Business and the Right
Daniel Gross wonders why business groups are so blindly loyal to the Republican Party when the evidence suggests that progressive governance produces better results for business. I don’t think this is really all that difficult to figure out. The evidence (graph from Larry Bartels to the right) is pretty clear that Republican administrations do fine by the interests of very rich people. And the CEOs of big companies are very rich people. And business groups represent the interests of high-level executives, not the interests of anything so abstract as a company.
As long as you assume that a lot of economic life is out of the hands of the president, it becomes easy enough to explain away the small gap between the fortunes of the very rich under Democratic administrations and under Republican administrations. What you’re left with is the undeniable fact that Republican administrations seem very interested in the well-being of the very wealthy, while Democratic administrations don’t seem to care very much. It seems to me that this is a good enough reason for CEOs and COOs and so forth to want Republicans to win. And them wanting Republicans to win is a good enough reason for them to try to use organizations like the Chamber of Commerce to try to convince middle managers and small business types that Democratic wins will be bad for them too. That’s not to say anyone should listen to the Chamber when it says that, but it’s much more likely that major business groups are being dishonest than than they’re being myopic.
41 Responses to “Business and the Right”
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October 30th, 2008 at 3:19 pm
It seems to me that this is a good enough reason for CEOs and COOs and so forth to want Republicans to win.
Then they must all be a bunch of idiots. Seriously, GOP rule has been so disastrous for the country that our very existence as a viable, sovereign polity appears questionable were it to continue. I mean, just how bad can living off a mere $2.3 million (as opposed to the, say, 2.7 million you’d take home under McCain) possibly be?
Talk about penny wise…
October 30th, 2008 at 3:30 pm
Totally agree - these folks can’t see beyond their selfish snouts. My boss, an otherwise OK kinda guy who makes a lot (lot!) more than 250K, constantly bitches about how he would have to pay more tax if “God forbid, Obama got elected”. He couldn’t give a shit about the economy or its impact on our firm (hit hard), or folks who are toiling day and night for a tenth of what he makes.
October 30th, 2008 at 3:36 pm
What does a person who has everything money can buy want?—Status.
The thing about status is that its purely relative. We all can’t have it in equal measure. Even in a rich society where all basic needs (and then some) are generally met, wealth and the things it can buy , in and of themselves, are of rapidly diminishing utility. However, wealth, in and of itself, can and does confer status.
In other words, inequality is perceived by some as a good thing, since it confers status on those with more. This, I believe, can go a long way to explaining why the Republicans have pursued policies that promote inequality over policies that promote growth.
October 30th, 2008 at 3:37 pm
This was precisely my problem with Greenspan’s admission that he was surprised companies didn’t look out for their own interest. He acted like this was shocking. But it’s not at all shocking. Ken Lay could give a crap whether Enron exists in 10 years if he’s already milked it for all its worth.
October 30th, 2008 at 3:38 pm
According to that graph, don’t the rich still do better under democrats? Just relatively not as good as poorer people.
October 30th, 2008 at 3:51 pm
Ross, that graph only goes up to 90th percentile, i.e. people making a puny $125,000 a year or so.
October 30th, 2008 at 4:09 pm
I’d say there’s two possibilities partially explained so far. The plot is coarse. It doesn’t go into the top 5% or 1%. The question then becomes, can 1% of the population be a significant influence on a political party? Yes, because money is power.
The second possibility was status. The wealthy don’t just want to remain wealthy, they want to remain wealthier. This doesn’t go far enough. While wealth is status, it is the fact that wealth is power that drives the wealthy to support Republicans.
October 30th, 2008 at 4:10 pm
This graph is as convincing as a graph showing US causalities of war and what party was in the oval office during the last 70 years. One could just as easily conclude that if you don’t want to die in war you shouldn’t vote for democrats.
Of course these sorts of gotcha graphs that don’t control for any variables, use small samples, and say nothing about the obvious objections (e.g. output/policy lag) are meaningless.
A better comparison would be between the United States and other countries of similar compositions. Since America is noticeably less progressive, how then do progressive policies compare. And when you do make reasonable comparisons it is quite obvious why businesses and the upper 50% should be against progressive policies.
October 30th, 2008 at 4:23 pm
Funny thing is that the graph doesn’t show what’s claimed for it. That is, even the richest in the graph do better under Democratic administrations. Now, Njorl mentions one possibility, that the plot doesn’t go far enough to the top income tier.
Another is that the rich relish income inequality more than income per se, since it makes them feel like they’re doing better. It’s a bit akin to a much overhyped theory of social scientists as to why economic progress doesn’t buy happiness, the theory being that envy of others is what matters. Njorl may mean this by “status,” Njorl’s second theory. (I say much overhyped, because the progress itself is overhyped, and people may actually turn out to be struggling more than ever even if, gee, they have TVs now.)
