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Jeffrey Dorfman: The Democratic Party Is Now The Party Of Big Business

Posted on 08-Dec-2013
Topics: Effects of Immigration on American Workers  

From RealClearMarkets:

The traditional view of American political parties and their special interest groups is that the Republican Party represents big business and social conservatives while the Democratic Party represents labor unions and the poor. However, evidence suggests that this situation has changed. Labor unions and the poor are still linked with the Democratic Party. Small business is strongly with the Republicans at the moment, thanks to Obamacare, and social conservatives still lean Republican (and certainly not toward the Democrats). However, big business has now aligned itself with the Democratic Party.

Big business is working with the Democrats in favor of immigration reform because they want to expand the labor supply so they can hire people for lower wages. Big business has also received special treatment under the Affordable Care Act and they are happy to have received those favors. Also, big business likes the Obama Administration's practice of picking winners and bestowing subsidies, bailouts, and other forms of corporate welfare because they are the beneficiaries.

Small business is sticking with the Republicans because these business owners pay the tax bills on their business profit (usually as personal income) and see all the government interference and redistribution programs as unwelcome taxes on their hard work and entrepreneurship. Social conservatives are not happy with Republicans all of the time and are never happy with all Republicans, but they have nowhere else to go.

Big business has changed teams because its executives do not personally pay the corporate taxes for their companies, have access to many ways to avoid or minimize tax liability (both personal and corporate), and can afford lobbyists to arrange for special treatment and favors. This administration, with its willingness to rewrite or ignore laws when it suits its purpose, fits perfectly with big business happy to benefit from what others have accurately termed crony capitalism.

Immigration reform is likely to impose large costs on society and taxpayers by making existing workers and their families eligible for government benefits that they are currently not able to collect. Big business does not care because it can benefit from lower labor costs and more potential customers for its products and is good at avoiding taxes. Democrats don't care about the costs because they want the voters and favor income redistribution anyway. On immigration reform, big business and the Democrats are clearly on the same page.

Big business has been given multiple waivers from the Affordable Care Act. First, many big companies were given waivers between 2010, when it passed, and 2013, as it was ramping up toward full implementation. In particular, a number of large corporations were allowed to continue health plans for their employees that did not meet ACA requirements (foreshadowing, anyone?). Then, this year, the Obama administration arbitrarily delayed the employer mandate for a year, allowing businesses to continue whatever their health plans had been (including nonexistent) for another year before they must start to incur additional costs and penalties. Extensive lobbying efforts by big business paid off again, while millions of ordinary people are spending hours or days trying to use a nonfunctional website to find out their health insurance fates.

Small businesses do not benefit from corporate welfare unless by accident. Big business, however, collects billions of dollars in corporate welfare every year. Big drug companies can benefit from federally funded medical research, big manufacturers like GE and Boeing benefit from both direct government handouts and indirect ones when the U.S. provides foreign aid with strings attached, requiring the recipient countries to spend the money buying American products. Airlines used to pay for airport security. Now the government provides it and taxes air travelers for the privilege of being groped. GM and Chrysler got billions in bailouts. A long list of green energy companies benefited from federal handouts and loan guarantees. Big business has perfected the art of lobbying the federal government for special favors and the Democrats are happy to play along.

When government is willing to bend the rules to suit its supporters those who have the most influence also stand to gain the most. Big business certainly has the resources to successfully lobby government. The expansion of government has led to many more opportunities for government to either benefit or hinder big business. That has increased the rent seeking behavior by many big businesses. It has also led to a realignment of big business and its political interests.

While the U.S. Chamber of Commerce still lines up with the Republican Party in many instances, its individual members, especially the largest ones, are increasingly forming alliances with the Democratic Party. A number of prominent CEOs have been strong and visible backers of President Obama. While this might simply be a result of their private political views it seems much more likely that the rationale is the hope that such open support will be rewarded with politically bestowed favors that translate into millions or billions of dollars of corporate profit.

President Obama and the Democratic Party are committed to income redistribution and are openly hostile to the rich in principle. In practice, they are happy to help the rich prosper if those partnerships lead to political victories for them in other arenas. This symbiotic relationship has paid off in record corporate profits. Big business has switched its support to the Democrats and that move already has paid impressive dividends.

Sources:

[1] "The Democratic Party Is Now The Party Of Big Business", Jeffrey Dorfman, Real Clear Markets, 2-Dec-2013

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