Has Government Crossed the Line?

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The Administration's approach has real dangers. Attempting to reorganize and tinker with the culture of a giant corporation like GM is risky in the best of times. Taxpayers may find themselves hopelessly entangled in lost corporate causes, with billions of loans never returned. Companies that are shackled with pay restrictions may lose top talent to those that aren't. Countless historical examples show the potential for unintended consequences from well-intended policies. (Just one example: the costly distortions in employee titles and pursuit of tax loopholes that followed imposition of government wage and price controls.)

Business Used to Want Federal Assistance

Of course, business was happy to get federal funds when they were being doled out by the fistful over the past eight months. The Chamber, for example, lauded Congress for the original $700 billion financial-system bailout; pushed for aid to the automakers; sought borrowing assistance for the nuclear, coal, and other industries; and called for stimulus spending and subsidies for transportation, broadband, housing, auto sales, and small business, as well as exporters.

And while Florida state GOP chief Jim Greer criticized the stimulus bill as laden with pork-barrel spending while it was being hammered out, he also made sure to praise its "important funding for certain essential services" and pushed to "ensure that Florida receives its full share and is able to use any federal economic stimulus dollars coming to our state."

Some lawmakers, too, are now calling for the government to back off where they once demanded more involvement. As The Washington Post's Steve Pearlstein points out, for example, Senator Bob Corker (R-Tenn.) criticized last fall's plan to aid automakers because it didn't demand enough from the companies in the way of restructuring. But more recently, Corker is pushing legislation to force the auto companies to reimburse dealers whom they want to restructure out of existence.

Time for a Backlash

Regardless of where you stand on the political spectrum, you could view this shift as a good sign, a return to something approaching normalcy. With a full-blown crisis raging, after all, it's politically awkward to stand in the way entirely, says Julian E. Zelizer, a political historian with Princeton University's Woodrow Wilson School of Public Affairs. "When everyone's losing their savings, it's hard for business to say the government shouldn't do anything," he says. "Now, there's some sense of calm for business to be more critical again."

Similarly, the President's political opponents have an easier time making hay out of what is, after all, a core issue to the GOP. Especially with cultural issues like gay marriage and abortion apparently lacking the traction they once had, "this is an issue Republicans have been able to do well with in the past," Zelizer says.

At the same time, the increasingly vocal backlash also illustrates a classic corporate dynamic—albeit with some unusual twists—says Heather Elms, an American University associate professor of international business. Ordinarily, she notes, corporate management is paid to use its discretion in balancing the interests of various stakeholders—shareholders, bondholders, employees, and government, among others. "To some extent, the crises at these companies are evidence that they weren't doing a very good job, so you have all these stakeholders stepping in and saying no, this is how you do it," Elms says. "Now the government is saying we want some strings attached to that, and the managers are saying we don't want you to mess around with our discretion."

Government Is Different

Of course, the government isn't like other stakeholders. While shareholders, employees, and customers can only vote with their feet, the government can force many of the changes it wants, as it did by statute when it came to limiting pay at banks taking federal aid, and with its deep pockets at the automakers, who might not have found bankruptcy financing elsewhere. Moreover, markets are flexible and can adjust fairly quickly, but statutes tend to linger.

"There's an inevitability that things aren't going to work out exactly the way they were intended," Elms adds. "People tend to ascribe great powers of thought and reasoning to executives and politicians, but they're exploring here, they're experimenting, and none of them knows exactly what to do."

With reporting by Jane Sasseen. Francis is a correspondent in BusinessWeek's Washington bureau.