they had to make it look like they were leaning on House Republicans, without actually doing so?
And what Richard Cownie said at comment #9 above.
September 30th, 2008 at 3:22 pm
I don’t know that your premise is correct. Politico is reporting that the Chamber of Commerce sent threatening emails to the Republicans who voted no.
I think Andrea Mitchell’s reporting on Gingrich’s role is spot on. The Republican GOP tried to set this up so they could run against the bailout in 2010 and 2012. And Palin’s pick (at Gingrich’s urging, she is afterall a product of GOPAC) makes perfect sense for Gingrich’s 2012 aspirations — McCain of course was duped (on the bailout and on Palin).
September 30th, 2008 at 10:53 pm
The reason corporate America is nowhere is that large established companies don’t really need the credit markets. They don’t need startup loans, or any type of loan that has recently been defaulted on.
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