Business and American Politics

...grants to the Heritage Foundation and the American Enterprise Institute...

...Not only have both the Reagan and Bush administrations provided business with incentives to promote advanced technology through antitrust protection, tax breaks, and research subsidies, but there are strong forces in the electorate and within each political party pointing toward a significantly expanded and often involuntary role for business...

...A deficit-driven competition for resources between the baby boom generation and the already well-organized elderly—together with the self-interest calculations of Republican party strategists—may result in continued neglect of the nation's most serious social ills...

...L Fluctuating Fortunes, * David Vogel, Professor of Business and Public Policy at the * Fluctuating Fortunes: The Political Power of Business in America, by David Vogel...

...Despite the ideological divergence of the two parties, there is clearly an underlying basis for a degree of policy convergence, no matter how reluctant, between left and right...

...For the past twenty-five years, the problems of poverty, particularly of black poverty, and the attendant pathologies of crime, welfare dependency, school absenteeism, and illegitimacy have increasingly become liabilities for the Democrats...

...Insofar as domestic social problems are addressed, however, it seems likely that, at least for the short term, the business sector will play a privileged, if not decisive, role...

...Third, the Democratic party throughout the same two decades supported progressive tax rates that, with inflation, suddenly began to place a heavy burden on the middle class: the marginal rates paid by a median-income family rose from 17 percent in 1965 to 24 percent by 1980...

...While the work force has steadily grown, the membership of AFL-CIO unions has dropped from 14.1 million in 1975 to 11.3 million in 1985, and their political and economic muscle continues to atrophy...

...market controlled by foreign car producers nearly tripled, from 8 percent to 22 percent...

...Finally, political pressure on the Republican party to demonstrate that conservative economics can address distributional and social-justice issues will be counterbalanced by pressures from the opposite direction...

...Vogel provides page after page describing business efforts to shape public opinion: growing corporate grants to the Public Broadcasting System, from $3.3 million in 1973 to $22 6 million in 1979...

...Nor did the newfound partisanship of corporate America produce a hostile reaction from Democrats: instead, House Democrats initiated a bidding war with the Reagan administration for the loyalty of business during the tax-cut fight...

...Liberal economists remain out of the power loop, increasingly relegated to campuses, where their views are under attack not only by conservative colleagues but by a substantial body of conservative students...

...Most striking during the late 1970s and early 1980s was how a large segment of the normally cautious business community became openly partisan...

...Such demands will dramatically restrict the energy and resources available for attacking the problems of poverty...

...At a more theoretical level, Vogel argues that the political leverage of American business correlates directly with the condition of the economy...

...the virtually unchanged poverty rate during the years of the recovery—just under 14 percent, with 32.5 million people falling below the poverty line in 1987...

...From 1978 through 1981: "Congress defeated labor law reform, voted against the establishment of a Consumer Protection Agency, . . . deregulated oil prices, delayed the imposition of automobile emission standards, . . . and enacted two tax bills, the first of which primarily benefitted the wealthy and a second which reduced corporate taxes to their lowest level since the Second World War...

...Layoffs in Detroit, Baltimore, Pittsburgh, and Birmingham—all heavily unionized and with strong historical ties to the Democratic party— were endemic...

...and the economic bifurcation of the black community, as substantial black middle-class gains have been shadowed by worsening conditions for lower-class blacks...

...Instead of supporting enlarged federal government services— some of which would inevitably be directed at lower-income groups, often disproportionately black—suburban residents have turned to local governments, targeting their tax dollars in their own communities for better schools, recreational facilities, and public maintenance...

...As the ranks of those who remember the Depression have thinned, it has become increasingly possible for members of the nation's white middle class to segregate themselves conceptually and physically—by race, class, and residence—from those who suffer most from, and are abandoned most quickly by, the market...

...One characteristic of urban poverty is that legitimate marketplace forces are absent to a much greater degree than in more affluent areas...

...In many respects, the downplaying by business of a Republican insurgency in favor of an alliance with those in control of Congress is a rational course of action...

...In general terms, this argument, I believe, is correct...

...The redirection of corporate resources toward the persuasion of elites coincided with two key developments...

...Along parallel lines, public recognition of deteriorating American corporate dominance in the international marketplace prompted increased sympathy with business complaints that regulation, high union wages, and excessive tax burdens were helping German, Japanese, Korean, and Third World competition...

...It is corporate America that produces both pollution and jobs, that creates wealth and the maldistribution of wealth, that generates industrial carcinogens and equips shock-trauma units, that abandons central cities, and that writes the paychecks financing an enlarged middle class...

