Obama and the Unease of “Corporate America”

The first salvo was fired by Rupert Murdoch at the New York Forum on June 22. Invited by Richard Attias for the opening of this “mini-Davos,” the head of News Corp. fired red cannonballs toward Obama. “Too aloof, lacking authority…” — the democratic president found all the less favor since he had betrayed his center left electors by opting for much more “liberal” policies (in the American sense) than expected. According to the owner of The Wall Street Journal, unless he takes a diametrically opposite direction after the mid-term elections, Barack Obama threatens to condemn the American economy to two years of “stagnation.” Though relatively predictable, Rupert Murdoch’s criticism — quietly relayed later by the Head of General Electric (GE), Jeffrey Immelt — nicely conveys the growing unrest between “big business” and the democratic administration.

“We [the U.S.] are a pathetic exporter…we have to become an industrial powerhouse again but you don’t do this when government and entrepreneurs are not in synch.” Uttered during a “private dinner” in Rome, the GE leader’s sentence reported in the Financial Times risks leaving a mark — even if GE attempted to soften the impact by clarifying that it had been taken out of context. Coming from one of the 12 members of the Economic Advisory Board charged in 2009 with advising the president on rebooting the economy, it can only stir up more trouble in a definite deterioration in relations between the Obama administration and business circles.

After two years of truce dominated by the necessity of getting out of the crisis, the uncertainties of the recovery and the mixed impact of the rebooting plan on employment are beginning to exacerbate tensions between a moralistic administration and a business world that is at once disappointed by an excess of interventionism and a lack of real leadership. In some cases, it sometimes resembles a lovers’ quarrel. Even the fierceness against BP with regard to the oil spill — highly justified in public opinion — has sometimes aroused a vague unease in industrial circles. And Washington’s trials and errors on freezing offshore drilling are perceived as a sign of an absence of long-term vision.

“It’s the first time in a long time that an administration has no cabinet members directly from the business world,” is often lamented in economic circles. In a country where lobbying is king, this can make one smile. But there is here a sincere grievance whose impact Barack Obama was wrong to have underestimated. Some are already pushing for the nomination of Anne Mulcahy, ex-CEO of Xerox. But it would be false to think that “big business” does not have powerful intermediaries in the White House. Pure products of “Clintonism,” Lawrence Summers and Timothy Geithner inevitably keep an attentive ear on “corporate America’s” complaints. But the relationship is always cautious. Even the billionaire Warren Buffett, one of the most fervent supporters of the American president in the business world, did not refrain from criticizing his ”punitive” banking tax project of $90 billion over ten years.

Until now, the most flagrant separation has been between Wall Street and the White House. Pending its adoption — all but inevitable — by the Senate in mid-July, the overhaul of financial regulation will be, along with healthcare coverage, Barack Obama’s second great success. Less neutral than it seems, it lays the foundation for a significant transformation of the banking sector, even if its aim is to correct the perverse effects of the abolition of the Glass Steagall Act under the Clinton administration in 1999. And even if the “Volcker rule” was rather watered down by Congress, the reform has already cast a certain chill between the White House and the heavy hitters on Wall Street — led by Goldman Sachs and JP Morgan Chase — who had, however, greatly contributed to financing the democratic campaign. Reporting on JP Morgan Chase CEO Jamie Dimon’s disappointment in the derivatives reform which will weigh heavily on his bank’s balance sheet, the magazine The New Republic recently asked, “Has Obama thrown his best friend on Wall Street overboard?”

In reality, what “big business” really reproaches Barack Obama for is having too often given in to the “liberal” temptation of the democratic left, too often taken the side of “big government” against free enterprise. The grievance is partly unfair because he has always taken care to set his reforms in the logic of the “free market.” But “big business” thought it was dealing with a Blairist centrist and finds itself confronted with a Jansenist reformer, who is less easily influenced than expected. Whence stems a kind of misunderstanding…In the end, the truly concrete test of Barack Obama’s credibility in the eyes of “corporate America” will be the real reduction of public deficits after the legislative elections of November 2. It is there that we will see whether “Obama the rigorist” is so not only in words but also in actions. After having exhorted Europe not to nip the new recovery in the bud by premature austerity, he knows that he will not escape, either, from a serious budgetary turn of the screw in the second part of his term and beyond. But austerity always has a price. “To win a second term Barack Obama knows that he must campaign in 2012 on raising taxes. It is far from being certain for him!” summed up a New York banker.

Editor’s note: The above quotes, correctly translated, could not be verified.