Business gains a friend: Congress
The Republicans’ big election gains will make the new Congress more business-friendly, with incoming leaders in the GOP-controlled House pledging less government involvement in the private sector and more scrutiny of new regulations.
President Obama also appeared to get the message, promising Wednesday to change his approach on business issues after his party took what he called a “shellacking” by voters.
He signaled he was ready to compromise on a temporary extension of the Bush-era tax cuts — a major concern for many businesses. And he acknowledged that he had not found “the right balance” between increasing regulation to protect consumers and setting “the right tone publicly” to encourage businesses to expand.
“There’s no doubt that when you had the financial crisis on Wall Street, the bonus controversies, the battle around healthcare, battle around financial reform, and then you had [the] BP [oil spill], you just had a successive set of issues in which … business took the message that well, gosh, it seems like we may be always painted as the bad guy,” Obama said at a news conference.
“And so I’ve got to take responsibility in terms of making sure that I make clear to the business community, as well as to the country, that the most important thing we can do is to boost and encourage our business sector and make sure that they’re hiring.”
Changing the rhetoric will be easier than passing legislation. Although Republicans took the majority in the House, Democrats still control the Senate and the White House.
Business desperately wants the tax cut extension and approval of foreign trade agreements, but a legislative stalemate on other issues wouldn’t be all bad, said Bruce Josten, the chief lobbyist for the U.S. Chamber of Commerce.
“Sometimes ‘no’ is a good answer,” said Josten, whose organization pledged to spend up to $75 million this year to elect more business-friendly candidates. “Gridlock has always proven to be more effective at reducing government spending and deficit than anything else.”
Rep. John A. Boehner (R-Ohio), who is expected to become House speaker when Republicans formally take control in January, said Wednesday his party would “renew our efforts for a smaller, less costly and more accountable government.”
The Bush-era tax cuts expire at the end of the year unless Congress acts. Republicans want to extend them all, while Obama wants to allow the cuts to expire for joint filers earning more than $250,000 a year.
About 3% of businesses that file personal returns, which account for about half the business income reported individually, would be hit with a tax increase under the Obama plan. Republicans and business groups have said the uncertainty over the extension of the tax cuts has hindered new hiring.
Boehner said Republicans “continue to believe that extending all of the current tax rates for all Americans is the right policy for our economy at this time.”
Obama and Senate Majority Leader Harry Reid (D-Nev.) said they were open to a deal, with the priority to keep tax rates on average Americans from going up Jan. 1.
Obama said he wanted to meet with Republican and Democratic congressional leaders in the next few weeks. He wants to reach an agreement “that extends those tax cuts that are very important for middle-class families [and] also extends those provisions that are important to encourage businesses to invest, and provide businesses some certainty over the next year or two.”
Boehner has called for repeal of the healthcare reform law and the overhaul of financial regulations. But analysts said wholesale repeal of either is highly unlikely given Democratic opposition.
Even so, Boehner said House Republicans would increase their oversight of the administration, specifically pointing to the hundreds of new rules being drafted by regulators under the financial reform law.
Such oversight, which would slow the rule-writing process, “is important so that not only will the Congress understand but the American people will understand just what this bill will do to our financial services industry,” he said.
Wall Street has been pounded by Democrats for its role in the financial crisis. Obama derided executives as “fat-cat bankers” last year and proposed a new tax on the 50 largest financial institutions to recoup projected losses in the $700-billion bailout fund. The financial overhaul enacted the most sweeping tightening of regulations on the industry since the Great Depression.
But the major players in pushing the legislation into law will be out of power next year. Analysts already predict the new bank tax is dead with the Republican gains.
Rep. Spencer Bachus (R-Ala.) is in line to supplant Rep. Barney Frank (D-Mass.) as chairman of the House Financial Services Committee, but Rep. Ed Royce (R-Fullerton) said Wednesday that he also would seek the post. Both fought hard against the financial overhaul.
Bachus said Wednesday he would pursue “vigorous oversight” of the financial reform law and would try to revise new regulations on complex securities known as derivatives, which financial firms, especially, use to hedge their risks. Those new regulations, he said, reduce a company’s available cash and cost the economy jobs.
“There are a lot of things we can accomplish in a short time if we have some bipartisan cooperation from moderate Democrats, and the message the American people sent to them … is either get off the train or get with this idea of resisting Obama’s over-reaching, expansionist policy,” Bachus told CNBC.
In the Senate, retiring Banking Committee Chairman Christopher J. Dodd (D-Conn.) is likely to be replaced by Sen. Tim Johnson (D-S.D.). South Dakota is home to Citigroup Inc.’s credit card operation, and Johnson is viewed as more friendly to the industry than Dodd was.
Johnson said Wednesday that lawmakers should wait to see the specific derivatives rules proposed by regulators before seeking revisions.
“I am willing to consider changes where there is consensus, but I don’t see the votes in place for any wide-ranging repeal or reductions in transparency of this critically important market,” Johnson said.
Republicans also are expected to push aggressively to dismantle the seized housing-finance giants Fannie Mae and Freddie Mac.
Regulators took over the former government-sponsored enterprises in September 2008 amid mounting losses from the collapse of the real estate market. Taxpayers now own 80% of the firms, and their combined bailout has cost about $148 billion so far.
Their regulator warned last month that the losses could more than double if the economy falls into a deep, double-dip recession. Federal Reserve action Wednesday to pump more money into the economy was designed in part to avoid a lapse into recession.
On Wednesday, Freddie Mac reported a net loss of $2.5 billion from July through September and requested an additional $100 million in bailout money.
Democrats also want to overhaul the housing-finance system, and the administration is required under the financial reform law to produce a plan by January. Experts said that is one business issue on which the parties could find common ground.