...These pressures are likely to confine the scope of expanded education and welfare benefits to those already employed—a population with far more political and economic leverage than the underclass...

...The recession was widely viewed as a refutation of Reaganomics: public and political anger was vented most directly at the corporate tax breaks business had won at the start of the Reagan administration...

...The Republican party had benefited enormously from these liabilities, and in a systemic sense the GOP has a stronger interest in maintaining the underclass as an example of Democratic policy failure than in pioneering market-based solutions...

...the key role of corporate-funded foundations in the financing of Jude Wanniski's The Way the World Works and George Gilder's Wealth and Poverty...

...Most of Vogel's book is devoted to documenting the shifting political influence of business, and in this respect it is unequalled for scope and supportive evidence...

...Liberal academics studying the underclass and the problems of central cities are finding that their most attentive audiences include major segments of the corporate community dependent on cities to produce competent work forces...

...The resurgence of corporate political power during the second half of the 1970s was paralleled 250 • DISSENT Business in American Politics by increased competition in previously regulated sectors of the economy...

...in a contest for corporate resources it would find itself in a grueling struggle with the right, which for generations has worked with, represented, and been financed by the power elite of America's private industry...

...Part of this shift was accomplished by a political and ideological mobilization of business...

...The relative influence of business—particularly vis-à-vis public interest groups—declined as a result of the strong performance of the American economy from the early 1960s through 1973...

...Perhaps of first importance, the internationalization of economic competition has enabled American business to attack regulation and unionization, undercutting the wage demands of domestic workers...

...When organized labor and other groups' PACs are added to the equation, House Democratic candidates in 1988 got $68.3 million from PACs, nearly twice the $35.6 million received by the Republicans...

...At the same time, the middle class and the affluent have found ways to provide for many of their own wants through mechanisms that skirt an expanded federal government—which helps to reinforce business opposition to increased federal spending...

...The National Association of Manufacturers moved to Washington in 1973, and chief executive officers of Fortune 500 companies formed the Business Roundtable in 1972...

...Watergate prevented a business resurgence during the recession of 1974, but by 1978, with the continued energy crisis and the emergence of stagflation, "business regained the political initiative...

...Two principal adversaries—organized labor and the liberalleft intelligentsia—are in retreat...

...A substantial segment of the business community now joined forces with the Republican party and the conservative movement to produce not only Reagan's victory but firm Republican control of the Senate for the first time in twenty-five years, as well as a net gain of 34 Republican House seats—enough to reestablish a governing conservative coalition...

...Through the glory years of the New Deal coalitions the Democratic party was able to hold the loyalty of those aspiring to climb the private-sector ladder while denouncing economic royalists and corporate profiteering...

...Democrats put in place the basic structure of a social welfare system, supporting at the same time a political climate that made possible the most technologically innovative industrial expansion of modern times...

...This pattern is evident in the steady shift from 1982 to 1988 among corporate and largely business-oriented trade association PACs in House races...

...It will require a substantial change in tactics by conservatives and liberals, and the shift is likely to be far more difficult for the left...

...Vogel concludes with the suggestion that American business leaders may regret their success in the political arena as they come to recognize that they too can become victims of the market...

...In spring and summer of 1982, when the unemployment rate reached 9 percent, the Senate Finance Committee took a minor tax bill passed by the House and turned it into legislation pointedly retracting the most lucrative corporate tax breaks enacted in 1981, including the accelerated depreciation schedules that were to go into effect in 1985 and 1986 and the provisions allowing businesses to buy and sell investment tax credits...

...In both northern cities and the South, where the Democratic-supported Voting Rights Act of 1965 enfranchised millions of blacks, race proved to be a stronger force than class or partisan loyalty...

...Fourth, the emergence of the Democratic party in the 1960s as a leading proponent of civil rights legislation, as well as of the use of court-ordered busing, resulted in a massive exodus of whites to a Republican party that had become increasingly conservative on race...

...The Democratic party and its thinkers remain under strong constituent pressure to address these problems but are increasingly constrained by the budget deficit, majority public opinion, and a recent history of flawed outcomes...

...252 • DISSENT...

...These voters are reaching the age where they are seeking a wide range of improved and expensive benefits, ranging from better pension plans to protections for older employees to enlarged corporate collegetuition, dental, health, and long-term nursing care plans...

...For business, the Republican reversals of 1982 resulted in a major shift of political strategy: the abandonment of partisanship in favor of cementing ties to incumbent—and therefore largely Democratic—members of Congress...

...The 1982 tax fight set the stage for the 1986 tax reform bill, which transferred $120 billion in federal taxes from individuals to corporations over five years...

