August 26, 2012

Ridiculous Reuters: Romney ‘Appeared to Parrot’ Obama’s ‘Private Sector Is Doing Fine’ Line in Statement About ‘Big Business’

Sam Youngman at Reuters, and several others have attempted to pounce on a comment about “big business” GOP presidential candidate Mitt Romney made at a Minnesota fundraiser on Thursday as some kind of equivalent to President Obama’s out-of-touch assertion that “the private sector is doing fine” back in June.

In fact, what Romney actually said in large part explains why the private sector isn’t doing fine. Here is the relevant text from Youngman (bolds are mine):

At fundraiser, Romney says “big business is doing fine”

Republican presidential candidate Mitt Romney appeared on Thursday to parrot a line used by President Barack Obama that Romney has repeatedly targeted on the campaign trail.

Speaking at a fundraiser, Romney said that “big business is doing fine in many places,” a remark that sounded similar to Obama’s now infamous proclamation that “the private sector is doing just fine.”

… Romney told the audience small businesses were struggling to deal with the regulations Obama had put in place. He said it was small businesses that were being “crushed” by the Obama administration.

“Big business is doing fine in many places,” Romney said. “They get the loans they need. They can deal with all the regulation.

“They know how to find ways to get through the tax code, save money by putting various things in places where there are low tax havens around the world for their businesses.”

In his remarks, Romney promised to champion small businesses as part of his five-point plan to ignite the American economy.

Emily Friedman at ABC News and several others have attempted to capitalize on Romney’s remark, which shows that they don’t understand how capitalist economies usually grow and when necessary recover, and how differently-sized businesses respond to regulation.

Small businesses and strong job growth at these firms have typically led the economy out of recessions. Big businesses usually retrench and try to get by with the people they have. New start-ups see opportunities the big guys overlook and are in a better position to respond quickly. In this recession, as seen in an economist’s quote found at an early July Los Angeles Times article by Ryan Faughnder and Shan Li: “There is no reason for small businesses to do well in this environment. Most of the employment growth you see coming out of a recession is coming from small businesses, but employment growth is anemic and the reason is small businesses not hiring.”

What’s different this time around? It’s the economic environment, not only of stifling regulation, as Romney mentioned, but also of cronyism.

As Romney asserted, big businesses are in a better position to handle the costs of regulation, and in some cases come to see them as competitive weapons against small, feistier competitors. Example: In the 1970s, as the government got its regulatory claws around the U.S. auto industry, when new regs came out, GM’s response would in essence be, “Yeah, we’ll (gladly) comply”; Ford would say, “We’ll reluctantly deal with it”; and Chrysler would scream bloody murder. That’s because GM and Ford were in a far better position to absorb the fixed costs of regulation than the far smaller Chrysler, which not coincidentally reached the brink of bankruptcy and was bailed out by government loans in the late-1970s.

Then there’s the cronyism factor. Big business has the time and money to closely monitor what’s going on in Washington, to hire the lobbyists to get favorable treatment, and to barter for political quid quo pros with candidates and legislators. Small businesses (with some exceptions such as “green” companies, whose very existence depends on government handouts in all their disguises) don’t. To the extent that economic “opportunity” to waste taxpayers’ dollars has geometrically increased during the Obama administration, big business has been there for them; small businesses mostly haven’t.

Both cronyism and excessive regulation impact the ability and willingness of inventors, especially individuals and small companies, to bring new products and services to market. Either the government will come up with a regulatory reason why it shouldn’t happen, or a big business or existing industry threatened by the new product’s or service’s entry will run to Washington to get regulators or legislators to stop it.

The attempt by Reuters and others to make Romney’s statement about big business somehow equivalent to Obama’s dismissive “the (whole) private sector is doing fine” is extraordinarily ignorant, even for a modern establishment press which has that characteristic in abundance.

Cross-posted at NewsBusters.org.

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2 Comments

  1. While I agree in the main, I do think to be fair it should be pointed out that not all bis businesses engage in cronyism and that smaller companies can and do engage in it by banding together and throwing their combined weight around (especially at the state and local level.) So trust me, small biz is not entirely innocent of playing the using regulations to punish others (even the big guys) game.

    (As an aside, if the government was not so big and influential as it is now, there would be much less incentive for such nonsense.)

    I would argue that at least under this Pres, it’s actually small companies who are doing most of the pushing for money and regulations, because most of B.O.’s crony “capitalism” is directed at the “green” economy sector, which is mostly made up of start ups and smaller companies.

    Also, in case some liberal comes along and says, “Oh, so this means we can engage in red tape and higher taxes as long as we only target the biggest companies!” I think it’s important to point out that such a tactic still hurts individuals and smaller companies and indeed still does hurt the larger companies as well.

    It hurts individuals because while bigger companies can weather higher taxes and more regulation better, all that money they have to spend to play nice with Uncle Sam means less money for them to improve their products and or services and less money to expand and/or hire more people. Which of course hurts the big companies roundabout because any expansion plans or innovation plans they had to get better and make more dough gets chilled somewhat.

    It hurts small businesses in two ways:

    1. The higher regulatory and tax burden that comes from getting bigger frightens them from expanding and growing.

    2. There is a trickle down effect. If the big companies who, for example, make the most appliances are getting slammed, this trickles down to the smaller companies who sell those appliances, or make parts for them, or repair those appliances, or any number of things that have to do with the industry involved also lose business and thus eventually they are negatively affected as well.

    So the targeting of bigger businesses is hardly free of any negative consequences to the big companies, smaller companies, and the people as a whole.

    Comment by zf — August 26, 2012 @ 1:46 pm

  2. You raise very good additional points:

    - I remember reading an Inc. item almost 20 years ago quoting businesspeople who refused to grow their companies about certain levels (15, 30, 50, 100 employees) because they knew that it they did, certain unpalatable legislation would kick in and adversely affect them. So guess what? They decided it’s better NOT to grow. Enough of that and you hold back the economy.

    - As I said in the post –”‘green’ companies … very existence depends on government handouts in all their disguises” are certainly at the trough, and we are paying dearly.

    - “if the government was not so big and influential as it is now, there would be much less incentive for such nonsense” — That’s not an aside, it’s a central issue.

    Comment by Tom — August 26, 2012 @ 4:36 pm

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