Tuesday, April 14, 2009

Obama the Front Man

The 2009 Business Olympics are on! Participants compete to advance the U.S. Chamber of Commerce's policy positions. The first event is the marathon, where America pursues the lowest global common denominator on worker pay and benefits. CEO's, lobbyists and government officials, especially those accepting money for placement, are exempt from this event.

Corporate runners are halfway through the marathon. They lightened their load by dropping heavy cotton defined benefit pension plans, substituting sweat wicking 401(k)'s and 403(b)'s. When they tired in a stiff economic headwind, many sponsors dropped 401(k) matches.

A rocky mountain looms ahead, the ever steepening hill of health care costs. Corporations would love to drop that pesky benefit. The Chamber line is "health care costs make American goods uncompetitive" in a global economy. President Obama's team will facilitate the shedding of the health insurance benefit from corporate payrolls. Individual responsibility means workers fund their retirement and health care.

But isn't President Obama planning to ensure everyone has health care coverage? The fight is over who pays. Businesses don't want to pay their current taxes, much less pony up more. CEO incentive pay needs another easy accelerator. Dumping health insurance to the worker will optimize executive take home pay. With a hundred applications for every job opening, what's the down side for a CEO? Any potential CEO hostage takers should note the recent piracy resolution. That could easily apply to employees wanting justice, but with so few options.

Business clearly wants to do less on health care coverge. That leaves the government or individual to pony up more. President Obama plans to address entitlement spending in the near future. That's a euphemism for cutting government sponsored retirement, disability and health care programs.

Fiscal hawkishness is vogue, thanks to Pete Peterson, the Blackstone Group billionaire. Pete took his massive windfall, aided by George W. Bush's lower capital gains rate, and started a foundation. It's aim is to educate people on America's unsustainable financial track.

Treasury Chief Tim Geithner admitted fiscal doves were extinct in his talk at the Council on Foreign Relations. He gave a big shout out to Pete Peterson, who was in attendance. (Fed Board member Pete Peterson picked Geithner for the New York Fed job.)

Of course the track is unsustainable, but keeping higher taxes off the table is absurd. I knew I'd been fooled by the Obama campaign montage as I read a WSJ piece. Obama said he was interested in lowering corporate tax rates over time.

That's the second race. The steeplechase is a race to the lowest global common denominator on taxes, specifically corporate and capital gains taxes. Private equity underwriters (PEU's) know how to work the system to their advantage. They frequently threaten to move their toys to other low cost areas of the global economy.

The Carlyle Group is full of ex-red and blue government insiders. Co-founder William Conway hates a level playing field, so he stacks it at every opportunity. Which leads us to the last change, having few officials on the track to monitor the race.

The big money boys want powder puff financial regulation. It looks like the hedge fund pit will gain an official, but not the PEU pole vault area or the foreign sovereign wealth fund (SWF) shot put zone. Obama's top economic adviser Larry Summers flip flopped on SWF oversight once he began "serving the public" again.

So far the race shows the big money boys winning in all three areas:

1. Driving down worker pay/benefits
2. Decreasing taxes
3. Offering up milk toast regulation

President Obama is a shill, a much more eloquent shill, but a shill just the same.

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