...There is a wide policy divergence between Wilson's call for a major manpower program, including expanded public-sector employment and privatesector training, and Housing and Urban Development Secretary Jack Kemp's proposals to establish urban enterprise zones and tenant ownership of public housing—but there is convergence on the goal of channeling employment opportunity into the ghetto...

...This was presaged, in part, by the 1986 tax reform bill raising the corporate share of federal tax revenues to an estimated 10.9 percent, a share that had dropped from 15 percent in the 1970s to just under 8 percent by the mid-1980s...

...The corporate community has become a major force among the special interests providing critical backing to maintain a Democratic majority in the House...

...Second, cultural upheavals of the 1960s — the civil rights, antiwar, environmental, and women's movements—produced a liberal elite within the Democratic party perceived by many working- and lower-middle-class voters as threatening to their neighborhoods, jobs, and values...

...Basic Books...

...In the aftermath of the Reagan years, some ideologically committed Republicans and conservatives believe that the political right must begin to address those failures of the market that most seriously threaten the political consensus: distributional inequalities potentially disrupting partisan alignments at one end and social order at the other...

...during the same period, their contribution levels grew from $4.4 million to $19.2 million...

...steel market grew from 13.5 percent to 17.8 percent...

...The tie between liberal Democratic planners and the party's traditional core — blue-collar workers and white ethnic urban neighborhoods—was further severed by Great Society programs, which focused an unprecedented concentration of government resources on the black poor...

...For the Democratic party, business has been a central political dilemma, ranking just behind race as the source of a policy conundrum pitting elite reformers against a working- and lower-middle-class electorate hungry for material improvement...

...The bill, which a reluctant President Reagan signed into law in September (the first month that unemployment exceeded 10 percent), raised taxes by a total of $214.1 billion over five years, of which $103.3 billion was in business taxes...

...Alert to the vulnerability of the Democratic party in the elections of 1978 and 1980, a significant number of corporate PACs abandoned their policy of supporting Democratic incumbents and funneled cash to Republican challengers...

...Renewed public faith in the ability of the private sector to provide the wherewithal for basic social needs suggests that ever-greater burdens—often state-prompted and regulated—may settle on the shoulders of private industry...

...The tax revolt of the late 1970s created a de facto alliance between business and a large segment of the public for cuts in both spending and tax rates...

...The continued stagnation of the economy also gave credibility to the complaints of business about the cost of regulation...

...This mobilization was backed by a corporate drive to alter public opinion, both among the broad citizenry and within intellectual and political elites...

...From 1971 to 1979, the number of corporations represented by registered lobbyists grew from 175 to 650...

...The past seven years have been one of the longest periods of sustained economic growth in American history...

...The political status of business has been buttressed by two developments tied to the issue of race relations...

...From 1970 to 1979, the share of the U.S...

...These tactics paid off: with the 1981 congressional passage of the GrammLatta budget cuts—the first substantial retrenchment of domestic spending in fifty years—and the 1981 $750 billion tax cut, a measure skewed heavily in favor of corporations and the affluent...

...Within the major cities, there is a growing trend by the middle and upper-middle class to, in effect, privatize public services—hiring private security firms, sending children to private schools, and organizing commercial cars to sidestep public transit, all of which militates against federal services...

...Six years later the amount going to Republican candidates increased modestly to $28 million, and the cash flow from business and trade association PACs to Democrats more than doubled, to $33.5 million...

...In spite of labor union success in creating the corporate-based sector of the American welfare state (health insurance, retirement plans, paid vacations), the American left has traditionally been committed to a substantially adversarial relation to big business...

...The corporate effort to regain control over the political and intellectual debate proved highly successful during the period of energy crisis and economic stagnation between 1974 and 1980, particularly when business made the case that high interest rates, accelerating inflation, and the problems of economic competition were caused by liberal Democratic government policies...

...the endowment between 1974 and 1978 of forty "free enterprise" chairs primarily at liberal undergraduate colleges...

...Vogel's point, though well taken, underestimates other possible consequences of corporate political success...

...In 1982 these groups were decidedly pro-Republican, giving $22.1 million to GOP candidates and $14.5 to Democrats...

...Of the three-year high point of the liberal alliance between 1969 and 1972, Vogel writes: Congress enacted the most progressive tax bill in the postwar period, reduced the oil-depletion allowance, . . . transferred the primary authority for the regulation of both pollution and occupational health and safety from the states to the federal government, . . . and banned the advertising of cigarettes from radio and television...

...Corporations are already entwined in one major area of probable legislative initiative: the expansion of entitlements and services sought by the middle class, such as day care, parental leave, pollution and toxic waste controls, and broad medical coverage...

