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As Clinton cleared the path for specific companies, the administration responded to the 2010 midterm defeat by trying to open up new markets for all US corporations. Obama had already appointed a delegation of government and corporate leaders to negotiate bilateral trade treaties that would “open up markets so that American businesses can prosper.” By the end of the year, passing new trade agreements with South Korea, Colombia, and Panama became a priority, with the goal that these actions would restore corporate confidence and unlock investment. In Obama’s words, these initiatives were intended to “make clear to the business community, as well as to the country, that the most important thing we can do is boost and encourage our business sector and make sure that they’re hiring.”19 Business loved it, though the public was less enthused. The Wall Street Journal reported in January 2011 that “the administration is relying on business groups to take a lead role in passing the trade deals, countering opposition from unions and a skeptical public.”20
Following the successful passage of these laws in Congress later that year, Obama moved on to the behemoth Trans-Pacific Partnership (TPP). The deal was designed to extend the privileges granted to corporations under other free-trade agreements to twelve Pacific countries. The administration’s pursuit of the TPP was a multiyear campaign involving a “war room” of top officials in the West Wing and the targeting of dozens of individual congressional Democrats
who were on the fence. The administration also took the inclusion of corporate leaders to new levels. It gave nearly six hundred business representatives direct access to the draft text, which it refused to release to the public or Congress, and recruited CEOs to lobby Congress.21
For Congress as well, subsidizing the overseas investments and exports of US corporations was a bipartisan policy, as the approval of the bilateral trade deals suggests. Congress members’ behavior was heavily shaped by the business-confidence logic that drove the administration to support these proposals. A telling example came late in Obama’s second term, when Congress was divided over whether to renew the Export-Import Bank’s subsidies to US exporters. The threat of disinvestment created the leverage needed for a congressional majority. As Bloomberg Businessweek reported, key manufacturers threatened to migrate overseas if Congress resisted. Boeing’s CEO “quietly warned that Boeing might have to move work abroad if it didn’t have Ex-Im’s help.” These threats “alarmed moderate members of Congress,” and produced the votes needed to assure the bank’s renewal.22
There are several noteworthy patterns in these efforts to bolster business confidence. First, representatives of large US corporations were directly involved in administration initiatives: through consultation in formulating tax policy, through the corporate presence on trade delegations and within the State Department, and through the White House’s enlistment of CEOs as consultants and lobbyists for the TPP. These business representatives helped design policy and also performed the crucial role of winning over Congress. Victories like the renewal of the Export-Import Bank and Congress’s approval of foreign trade deals did not result from negotiations between Republicans and Democrats, but from negotiations between corporate leaders and reluctant members of both parties. The deployment of business lobbyists against one’s congressional opponents is a common political strategy utilized by both Democrats and Republicans.
Second, many of the policies initiated after the 2008 economic crash entailed quid pro quos between government and business. The policies were not designed to address the economic roots of disinvestment, nor to directly resolve problems like unemployment and slow growth. Rather, they were part of a bargaining process that traded government actions for corporate investment. This disconnect is particularly visible in the pursuit of trade and investment treaties, which were publicly advertised as ways to “make sure” that corporations would expand domestic production and therefore add jobs. But trade agreements can only produce net job gains if they generate increased production, if the increased production takes place domestically, and if that production involves expanding the workforce. In practice, this has generally not occurred.23 Likewise, as even the business press and most mainstream economists concede, reduced corporate tax rates tend to have “little bearing on economic growth” in industrialized nations. As business analysts would later testify during the 2017 tax cut debate, corporate tax cuts or a tax holiday (designed to allow corporations to repatriate money held in overseas tax shelters at a low tax rate) would not produce significant new investments or jobs.24 Many CEOs frankly admitted in late 2017 that “tax cut proceeds will go to shareholders.” And, as predicted, most of the proceeds of the December 2017 tax cut were indeed used to increase profit levels, stock prices, and shareholder dividends.25
Third, the process also highlights the necessity of trust in the negotiations around capital strikes, since capital investment and government policy can never be fully implemented at the same time. Obama’s actions were intended to “boost and encourage” business confidence in the government as an ally across a range of issues. But someone had to go first. Either corporations would first invest in new hiring and trust that the Obama administration would negotiate favorable policy reforms, or the administration would first secure pro-business reforms and then trust that the corporate beneficiaries would invest in new US jobs. Congressional actions obeyed the same logic, as the Export-Import Bank renewal suggests. This “who goes first” dilemma is common to most policy negotiations between business and government.
Fourth, negotiating relationships were asymmetrical. The Obama administration was constantly trying to persuade business to trust the government, not the other way around. Government overtures to business were a gamble, since pro-business policy changes would not necessarily result in business being confident enough to end disinvestment. As the Wall Street Journal noted in late 2010, “It isn’t clear how far any moves by Mr. Obama or the new Congress would go in encouraging U.S. businesses to unleash the $2 trillion in capital they are holding.”26 The renewal of corporate investment remained agonizingly slow, and hoarded profits remained at gargantuan levels at the end of Obama’s time in office. The structural power of business meant that it was not obliged to negotiate in good faith. Executives could take their tax cuts and then decide to give the money to shareholders instead of investing it. Capital strikes tend to be open-ended, capable of generating a series of pro-business policy initiatives—unless government officials are willing and able to punish business for reneging, which the Obama administration was very reluctant to do.
In the end, Obama was only partly successful in restoring business confidence. While the unemployment rate had significantly declined by 2016, US companies were still hoarding some $2.5 trillion in profits in overseas tax havens. Prominent CEOs were still rehearsing the standard line: threats of continued disinvestment coupled with promises of new investments should government comply with their demands for lower taxes. The CEO of Apple, which held $181 billion overseas, said frankly that “we’re not going to bring it back until there’s a fair rate. There’s no debate about it.” General Electric’s CEO said in early 2017 that the economy “is in what I would call an investment recession. Companies aren’t reinvesting in capital expenditures in the U.S.” Only drastic corporate tax cuts would give business “the ability to repatriate capital from around the world.” The Democratic and Republican nominees to replace Obama agreed that slashing corporate tax rates was the way to “bring private sector dollars off the sidelines and put them to work here.”27 Again, the strategy was to cajole, not coerce. Outlawing tax havens or taking punitive measures were off the table.
The
