The Dems' Big Business Opportunity

Last Tuesday, a remarkable article appeared on the front page of The Wall Street Journal, able chronicler of the interests and habits of America's economic elite. "GOP Is Losing Grip On Core Business Vote," it read, no doubt causing more than a few Republican strategists to spit out their morning coffee.

"Some business leaders are drifting away from the party," according to the Journal, "because of the war in Iraq, the growing federal debt and a conservative social agenda they don't share."

Well it's about time.

It isn't as though the captains of industry just realized that the Republican coalition they've been supporting for its economic agenda happens to include people whose every waking hour is consumed with the thought that somewhere, two men are kissing. But their social conservative partners become harder to tolerate, apparently, when the party they all have supported puts together such a stunning record of incompetence.

What the business elite doesn't seem to have realized is that the Bush administration's fiscal blundering isn't a departure from the conservative norm. It is the norm. And today, with health care emerging as the key domestic issue of the moment, it's time for Democrats to make a new argument to those businesses that want to act responsibly and simultaneously enhance their prospects for profits over the long term. If Democrats can successfully advance that argument, they can break through the presumption that the GOP is the "pro-business" party.

For decades, Republicans have portrayed themselves as careful stewards of the nation's economic health, managing the government with a hard-nosed approach to spending and a commitment to strong markets and fiscal discipline. Democrats' hearts may ache for the less fortunate, they would argue, but if you want the economy to keep humming along, you'd better elect Republicans.

But the truth is exactly the opposite. Historically, the economy does better under Democrats than Republicans, by almost any measure you can come up with. Here's a list of some economic indicators that have been more positive when Democrats are in charge: Inflation, unemployment, GDP growth, personal income growth, federal deficits and debt, and stock market returns. (This page gathers together links to the sources for these data; Michael Kinsley wrote more about this topic here.)

Unfortunately, these facts won't be enough to convince those too wedded to ideology to believe them. The complexity of the American economy lends itself to myriad interpretations of any event or trend, enabling the thickheaded to believe pretty much whatever they want. For example, there are many conservatives (some with their own television shows) who contend with a straight face that the prosperity of the mid-to-late 1990s occurred because of tax cuts Ronald Reagan passed in 1981.

But apparently, at least some business leaders are clearing the cobwebs from their eyes. This comes at a time when the kingpins of the religious right, terrified that they may find their influence in the GOP waning even further, are threatening to bolt the party should Rudy Giuliani become the Republican nominee. This might be just a head-fake, but it could also be because they see 2008 as a potential repeat of 1964: A spectacular, deck-clearing loss that gives rise to a new period of conservative ascendance, a rejuvenated movement built on the rubble of the old, moribund party.

Either way, it seems that no matter where you look, key components of the Republican coalition are peeling away. But while Democrats may not have much chance of winning over a significant portion of the social conservative vote, they could make a strong case that they are not just the party of women and minorities, the party of labor, and the party of intellectuals, they're also the party of business -- at least, that is, the party of responsible business.

Sounds crazy, I know. But not every capitalist is a crony capitalist, and some may be ready to ask where their interests truly lie. And if Democrats are smart enough to approach business with a new grand bargain, they could bring about some transformative change. It would require businesses to tolerate a reasonable degree of regulation and payment of their fair share of taxes. In return, Democrats would have to change how they think and talk about corporations.

Progressives have a long history of railing against big business for exploiting workers, polluting the environment, and gaming the system to suckle at the federal teat (all true of many corporations). Meanwhile, elected Democrats nod to populism at election time, but offer business only a slight variation on the deal they get from Republicans: Contribute to our campaigns, and when the laws are written, we'll be sure not to threaten the tax breaks that really matter to you. (Hedge funds are the latest example.) The only difference is that Republicans suck up to corporations with pleasure, while Democrats do it reluctantly but do it nonetheless.

