Competent, credible leadership during a crisis is also important. As is being able to hire needed talent.
Under Donald Trump, the GOP failed on all these objectives. The party hemorrhaged support from businesses, and relationships with key allies such as the U.S. Chamber of Commerce publicly deteriorated.
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Democrats could have taken advantage. They could have swooped in and presented an alternative economic vision — one that was pro-growth but rooted less in tax cuts and more in the rule of law and fairness. They could have partnered with the private sector when objectives were aligned.
Instead, Democratic officials decided they wanted to be enemies of the private sector, too.
This choice seems driven partly by ideology and partly by short-term political considerations. Democratic and Republican survey respondents alike now view “Big Business” very unfavorably, after all.
Additionally, Democratic policymakers have been seeking ways to deflect from their own fiscal missteps, which have likely contributed to inflation. The most useful scapegoat — the one polls suggest their base is already eager to vilify — is Big Business.
And so, after denying for months that inflation was a problem, Democrats settled on a new message: Inflation was real but it was not driven by red-hot demand outstripping still-constrained supply. Rather, it was caused by “corporate greed,” “profiteering,” “price gouging” and other vague accusations of corporate malfeasance. (Also: Vladimir Putin.)
This anti-business blather has turned out to be both factually incorrect and a strategic misstep. It cost Democrats a valuable political partner heading into the midterms, when the fate of democracy itself might be at stake. It has also hampered Democrats’ ability to respond to the major economic challenge of our times.
Framing inflation as driven by “corporate greed” discouraged them from adopting many good policies that could modestly alleviate pricing pressures. Particularly approaches that might be viewed as too “industry friendly.”
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This includes, for instance, addressing what’s actually holding back oil production.
Ramping up drilling and refining requires big, expensive investments that firms worry won’t pay off if (when) oil demand eventually falls again. A lot of companies went bust in 2020, when oil prices briefly went negative. The long-term outlook for fossil fuels isn’t great. One solution might involve insuring companies against some “downside risk.” For example, the government could guarantee some minimum level of future prices or profits.
But that would be politically toxic. How can Democrats guarantee profit levels, when they’ve convinced their voters that these greedy firms are already “profiteering”? Progressives have effectively boxed themselves in.
Meanwhile, Democrats’ obsession with performative punishment of Big Business has given momentum to bad proposals that might make inflation worse. These include price controls or punitive taxes that discourage more production.
Or, to stick with the energy example: The Biden administration has threatened to revoke drilling permits not currently in use — a punitive “use it or lose it” policy. But each permit is for a specific location operated by a specific company that owns the lease for that area. In other words, if a permit to drill on a given location gets canceled, nobody else can drill there, either.
The existing permit holder may not be drilling on that site now because it wants to see how its nearby wells do, or it may be waiting on equipment held up by supply-chain issues; if in the meantime the unused permit gets canceled, “the operator would have to reapply for the permit, which is a time-consuming affair,” explains Rene Santos, an energy analyst at S&P Global Commodity Insights.
Which means this approach would likely reduce oil output, not increase it. Biden officials would know this by now if they actually talked to people in the energy industry, which apparently they’ve been loath to do.
Dems’ distrust of industry is understandable. Companies do misbehave, after all. The corporate lobby will probably always overstate how much regulation hurts its members, while always playing down any negative externalities they cause.
But the choice is not between either taking at face value everything executives say, or browbeating them at every opportunity. Another option is to talk to industry, and suss out how these businesses actually work and what changes to incentives might help achieve broader economic goals.
Alas, Democrats have become so eager to prove their anti-Big-Business bona fides — and so fearful of being tarred as “corporate shills” — even that seems too much to ask.