The Big Question

What Role for Government in American Business?


Ever since the Sherman Antitrust Act became law in 1890, Americans have been arguing over how much, or how little, the federal government should be involved in the private sector.

Their opinions tend to reflect their politics. Democrats are likely to favor more regulation and entitlements, whereas most Republicans would prefer that Washington just mind its own damn business. What it really boils down to is money: Democrats want to spend it, and the GOP doesn’t. Neither group, however, is really willing to take ownership of what would happen if they actually got their way: If the Democrats got what they wanted, taxes and debt would soar in order to pay for all the stimulus and entitlement programs—which no one wants. If the Republicans won, millions of Americans might find themselves without health care, jobs, or Social Security, which would lead, among other things, to higher crime and a lot of angry senior citizens. No American, and certainly no politician, wants to piss off Grandma.

The dilemma is that since 1890 the federal government has become increasingly more intertwined in the fabric of American business—never more so than when, at the height of the most recent downturn, it not only bailed out Wall Street but Detroit as well. Certainly there were critics in both camps who howled at the money being spent. Many carped that Washington—first under President George W. Bush and then under President Barack Obama—should have just let the big banks and automakers (and any other company for that matter) live or die on their own. Why should taxpayers foot the bill? Wasn’t that the nature of capitalism, after all? That the strong survived and the weak, or at least the overleveraged, perished? The answer was a resounding yes, but.

REACTIVE BODY

The government could no more let General Motors (GM) or Bank of America (BAC) fail than it could let al-Qaeda destroy the Twin Towers without reprisal. Contrary to what many people might think, government isn’t designed just to stand by and watch. It’s a reactive body, after all, one made to create laws and represent the best interest of its constituents. So it weighed up the pros and cons and realized that without a massive injection of aid, essential areas of the U.S. economy would be obliterated.

In proposing the Troubled Asset Relief Program in September 2008, then-Treasury Secretary Henry Paulson said, “The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy.”

Of course, significant strings were attached, most notably in the form of increased regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, which allowed the government to burrow even deeper into the private sector. Today it would be no more possible to extricate government from business without disastrous consequences than it would be for the European Union to revoke the euro. Unfortunately, the government is just too wedged in. So instead of worrying about how to curtail government involvement in business, it makes a lot more sense to figure out how to make government help.

That’s why Businessweek.com went to people across the U.S. to ask them, “How can Washington help American business?” We spoke with economists and chief executives, billionaires and dairy farmers, liberals and conservatives. The answers we received were illuminating, some even innovative, and revealed several broad themes, including tax reform, reduced government involvement, removing barriers for small business and reassuring the American people that the federal government is less dysfunctional than it has recently appeared.

POPULAR PROPOSALS

Tax reform as a way to jump-start the economy and create jobs was far and away the greatest mutual desire voiced by our respondents. Will McDermott, an executive at Kern + Lead, a New York design and advertising agency, said: “I think that Washington should focus on simplifying the tax structure. By ridding the tax code of loopholes and complication,  they’ll be creating both greater income equality and future predictability.”

This sentiment was shared by Elaine Chao, the former secretary of labor in the George W. Bush Administration, Carly Fiorina, former CEO of Hewlett-Packard, and Mark Zandi, chief economist for Moody’s Analytics. All called for tax reform as a way to ease the burden on American businesses, big and small. Some, as Don Secor, president of Norwalk (Ohio) manufacturer Durable Corp., want an even more radical overhaul of the tax system by implementing a plan called the Fair Tax, which would replace all federal taxes with a national consumption tax on retail sales.

While achieving meaningful tax reform—regardless of what shape it takes—will likely be a long, drawn-out legislative battle, there are things Washington can do that would be considered quick wins. One is to let the American people know that someone’s actually minding the store. “Washington is a big part of why our economy is struggling to recover. There’s too much uncertainty about what kind of new rules, mandates, or taxes might be around the corner for business,” says Bernie Marcus, co-founder of Home Depot and a founding member of the Job Creators Alliance.

There were more specific insights as well. Mark Bozik, a firefighter and paramedic from North Aurora, Ill., urged that resources set aside to train and equip first responders not be cut. Dina Kaplan, co-founder and chief operating officer of New York’s Blip Networks, wants an end to caps on H-1B visas in order to attract more skilled engineers from overseas to U.S. companies.

The takeaway is that none of the people we spoke with was satisfied with what the government is currently doing. Not Republicans. Not Democrats. (Small wonder, then, that on Sept. 14 a Bloomberg National Poll showed that President Barack Obama’s approval rating down to 45 percent, the lowest of his presidency.) Nor did any of them call for the government to step back completely, as some conservatives would prefer. What they do want is for the federal government in general, and the Obama Administration in particular, to stop squeezing business with punitive taxes and overregulation.

What is also apparent from the brief survey we conducted is that finding consensus, even among those who may at first appear relatively like-minded people, is no easy thing. Everyone has his or her priorities, and few people are willing to give them up without getting something in return. And not everyone can get what they want. First responders may not receive the funding they need, even though lives and property may be lost. Small businesses will fail because of a lack of credit and customers. Telecom companies may not be able to bring broadband to rural counties and health-care workers will continue to be overworked and underpaid.

In many ways, the most important thing Washington can do to help American business is to listen.

Click here to see the complete Big Question special report.

Charles Dubow is an editor at Businessweek.com.

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