A Backlash Against Obama's Budget

Businesses from startups to global giants to drugmakers and farmers are gearing up to fight the President's spending plan with ad campaigns and public protests

By Jane Sasseen and Keith Epstein

Philip Burke

Business is marshaling its forces. The target is the aggressive domestic agenda laid out in President Barack Obama's first budget.

Private health insurers are mobilizing to fend off Obama's plans to cut the fees they receive from Uncle Sam and create a government-subsidized rival that, they fear, would undercut them with lower-cost care for the uninsured. Multinationals are up in arms about the prospect of paying higher taxes on foreign earnings. Real estate agents want to quash efforts to lower the mortgage interest deductions for families earning more than $250,000. Small business owners—many of whom pay personal income tax rates on their companies' profits—fear his plans to raise income, capital-gains, and dividend taxes on those same high-end earners. Many industries accept the idea of paying a price for carbon emissions—but not as quickly as Obama envisions. Private equity players and venture capitalists claim that the higher taxes Obama wants them to cough up will drain away innovation and investment. "There's a lot of activity as people gird their loins for these battles," says longtime Washington lobbyist Patrick E. O'Donnell, who represents defense contractors, potential bank bailout recipients, and insurance companies. Like many others on K Street, his firm, Squire, Sanders & Dempsey, is staffing up.

What's stirring up industry is not only the breadth of Obama's agenda but the strength of his position because of Democratic dominance in Congress. As Peter Orszag, Obama's budget director, puts it: "The President has the bully pulpit, he has strong public support, and these are all things he campaigned on." If Obama faces a tough fight getting his entire budget passed, business faces one, too, warns Stan Collender, a partner of Qorvis Communications, a Washington firm that represents banks, drugmakers, and defense contractors. "A lot of things that could be harmful to industries now have a better shot at being enacted," he says.

LOBBYISTS PLAN PROTESTS

So business is hitting hard on the theme that the budget will squeeze vitality out of the economy. Says Jay Timmons, head of government affairs at the National Association of Manufacturers: "They're taking a tremendous amount of money out of the private sector, which will hamper the ability of business to create and retain jobs."

Lobbyists are already planning public protests, ad campaigns, and more targeted appeals to key members of Congress. On Mar. 3 former Columbia/Hospital Corporation of America CEO Richard L. Scott, contributing $5 million from his own pocket, launched a $20 million advertising and public-relations effort emphasizing free-market alternatives to Obama's health-care plans. Scott plans three weeks of ads on CNN (TWX) and NBC (GE), then video documentaries hosted by former CNN anchor Gene Randall in which doctors and patients in Britain and Canada bemoan their health systems.

Agribusiness interests, startled by Obama's planned subsidy purge—the President voted for the farm bill last year—are already mobilizing for a march on Washington. Lobbyists for the American Farm Bureau Federation are targeting freshman Democrats who make up some 30% of the House Agriculture Committee. Many come from rural areas and depend on support from farmers. Key among the freshmen to persuade: Travis Childers of Mississippi, Bobby Bright of Alabama, and Debbie Halvorson of Illinois.

The American Petroleum Institute plans to battle Obama's proposals to reduce the industry's tax breaks through presentations to newspaper editorial boards and visits to Washington by top oil company executives and employees, plus drop-ins by ordinary shareholders. The messages: Obama will increase U.S. reliance on foreign oil by eliminating the deduction for drilling in the U.S. and put at risk up to 6 million jobs directly and indirectly reliant on the industry. "They are going to push more of the investment offshore," said Mark Kibbe, the institute's chief lobbyist.