...Still, strong pressures restrict the likelihood of a substantial converging effort to address poverty and the underclass—pressures that go SPRING • 1990 • 251 Business in American Politics beyond the difficulties of negotiating strategies that seek to redefine the role of markets and government...

...The defeat of [laborbacked] common situs picketing in 1977 coincided with a tripling of America's merchandise balance-of-trade deficit, and 1981 witnessed not only an unprecedented reduction in corporate taxes but the beginning of a wave of hostile takeovers that have threatened the power of almost every CEO...

...SPRING • 1990 • 247 Business in American Politics University of California, Berkeley, provides a detailed examination of one of the most dramatic recent shifts in the balance of political power: the collapse of the public interest– organized labor alliance that dominated much of the political agenda from the late 1960s through the early 1970s, and the ascendancy of business from its nadir in public opinion at the time of Watergate to a position of agendasetting power in 1981 with the election of Ronald Reagan...

...The steady, post-Watergate Republican gains in the House, as the GOP went from 144 seats in 1975 to 190 seats in 1981, were now reversed, with the Democrats winning 26 new seats in 1982 and breaking the conservative coalition that had momentarily gained SPRING • 1990 • 249 Business in American Politics control of the House...

...During the last twenty-five years, tensions that once proved so beneficial to the Democratic party have been displaced by a complex set of forces tearing apart the formerly dominant majority coalition...

...Faced with such broad regulatory initiatives as proposals to create a Consumer Protection Agency and to reform labor law legislation, corporate interests in Washington abandoned marketplace competition to form coalitions encompassing manufacturers, wholesalers, retailers, large and small businesses, unionized and nonunionized firms...

...In highly conservative, overwhelmingly white and Republican Gwinnett County, Georgia—the fastest-growing metropolitan county in the nation—voters have repeatedly backed bond issues and other public expenditures to finance a massive expansion of services from tennis courts to state-of-the-art high school labs...

...However, once economic stagnation turned into a serious recession in late 1981 and the unemployment rate broke the 10 percent barrier in September 1982, it was a severe blow not just to the corporate community but to the conservative Republicans...

...Access to power became more important than efforts to recast the structure of power...

...Membership in the Chamber of Commerce more than doubled, from 36,000 in 1967 to 80,000 in 1974...

...The most important of these pressures will be an aging baby boom generation, the leading edge of which is now entering its mid-forties...

...Fifth, internationally, the troubles of the Labour party in England and the failures of central planning in the communist and developing countries have seriously contributed to undermining the more modest regulatory and interventionist goals of American liberals...

...The number of business-related political action committees (PACs) grew from eighty-nine in 1974 to 1,204 by 1980...

...The importance of this disparity cannot be overestimated: House Democratic incumbents, who have far more difficulty raising money from individuals and for their party committees than Republicans, depend on PACs for more than half their campaign funds, 51.5 percent, while GOP incumbents depend on PACs for 39.7 percent...

...From 1975 to 1977, the foreign share of the U.S...

...The scope of these coalitions, in turn, provided business strategists with the ability to bombard Congress with corporate-generated "grassroots" mobilization of employees across the nation...

...To the extent that worker pressure and government mandate will give rise to increasing corporate involvement in various social services, such services are likely to be restricted to those already under the corporate umbrella, rather than targeting those on the outside seeking to take the first step in...

...There is, for example, an increasing willingness among both Democrats and Republicans in Congress to use the tax system to channel child care benefits to working parents and to expand the earnedincome tax credit to lift the incomes of the working poor...

...The 1981-82 recession had much broader political consequences: it obstructed the opportunity for further development of political realignment...

...The central argument in William Julius Wilson's The Truly Disadvantaged is that corporations have abandoned older, heavily black cities, thereby closing traditional avenues into the working and middle class...

...Despite restored popularity as the economy rebounded in 1983, Reagan never regained full control of the legislative or ideological agenda...

...General Motors increased its Washington staff from three to twenty-eight...

...Six years later the pendulum had swung in the opposite direction...

...the expansion of the underclass...

...In the election of 1980 all these forces 248 • DISSENT Business in American Politics coalesced—as close as this country has come to a realigning election since the 1930s...

...The cost of such initiatives may fall directly on the corporate sector or may be government financed through tax credits or other mechanisms—but given the currently disputed effectiveness of the federal government as provider of social services, Republicans and Democrats may well focus increasingly on business as the vehicle for delivery...

...Significantly, the high point of business's political influence during the last two decades coincided with the most severe postwar recession [in 1981-82...