A President's Day Look at the History of U.S. Presidents and American Business

"The chief business of the American people is business."
- Calvin Coolidge

This President's Day weekend, I got to thinking about which Presidents have generally been thought of as "pro-business" and why.  This is an issue that generates a lot of debate, as everyone seems to want a President who promotes American business, but not everyone agrees as to what constitutes a policy that is favorable to business.  Virtually every President since Washington has paid lip service to the ingenuity of American business, particularly small business, and extolled its role as the driver of the economy.  But in reality, what does it mean to be pro-business?  I've included my thoughts on what the American people view as "pro-business" policies and, as a special bonus, I've included quotes from semi-randomly-selected Presidents on each subject!

Corporate Taxes

"Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
- John F. Kennedy

Certainly, this would be seem to be one of the most obvious (or, at least, easily quantifiable) ways to be pro-business: lower corporate tax rates.  In fact, businesses nearly universally do support lower corporate taxes, since the U.S. has the highest statutory corporate tax in the developed world.  It's safe to conclude that, whether or not corporate taxes should be higher or lower, it is generally seen as "pro-business" when Presidents seek to reduce corporate tax rates.  If only everything else were so simple...

Industry Regulation

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
- Ronald Reagan

Regulation is a little more tricky.  Many believe that it is "pro-business" to reduce regulation and red tape, but businesses often do not agree with that assessment.  First, businesses (particularly big businesses) routinely favor additional regulation of their own industries.  For instance, the airlines are all very much in favor of government regulation of airport security through the TSA.  None of the major airlines (to my knowledge) want to abolish TSA and have security handled by the airports or the airlines themselves.  Why?  Because, should a terrorist attack occur due to a failure of security, the airlines can now blame the government and avoid being sued by the families of the victims.  With TSA funded on a per-passenger basis, there is no need for airlines to worry about increasing costs by beefing up security, as that is entirely the job of the government, and the risk can be passed on.

Another very highly-regulated industry is banking; would it not follow that banks would prefer less regulation?  Big banks are actually huge beneficiaries of a Federal Reserve controlling the money supply and setting interest rates and an FDIC insuring deposits.  In fact, the concept of the Federal Reserve was first envisioned by big banking interests (while at Jekyll Island, in my home state of Georgia!) due to their concern about the rapid expansion of non-national banks as well as a trend towards business being financed from profits rather than borrowed capital.  Big banks knew that if all banks were forced to have the same reserve ratio, individual banks could not be blamed for failures to produce deposits.  With the FDIC insuring deposits at the same price for all banks regardless of past behavior or size, banks are incentivized to continue risky (and highly profitable) behaviors.  All this is to say that industry regulation is a difficult subject to clearly define and categorize as pro- or anti-business.

Minimum Wage

"Americans support raising the minimum wage.  And that’s because we believe that in the wealthiest nation on Earth, nobody who works full-time should ever have to raise a family in poverty."
- Barack Obama

The minimum wage is a very divisive subject, with both sides pitching theirs as the pro-business argument.  Proponents say that employers that raise wages see higher retention rates, more satisfied workers, and therefore higher profits.  They say that society also has a moral obligation to provide a living wage to all full-time workers.  Opponents say that the minimum wage increases unemployment, makes it harder for small businesses to compete, increases prices, and disproportionately negatively affects the poorest in society.  They think that the minimum wage is an economically-inefficient kickback to unions.  The best I can discern is that either side can be spun as being pro-business to the respective supporters, though it's probably safe to say that lower minimum wages resonate as being "pro-business" (though possibly anti-worker) to more people.

Tariffs

"I am a tariff man, standing on a tariff platform."
- William McKinley

On its surface, this should be a no-brainer.  In fact, U.S. Presidents have been implementing steep tariffs on imports for centuries under the guise of protecting American businesses.  Unfortunately, high tariffs do result in higher prices for consumers.  What is more important is that the consumers and the producers are often entirely separate, as was the case with the Tariff of 1828, set up to protect northern businesses from British competition.  Unfortunately, this resulted in higher prices for the southern states, which were not seeing the windfall of profits that the north was enjoying.  Similarly, high tariffs often result in retaliatory tariffs from the nations affected, thus drying up markets for exports from the U.S. and hurting American business in the process.  There does not seem to be a consensus on tariffs, but it is possibly seen as more "pro-business" (obviously American businesses only) to implement tariffs to protect these businesses from competition that is deemed to be unfair.

Monopolies

"Even the most monopolistic business man disapproves of all monopolies but his own."
- Franklin Delano Roosevelt

Americans have an almost universal distaste for monopolies, price-fixing or other anti-competitive behaviors.  These businesses harm consumers through higher prices through a lack of competition for business.  In fact, around the turn of the 20th century, there was a whole movement (led by Theodore Roosevelt) towards "trust busting", during which monopolistic corporations were dissolved.   It's safe to say that it is seen as "pro-business" to be anti-monopoly and anti-cartel, and nearly all Presidents have stated this to be their view.  Of course, this Presidential distaste for monopolies does not extend to the money supply, infrastructure, education, lotteries, etc.

Bailouts

"In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed."
- George W. Bush

This might be the most confusing issue of all.  The businesses that campaigned for bailouts during the financial crisis said that these were not only necessary for the shareholders, but for the jobs of their employees.  The economy could fall into total collapse and never recover if short-term loans from the government were not issued.  This may be true, but the offer was not extended to small businesses and start-ups, many of which filed bankruptcy during this time.  Essentially, these businesses were forced to subsidize their competitors' insolvency.  And it is difficult (possibly impossible) to say what the long-term effect on corporate decision-making has been now that a potential bailout is a part of the discussion of risk.  In the end, I believe that TARP was generally abhorred by most Americans not working at the companies that received bailouts, though many still viewed it as "pro-business" in that it was a necessary evil for the preservation of the economy.

So what are the takeaways?  First, the term "pro-business" is very difficult to clearly define.  Every individual has a different definition and hardly anyone (in the U.S., anyway) would willingly admit to being "anti-business" regardless of their views.  Second, a policy can be favorable to business in some ways and not in others.  For instance, what is good for big business is not always good for small business.  What is good for business in the short term is not always good for the economy in the long term.  Finally, though virtually every President has ostensibly supported American business, their policies have not always been consistent with their publicly-stated views.  So when thinking about American Presidents and their policies on business, skip the speeches and watch their actions...and remember that not all policies are as simple as they may seem.