Another is fear and ideology: all this regulation and taxation is going to hold us back if we let them get away with it. Obviously the McCain campaign banks on this last response. But then Matt may be wrong, and it might not be just the CEO, but rather the whole upper managerial class.
October 30th, 2008 at 4:27 pm
“say nothing about the obvious objections (e.g. output/policy lag)”
Yes, gekko is right that this is a prety important point. The economy we have under Obama on January 20, if he is elected, will be almost 100% the work of Bush and other past presidents. So Obama won’t deserve blame for the fact that a guy got a pay cut or credit if he gets a pay raise on that day. As Obama’s administration progresses, the policy environment that wage-earners will live in will be some combination of past presidents’ policies, with his own contribution making a greater proportion of the whole. Heck, to some extent, we’re still living with Kennedy’s and Reagan’s tax cuts, such that the threshold of what’s considered “socialist” tax rates on the rich is much lower than it was 50 years ago.
You could just say that this chart shows that when Democrats take office they do not instantly ruin American capitalism and kill wage growth. Or you could get more direct about it and point out that Social Security, the Great Society programs, and the increase in the EITC during the Clinton years have very clearly brought millions of people out of poverty and increased the standard living of even more middle class people.
October 30th, 2008 at 4:43 pm
Perhaps when confronted with this graph, Republicans ignore what the X-axis actually is, and simply see that their curve is rising, and the Dems’ is flat. Q.E.D.!
October 30th, 2008 at 5:13 pm
You’re being too nice. As mentioned a couple of places above, on the assumption that rich people are being rational when they vote Republican, it must be that what they’re trying to maximize is income inequality, not income.
Which is to say, what they’re trying to maximize is power.
October 30th, 2008 at 5:22 pm
The problem is not why our magnates support the oligarchic party. That’s almost a tautology - since there are magnates, there will very likely be a party of oligarchs. The question is why is such a wide swath of the plebes so enamoured with the oligarchic party? (Note: medieval peasants and day labourers were never so bizarrely foolish as our current-day proles). IE, why do so many seem eager to eat any bullshit our current oligarchs feel like serving up to them?
October 30th, 2008 at 6:11 pm
I feel like a fool, but I don’t understand this graph at all.
can someone explain it? MY does this a lot (or else I am a fool), presents graphs that need some form of explanation.
I don’t see what the conclusion is from this graph.
Help me understand it.
October 30th, 2008 at 6:20 pm
The evidence (graph from Larry Bartels to the right) is pretty clear that Republican administrations do fine by the interests of very rich people.
Matt, you’ve completely missed the point of your own figure.
According to your chart everybody does better under Democratic presidents than they do under Republican presidents.
Under Republican presidents the rich do much much better than the poor and under Democratic presidents everyone does about the same. But everyone’s income grows better than 2% per year under Democrats and less than 2% per year under Republicans.
October 30th, 2008 at 7:08 pm
This is a principal-agent problem?
October 30th, 2008 at 7:45 pm
Yglesias screwed the pooch on this one.
The whole point of this graph is that since graph for average income growth under Democratic Presidents is AIGUDP at all points higher than the average income growth under Republican presidents, everyone is better of on average under Democratic Presidents AIGURP.
The AIGUDP shows a slight downward trend meaning the poor show slightly higher Av. Income growth than the rich (inequality decreases slightly).
THE AIGURP shows a step upward trend meaning the poor show much lower Av. income growth than the rich (inequality increases a lot).
Please post a correction on this MY.
October 30th, 2008 at 8:54 pm
This is an example of an absolutely terrible graph. Line graphs imply that as you go from left to right, you are tracking time. In other words, as you move to the right, you’re doing stuff that’s more recent.
Of course, that’s not what this graph tracks, so it’s unreadable by most people.
This is actually one of the few times you can do well with a side by side bar graph. It would show that Democrats help the rich more than Republicans, but that Republicans help the rich more than they help the poor.
October 30th, 2008 at 9:52 pm
Leaving aside some people’s inability to read graphs, I think you’re missing something else. These results are historical and we all know that the warning that ‘past performance doesn’t guarantee future results’. The particularities of the present always lead people to discount these types of generalizations.
People also tend to discount evidence that goes against their beliefs, so it is easy enough to come up with reasons to disbelieve something like this. The most common is blaming current conditions on a previous administration. (When did Bushies finally stop blaming their own failures on the Clintons?) If things are going poorly, and you’re partisan on the side in control of government, you are more likely to blame external factors. If things are going well, you will claim the credit.
October 30th, 2008 at 11:03 pm
Jim in Missoula, Read this article http://www.washingtonmonthly.com/features/2008/0808.drum.html
Better yet read the paper; Unequal Democracy by Larry Bartels. The fact that everyone does better of under Democratic Presidents is undisputed even when controlled for the lagging effect of the departed Administration. It’s not discounting evidence, it’s established fact.Now a plausible mechanism has been proposed to explain the effect.
