The Business Roundtable (BRT) is a group of US CEOs that seek to promote pro-business government policies. My review of the BRT is mixed. Some of its positions, like the group’s support for “comprehensive immigration reform,” are just plain self-serving. In fact, the notion that CEOs and the President should “work together” to solve our nation’s problems might sound good to some, but it’s a recipe for cronyism.
My concerns aside, President Obama addressed the BRT on Wednesday and made some interesting comments:
http://www.whitehouse.gov/the-press-office/2014/12/03/remarks-president-business-roundtable
The last 2 paragraphs before Q&A were particularly revealing:
But, domestically, the area where I have the deepest concern is the fact that although corporate profits are at the highest levels in 60 years, the stock market is up 150 percent, wages and incomes still haven’t gone up significantly, and certainly have not picked up the way they did in earlier generations. That’s part of what’s causing disquiet in the general public even though the aggregate numbers look good.
And one thing I’d like to work with the BRT on is to ask some tricky questions, but important questions, about how we can make sure that prosperity is broad-based. I actually think when you look at the history of this country, when wages are good and consumers feel like they’ve got some money in their pocket, that ends up being good for business, not bad for business. I think most of you would agree to that. And we’ve got a lot of good corporate citizens in this room; unfortunately, the overall trend lines, though, have been, even as productivity and profits go up, wages and incomes as a shared overall GDP have shrunk. And that’s part of what is creating an undertow of pessimism despite generally good economic news.
The President is arguing that CEOs have a responsibility to be “good corporate citizens” and increase wages when profits and stock prices increase. When they don’t, a “disquiet” and “undertow of pessimism” develops in the populous. He’s wrong for at least 3 reasons:
First, wages are—or at least should be—determined by the market, not profits or stock prices. Companies pay workers what is necessary to get a job done. Companies don’t increase wages because profits increase. If this were true, then wages would fall at a company when profits decline. The market simply doesn’t respond this way.
Second, shareholders incur risk that typical workers do not bear. Companies that lose money still have to pay their workers—or lay them off; their shareholders suffer the consequences. Workers wishing to share in the bounty of anticipated company growth should become shareholders and accept the risk. You can’t have it both ways.
Finally, Obama only mentioned profits, share prices, and wages. He neglected to address the myriad government policies and regulations that discourage companies from hiring workers. Whether it’s Obamacare, his higher minimum wage proposals, or his support for amnesty for illegal immigrants, Obama’s policies—not corporations—have created the “disquiet” and the “undertow of pessimism.”
The President’s comments reflect a continued misunderstanding of how business can and should function.
I didn’t hear Obama calling for wage cuts when profits and the stock market were down. He doesn’t understand how things work.
I don’t understand your problem with our president. Shouldn’t companys pay more when they make more? Maybe I don’t understand how business works either, but he makes sense to me.
In my opinion, it is all politics. The Democrats tell the middle class how they are getting a raw deal from the corporations. This political approach is divisive and creates resentment, which is precisely where the “disquiet” and “the undertow of pessimism” come from. They tell them we will fix it for you if you vote for us. Their fixes only serve to make the situation worse – i.e. raise taxes, increase regulations, etc… When things get worse, they can simply point to the corporations again.
We recently passed $18 trillion in national debt. We have the best economy and the most bankrupt government in the history of the world. How is this possible? With a strong economy, strong dollar, etc., the government is able to sell it’s obligations, thereby increasing the debt. This is not always possible with a government, e.g., Greece. We do not attract foreign investors because they love us, but rather that they trust us to continue doing what we’re doing. To have a strong economy requires businesses which are attractive to investors, i.e., profitable ones. Our need to increase the debt will continue with growing entitlements, and what is now a serious problem will get worse. It could get worse in a hurry if interest rates are allowed to rise. This great economy is necessary to support the runaway national debt.
crony capitalism on display
Sooner or later interest rates will rise and the house of cards will crumble