Much to the business community’s relief, President Obama is no longer referring to its members as fat cats or rule breakers in need of a good smackdown.
But will Obama’s change of tone in his State of the Union address result in businesses trusting him more and being more confident in his economic policies?
Many in the business community say they want to see if Obama follows through on his more-business-friendly proposals — such as reforming the corporate tax code and getting rid of rules that create an “unnecessary burden” on small businesses.
“After being estranged from someone for two years, you can’t just call them up out of the blue and say, ‘Let’s go out on a date,’ ” says Brian Bethune, chief U.S. financial economist for IHS Global Insight in Lexington, Mass.
Obama started to try to reconnect with the business community late last year, when, among other things, he proposed allowing businesses to write off the entire cost of an investment in 2011. (Usually, write-offs happen over several years, but the proposed arrangement would save businesses considerable money on their 2011 tax bills.)
Also, early this year, Obama replaced his chief of staff, Rahm Emanuel, with William Daley, viewed as more pro-business.
But, says investment strategist Fred Dickson, business remains “somewhat” worried over the direction of the Obama administration. “They still have huge questions about the regulatory side of financial reform and health-care reform,” says Dickson, of D.A. Davidson & Co. in Lake Oswego, Ore.
The health-care issue is of concern to Shel Horowitz, for example, who runs his own marketing and consulting company — GreenAndProfitable.com in Hadley, Mass.
“Let’s put government-funded universal health care back on the table so American businesses are not handicapped by an unequal system … Companies in other countries don’t have to pay for health care, but we do,” Horowitz says.
Small businesses aren’t the only ones with views on government involvement in the health-care industry. Abbott Laboratories, a large pharmaceutical company based in Chicago, is blaming difficult regulatory conditions for the need to reduce expenses. On Wednesday, it announced a restructuring of the company that will result in the loss of 1,900 jobs.
In 2010, job cuts by big drug companies were the second highest of any industry, according to Challenger, Gray & Christmas in Chicago.
Not surprisingly, Obama’s proposal to simplify the corporate tax code and reduce rates meets with a much better reception from businesses.
“It’s a great idea,” says Rachelle Bernstein, tax counsel at the National Retail Federation in Washington. “Taking the tax incentives out of the tax code and lowering rates instead … is much better for the economy over the long run.”
Most retailers pay the highest effective corporate tax rate, Bernstein notes.
In his speech, Obama tried to convince business he believes in the free-enterprise system, which “drives innovation,” he noted.
But then he pursued the argument that the government should “invest” in biomedical research, information technology and especially clean-energy technology. Those investments lead to business innovation, he said: “It is how we make our living.”
Not so fast, says the American Petroleum Institute, which is often at odds with Obama’s policies.
“[Tuesday night] was a missed opportunity,” said Jack Gerard, president of the American Petroleum Institute, in a statement. “The president focused on job growth through federal spending, but was silent on one of the best ways to create jobs: allow more energy development.”
Gerard takes issue with Obama’s proposal to take away what the president called oil-industry subsidies and use that money to pay for renewable-energy projects. Yet the big oil companies are the largest investors in new energy technology, Gerard says — plowing some $58 billion between 2000 and 2008 into technologies such as wind, solar and geothermal.
But Horowitz of GreenAndProfitable.com says that Obama’s emphasis on green could be helpful to entrepreneurs such as himself. “He’s spot on about the urgent need for American business to reinvent itself with innovation in the green sector,” he says.