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Business Boards The Clinton Express


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BUSINESS BOARDS THE CLINTON EXPRESS

For die-hard Republicans, many of whom are still in the public-mourning phase of post-election trauma, the event was particularly painful. On Feb. 25, chieftains of some of the nation's largest corporations trekked to the White House to praise Bill Clinton's economic plan. Seizing on Clinton's proposed deficit cuts--and tactfully ignoring his soak-the-rich tax plans--GOP stalwart Lodwrick M. Cook, chief executive officer of Arco, declared: "We believe that the President has faced up to the economic problems of our nation." As fellow CEOs nodded, Cook added that the new President has "taken a gutsy step and deserves our support."

Getting Cook's blessing was no small accomplishment for the Clinton White House. For one thing, the Administration's economic plan calls for both a hike in the corporate tax rate, to 36% from 34%, and a broad new tax on energy use. For another, during the '92 campaign, the Arco chief gave $27,500 to GOP candidates and committees--including $2,000 to George Bush.

Now, Cook and a host of other tycoons have hopped aboard the Clinton Express, part of a stampede that has made seats in business class a hot ticket. None of this is accidental. As governor, Clinton beseeched companies to promote development in Arkansas. As President, he decided corporate support would build momentum for his economic plan.

The result has been an unusual high-level courtship for Democrats (page 46). It goes way beyond Clinton's hobnobbing with the likes of former Hewlett-Packard CEO John A. Young, Sara Lee Corp. Chairman John H. Bryan, and Apple Computer Inc. honcho John Sculley. Clinton, who knows that his business backing is fragile, hasn't let up. He has met with the Business Roundtable, the Business Council, and small business owners--among others.

TRADE WORRIERS. He has also ventured to Silicon Valley to techno-schmooze with representatives of leading electronics companies, headed to Boeing Co.'s Seattle headquarters to discuss government help for U.S. aircraft manufacturers, and traveled to Atlanta on Mar. 19 to stump before its business leaders. "The President knows the issues, and that has impressed the business community," says White House Chief of Staff Thomas F. "Mack" McLarty III.

Clinton can't afford to relax, though, because many elements of his program put him on a collision course with much of business. Corporations are waiting to see how hard the President will fight for the North American Free Trade Agreement, which would expand export and investment opportunities. Many manufacturers worry that Clinton will agree to start taxing products made in Mexico by companies that violate labor and environmental agreements. Labor Secretary Robert B. Reich's new commission to review labor laws, possibly reinvigorating unions, also worries business. The breaking point could be health-care reform, since it will be difficult, if not impossible, to come up with a plan that won't infuriate large segments of business. Says Jerry J. Jasinowski, president of the National Association of Manufacturers (NAM): "Clinton's business support is a mile wide and an inch deep."

Many CEOs sympathize with Clinton's focus on the deficit, investment, job training, and infrastructure. Says Alexis M. Herman, who heads the White House corporate-outreach effort: "The business community responds to leadership and risk-taking and to a President who takes responsibility."

Actually, most execs are signing up with Clinton for a less lofty reason than their concern for the deficit: With Democrats in control of both ends of Pennsylvania Avenue, business needs every friend it can get in Washington. Notes one veteran corporate lobbyist: "Bill Clinton is the gnly game in town."

And so far the score is heavily in his favor. With skillful jawboning, the President has defused some corporate opposition. Still, large pockets of resistance remain, particularly among small businesses and old-line manufacturing concerns. Clinton's populist broadsides against drugmakers and health insurers also have rattled CEOs.

DARK MUTTERINGS. Such anti-corporate forays haven't dampened business' desire to open lines of communication to the Clintonites. Nowhere is this more apparent than in the transformation of the Chamber of Commerce. Once a hotbed of Reaganism, it now says it's ready to consider both tax hikes and mandated health coverage. While right-wing members muttered treason, the Chamber gave Clinton a warm reception at a Feb. 23 speech. "The political calculus is fundamentally changed," says Chamber Vice-President William T. Archey. "We have to be where policy is shaped, or we won't get anything we like."