What Democrats and progressives need to do is construct and drive a new wedge, one that divides not business from labor, but irresponsible business on one side from responsible business, workers, and communities on the other. For every Wal-Mart that can and should be criticized, Democrats should find and loudly praise a Costco that treats and pays its workers well (not that Costco is a perfect corporate citizen in every way, but they get a lot of things right). Do it often enough – and devise creative ways to not just punish bad behavior but to reward good behavior - and eventually both businesses and citizens would come to understand that Democrats support businesses that act responsibly. This bargain would be about winning votes, but perhaps more importantly, if successful it would remove business as a unified political force that all too often in the past has doomed progressive policy initiatives.

The best example is the Clinton health care plan of 1993, which succumbed to a torrent of opposition not just from insurance companies, but from big business in general. Clinton's efforts to reach out to business failed in no small part because of their default position that Democrats didn't have their best interests at heart, and they didn't have much to lose by opposing reform. But when the insurance companies come calling the next time around with another campaign to fend off health insurance reform, the odds that other major corporations will reply, "Sorry, we're with the reformers this time" will increase if the idea of the GOP as the "pro-business" party is eroded.

It would be bizarre if at least some portion of the business community weren't ready to hear progressive arguments about the role of government. The GOP has been held hostage to its own anti-tax mania; in the current Congress, 194 out of the 200 Republican House members and 42 out of 49 GOP Senators have taken Americans for Tax Reform's pledge to never, ever raise taxes. Over time, this kind of dogmatism twists the mind to the point where one would say, and presumably believe, things like "Nothing is more important in the face of a war than cutting taxes." (As Tom DeLay did in March 2003.)

The result is large federal deficits and an unwillingness to invest in the kind of infrastructure businesses require to operate. Just as it did with the development of the interstate highway system and the Internet, there are times when the government must step in to make investments that businesses can then utilize to create opportunities, jobs, and wealth, or at the very least remove obstacles from their way. With the issue of health care, this is just such a moment.

We all know that the country, and particularly businesses, are choking on health care costs. According to the most recent Organisation for Economic Co-operation and Development (OECD) data available, in 2005 the United States spent $6,401 per capita on health care, far more than any other country on earth. As a point of comparison, France -- which in 2000 was rated by the World Health Organization as having the world's best health care system (the U.S. was 37th) -- spent $3,374. And it isn't just because we're richer -- while France spent 11.1 percent of its GDP on health care in 2005, we spent 15.1 percent.

As you might have heard, health care costs add around $1,500 to the price of every car produced in the United States. So it seems logical that General Motors just agreed to the United Auto Workers' demand to spend $15 million over the next five years on a health care think tank to research ways to reform the health care system (the U.A.W. hopes to obtain contributions from Ford and Chrysler as part of upcoming contracts). The question is, what took them so long? Indeed, why would a company like G.M. not be devoting the bulk of its spending on lobbying (over $77 million in the last ten years) to pushing for single-payer healthcare?

Let's think about this purely in terms of economic rationality. The profit-maximizing firm would obviously favor whichever kind of health care system minimized its costs and therefore maximized its profits. Whatever else you believe about health care, there is no debate over the fact that our current system is the most expensive in the world, and that single-payer systems are far cheaper. From the firm's perspective, it shouldn't matter whether their outlays for employee health care come in the form of payments to insurers or taxes. To the bottom line, a dollar is a dollar.

So why have the overwhelming majority of big businesses, and their representatives in groups like the Chamber of Commerce and the National Association of Manufacturers, been so ardently opposed to the kinds of reforms that would enhance their profitability?

The answer is that firms do not simply seek to maximize profits in a pure application of economic rationality. Businesses are led by people, and people often do stupid things. For too long, America's capitalist class has assumed, against all evidence, that if they stick with the GOP, things will work out for them in the end. It has worked out well for some of them -- if your business involves exploiting public land, distributing unsafe products to consumers, or stealing money hand over fist from the taxpayers, Republicans have done quite well by you. But there are other business leaders who are having their doubts, and they need good reasons to switch sides. The case can be made -- if Democrats are willing to make it.

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