With jobs still scarce, Obama dances closer to business. But is it a detente?
With unemployment rate likely to stay high for years, Obama is running out of federal solutions. He has turned to business for help, but his political pivot now requires more credibility.
A year ago, it would have been hard to imagine President Obama making these moves:
Next month, he speaks to the US Chamber of Commerce – after meeting recently with 20 top CEOs. His new chief of staff is a JPMorgan bank executive. He struck a deal with Republicans to extend Bush-era tax cuts for even rich Americans. And to win a trade deal with South Korea, he worked closely with US business.
In just a few weeks, Mr. Obama has pivoted from saving key industries – housing, finance, and auto – to wooing business as a political ally. And instead of pointing fingers at “fat cats” on Wall Street or in health insurance, he now sounds more like Calvin Coolidge, saying: “We can’t succeed unless American businesses succeed.”
Whether or not this is a short-term chameleon act meant solely to win reelection in 2012 may not matter. The reality for him is that the US government is fast running out of solutions to spur job creation. The $787 billion stimulus is nearly spent and the Federal Reserve’s $600 billion bond-buying program ends in June.
To be sure, the economy is heading up – at about 3 percent annual growth. Americans are slowly reducing their debt load. Exports are rising. And the Pew Research Center finds most jobless workers are either making big changes in their career choices or thinking about it.
But the picture is grim on the biggest economic indicator: Private-sector hirings in December were a less-than-anticipated 113,000 jobs, another signal that it may be years before unemployment returns to normal rates of 5-6 percent. Long-term joblessness remains chronic, and the economic recovery is not yet sustainable, especially if an adverse shock strikes.
Instead of shaming businesses for not investing in the economy – as FDR did during the Depression – Obama may now be making a sincere effort at a détente with them. Many big businesses are sitting on an estimated $2 trillion in cash and other liquid assets – money they aren’t investing out of uncertainty over the future of both markets and government actions.
Becoming a partner with business is an uphill political task for Obama after he secured tough regulations on health care, finance, and carbon-based energy industries over the past year. The shake-out from those new rules isn’t yet clear.
It’s also unclear whether Congress might bail out one or more big states if they head into bankruptcy, further pushing up the federal debt.
And markets are uncertain over whether Congress will simply raise the federal debt ceiling by this spring – or, instead, make the necessary big cuts in government spending, thus reducing the need to take on more debt.
Republicans in the House had promised $100 billion in budget cuts. Such a step would be difficult, but compared with the huge budget slashing now under way in parts of Europe, it would be modest. Obama can gain credibility with business (and bond markets) by offering big reductions in spending in his proposed budget next month – and for years to come.
Federal Reserve Chairman Ben Bernanke told Congress Friday that it must make a “credible” plan to reduce the deficit soon. He said projections show that the level of federal debt, as a percentage of the economy is heading “straight to heaven.”
Obama must bring more business people into his inner circle besides his new chief of staff, William Daley (a harsh critic of the new financial regulations). He can push harder to have Congress approve pending free-trade pacts with South Korea, Panama, and Colombia. And the president can further lower business taxes that now hinder hiring.
But knowing the president will end his antibusiness rhetoric would be the best move. “I want to dispel any notion we want to inhibit your success,” he reportedly told business leaders in a White House meeting last month.
Good words in 2010. But what will be the deeds in 2011?