The willingness of such conservative bastions as the Chamber to fraternize with the enemy has left Republicans dyspeptic. Fumes Representative Tom DeLay (R-Tex.): "The worst part is that a flawed economic policy is being given legitimacy. [Business] is just helping Clinton to destroy the economy."

Fuming aside, there's little the GOP can do because the Administration has effectively neutralized opposition to key components of the plan. Take the energy tax. Though Arco's Cook and Ford Motor Co. Chairman Harold "Red" Poling prefer hiking the gasoline tax, both endorse Clinton's new energy levy. That may give lawmakers from energy-producing states the cover they need to vote for it. As things heat up, the White House will praise corporate supporters while singling out foes as greedy special interests. "The Administration is playing hardball," says one oil-company official.

Indeed, Clinton's economic strategy was artfully crafted to appease entire industries. To help move real estate, the Administration decided not to seek a cap on home-mortgage deductions. Brewers were geared up to oppose the plan until the Administration omitted higher excise taxes on beer. "Clinton understands that the more people you go after, the more will go after you," says David K. Rehr, lobbyist for the now-neutral National Beer Wholesalers' Assn.

Many corporations that are supporting Clinton or keeping mum hope to cut their own special deals. The auto industry has a long shopping list led by its demand for higher duties on imported minivans and utility vehicles. Airlines want tax breaks and regulatory relief to help them snap out of their swoon. High-tech companies are attracted to a research-and-development tax credit and stepped-up support for cutting-edge technologies. "This is the first Administration that even mentions help for high-tech industry," says Enzo Torresi, CEO of NetFRAME Systems Inc. in Milpitas, Calif.

Still, fear may be a stronger motivation than hope. Many companies are scared silly by Clinton's health plan, due in early May. It was no idle choice of words when Anheuser-Busch Cos. Chairman August A. Busch III endorsed Clinton's economic plan "as it now stands" at the Feb. 25 confab. A few minutes later, when asked about funding health-care reform with "sin taxes," the President singled out cigarettes but not alcohol. "We have neither asked for nor received any assurance that beer taxes would be exempted," says Busch. "We would oppose any package that included higher beer taxes, and no one should be surprised by that."

So far, the sector most resistant to Clinton's charms has been old-line manufacturing, which expects to bear the brunt of both the energy tax and higher corporate rates. A survey of NAM members found that 83% didn't believe Clinton's program would lead to economic growth. "The investment-tax-credit will not produce one job for us, and the higher corporate rates will hurt," agrees Jeff Nedelman, vice-president of the Grocery Manufacturers of America.

Clinton-shock has led some of these companies to resurrect the Tax Reform Action Coalition. TRAC, which fought effectively for low rates in 1986, is gearing up to oppose the Clinton economic plan. Members include DuPont, IBM, Kellogg, Procter & Gamble, and McGraw-Hill (which publishes BUSINESS WEEK). TRAC's Alan M. Kranowitz insists that corporate acquiescence to Clintonomics is a mistake, because companies "fail to realize that if they're silent, Congress could raise the [corporate] rate even more."

Despite Clinton's praising of small business as the engine of growth, it has also held out. The National Federation of Independent Business contends that higher individual tax rates will hurt most of its members while the investment tax credit, though targeted at smaller companies, won't help retail and service establishments.

And small business is frightened by the talk about mandatory health insurance and a higher minimum wage. Clinton is "helping chic businesses like small high-tech firms in Silicon Valley," says NFIB lobbyist John Motley. "But if you own a beauty shop, to hell with you."

In the end, the fate of Clinton's relationship with business, like his ties to voters at large, may well be determined by the path of the economy. If growth continues and inflation and interest rates stay low, any business grousing will be drowned out by huzzahs for the President's economic stewardship. If that happens, what's now a marriage of convenience between Clinton and Corporate America could blossom into true love.Susan B. Garland in Washington, with Kevin Kelley in Chicago, Wendy Zellner in Dallas, Robert Hof in San Francisco, and bureau reports


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