Since we know how previous Dem Presidents have done and at this moment in time Obama appears to be no worse than any of them then chances are the trend will hold. There is a chance that the horrible global economy will screw it all up but since the behaviour is a measure of the difference between Dems and Rep. Presidents then it should hold that things would be worse if McCain becomes President as compared to Obama. It sounds strange but that is the only projection we can make on the available data.
October 30th, 2008 at 11:52 pm
Of course these sorts of gotcha graphs that don’t control for any variables, use small samples, and say nothing about the obvious objections (e.g. output/policy lag) are meaningless.
No, they’re not meaningless: Democrats pursue policies which are focused towards increasing the number of jobs and how much the jobs pay. Republicans support policies that help the very wealthy and claim that there might be an advantageous side effect that creates more jobs and improves median incomes. It is quite logical to assume, and the data bears out, that the Democrats would be more successful in having their policies succeed in what they specifically want to do while for Republicans, since such results are only an afterthought and not their main goal, have a lesser impact on those final results. Why on earth would you assume that the Republicans would be more successful in producing a result that is not their goal to produce? The results make perfect sense in light of Republican policy goals vs. Democratic policy goals.
October 31st, 2008 at 1:35 am
Tyro,
Fine. Democrats are great, republicans are evil. But this graph proves nothing. Here are my two best reasons why:
1) Who wins an election is not a random event. We are not simply assigning democrats and republicans to random periods of time. Democrats and Republicans each come to power for different reasons which relate to the underling economic condition of their presidency.
2) Each policy has different effects over time. Prime example would be the CRA which was signed in 1978 but didn’t take effect until mid-2000 (that’s a joke!). Seriously though unless we’re taking about New Deal style stimulus most policies will have a lag or perhaps even an extended effectiveness.
Since we are only dealing with a few presidency these issues are magnified. A more reasonable, but still pretty superficial, graph would compare the majority party in congress to earnings growth. This would still suffer from problem 1 (and 2) but congressional elections seem much more random than presidencies.
October 31st, 2008 at 1:41 am
Having worked at a big corporation for a good number of years, I can promise you that the people who run big companies do not want government policies that are good for the economy. They want government favors, special tax breaks, dominance in their markets without the fear of fed trustbusters — things that are easier to get with Republicans in power rather than Democrats.
I don’t think the CEO class is mostly Republican just because they are wealthy. They (rightly) see that Republicans tend to favor policies that favor the interests of the big companies that they run.
What’s good for the economy, though, is not the same as what’s good for big business. Most growth comes from small and mid-sized companies, and when these companies are most competitive it is often not so good for the big boys.
I can understand why the top CEOs favor Republicans. Even if the economy does better under Democrats, as well as all classes of income earners, as the chart demonstrates, it’s the special favors Republicans dole out that makes their support worth it. They’re just paying pennies on the dollar for what they get in return.
The better question is why do so many business people, not just the big CEOs, lean Republican. As we know from Joe the Plumber Inc., most will do better under Democrats, but they have a misguided, non-rational belief that Republicans are good for business. Overall, that’s just not true.
October 31st, 2008 at 9:59 am
Fine. Democrats are great, republicans are evil.
It has nothing to do with who’s great vs. who’s evil. It has to do with the results of well-known policies stances. Democrats, as a party, run on a platform of improving the wages and employment levels of middle income people, and their policies reflect those goals. Republicans certainly wouldn’t mind if median wages rose and unemployment fell, but they don’t really care one way or the other: the goal is to cut taxes in the hopes that GDP growth increases. There may or may not be some employment related side-effects, but they don’t really care.
Thus, it’s not in the least bit surprising that under Democrats, their specific goals are borne out, while under Republicans, a metric that they don’t focus on during their presidencies underperforms.
For you to dispute this reality would be like saying that there is no causative relationship between Republican presidencies and tax cuts for upper-income earners. Presidents of the different parties have goals. They follow up on those goals. The party with a specific set of goals to improve a certain set of metrics will outperform the party that doesn’t care about those metrics.
October 31st, 2008 at 12:56 pm
“Republicans certainly wouldn’t mind if median wages rose and unemployment fell, but they don’t really care one way or the other”
You’re clearly being far too optimistic. Since the overall Republican vision of economics is roughly as related to reality as Allie McBeal is to legal work, there is certainly a segment of them that would vociferously disagree with median wages rising or unemployment falling (below a certain level at least).
October 31st, 2008 at 2:39 pm
“Republicans certainly wouldn’t mind if median wages rose and unemployment fell, but they don’t really care one way or the other”
That’s not really true. Before Clinton took office, Alan Greenspan often warned that if the unemployment rate fell below 6.5% we’d see a rapid rise in inflation and the stock market often dipped when the unemployment numbers fell too low.
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