Are CEOs Obama’s new allies?

Under bright spring sunshine, the mood at the White House was celebratory last week as President Obama announced an agreement on new rules to force drastic improvements in the fuel efficiency and tailpipe emissions of the nation’s cars and trucks.

But what made the Rose Garden audience unusual was not the environmentalists and liberal Democrats, who have long supported such requirements. The surprise was the presence of executives from the world’s 10 largest automobile makers, most of whom had fought long and hard to avoid tougher standards. Like other businesses, however, they had joined with the Obama administration to help craft new rules for their industry.

The lions-and-lambs quality of the gathering suggested that a new paradigm was developing in the relationship between government and business.

In the space of only a week or so, there was significant movement not only on vehicle fuel efficiency but also on similarly contentious issues including reducing greenhouse gas emissions by factories and power plants, subjecting tobacco to new health and safety supervision, and overhauling healthcare coverage.


In each case, the forward movement took place with significant industry participation and input.

“It’s no secret that these are folks who’ve occasionally been at odds for years, even decades,” Obama said, remarking on the diversity of the crowd gathered for the auto standards announcement. “In fact, some of the groups here have been embroiled in lawsuits against one another.”

Although he was talking about the environmentalists and automakers, the observation applied equally to stakeholders on the other issues, who have long been mired in stalemate and bitter conflict and now seem to have opted for at least some cooperation.

On each of these issues, final agreement on new policies is months away. And as they get deeper into the specifics, the old adversaries could come to blows again.

But the relationship between government and business appears to be undergoing a fundamental restructuring, similar to what happened during the New Deal of the 1930s and the deregulatory push of the Reagan administration in the 1980s, said Robert N. Stavins, a professor of business and government at Harvard University.

Those shifts have been fueled by deep economic troubles accompanied by a sharp change in national political control, leading to a vastly different philosophy about how Washington should interact with corporations, he said.

“There is a changing climate with regard to the relationship between business and government,” Stavins said. “In the Congress and in the executive office of the president and administration, there is a movement toward greater interest in playing a hand in the private economy.”

Some of these changes were underway before Obama’s election, particularly in healthcare, where businesses have become increasingly concerned about the burden of spiraling costs in an era of global competition.


“It’s one of the issues where I can’t name any one individual company, association or organization that says we don’t need to do anything,” said R. Bruce Josten, the chief lobbyist for the U.S. Chamber of Commerce, which has been working with the Obama administration and key lawmakers on healthcare reform.

“We’re looking for somebody to do something, and the only ones who can get things done is the administration.”

The financial crisis and recession have accelerated the process, amplifying the costs of failing to act and increasing the likelihood of bold government action.

With Democrats’ desire to tackle issues they could not move on during the Bush presidency, corporate executives see the writing on the wall, said David M. Hart, associate professor of public policy at George Mason University.


“Smart businesses try to stay ahead of the curve, and if they see the train coming down the track . . . try to shift its direction a little bit,” he said.

“Clearly the business community is being very pragmatic about this. They see that change is going to happen,” Commerce Secretary Gary Locke said in an interview. “They can either sit on the sidelines and watch the legislation go by or they can help shape the legislation.”

Corporate America is not cooperating on every issue and has worked to derail some of the president’s proposals. Business groups have successfully fought back legislation supported by Obama and organized labor to make it easier for workers to form unions.

The U.S. chamber has also sharply criticized Obama’s “cap and trade” proposal to limit greenhouse gas emissions. And credit card issuers strongly opposed landmark legislation placing new restrictions on them, including the ability to raise interest rates.


But the credit card legislation passed Congress and Obama signed it Friday, demonstrating the sharp public and political backlash against big business caused by the financial crisis.

Obama and the Democrats are taking advantage of that weakness, said John Steele Gordon, a business historian.

“They see this opportunity and they’re pushing it, and a lot of the business community is not in particularly good shape right now,” he said.

Obama has channeled some of the public anger himself, often talking tough about the practices of corporate chief executives and U.S. corporations. He slammed them last month for abusing overseas tax loopholes as he proposed a plan to close the loopholes.


Locke, the administration’s chief liaison to the business community, said Obama was committed to helping businesses even though he has criticized of some of their practices.

“It’s no different than a parent who says to a child, ‘I am very disappointed in your behavior here, and we think what you did is wrong and unwise, but we still want you to succeed,’ ” Locke said.

Obama has alternated between tough talk and engagement. In recent weeks he has met with CEOs from banks, credit card issuers, pharmaceutical companies and insurers. And he has sympathized with their plight even as he has pushed for changes.

“Credit card companies provide a valuable service; we don’t begrudge them turning a profit,” he said in signing the new law Friday. “We just want to make sure that they do so while upholding basic standards of fairness, transparency and accountability.”


Locke said the economic realities of issues such as rising healthcare costs combined with Obama’s commitment to tackle them had led to new partnerships.

“You’re seeing all this collaboration and cooperation simply because all the forces are in alignment for change,” he said. “You have an American public very much wanting solutions to these tough issues, you have a president who was elected on the promise of change, you’ve got control of Congress that will support the president, and the business community wants change as well.”