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How Dumb Can CEOs Be?

Pundits are fond of calling the U.S. Congress “the best that money can buy.” They’ve got it all wrong. American …

Pundits are fond of calling the U.S. Congress “the best that money can buy.” They’ve got it all wrong. American businesses have helped bankroll congresssional campaigns for years. Yet, business routinely gets the stuffing kicked out of it on Capitol Hill.

As election day nears, it doesn’t take much of a crystal ball to predict the outcome in November. First, 98 or 99 out of every 100 incumbents will be reelected to Congress; second, organized labor will wield more political clout than ever; third, corporate America will shoot itself in the foot by giving enormous sums of money to members of Congress who consistently vote against it.

WELCOME BACK, UNCLE SAM

While the current Congress works hard to roll hack the gains of the Reagan years by raising taxes, reregulating, and generally recapturing the expensive pleasures of

Big Government, corporations and their trade associations fight back by strangely and wrongheadedly lavishing tens of millions of dollars (an estimated $100 million in 1988) on congressional incumbents, most of whom vote against business with unblinking regularity.

Business interests give the bulk of their money through political action committees (PACs). Originally, it was thought that business and professional PACs would help even the odds against labor and anti-growth environmentalists. (See “Feeding The Mouths That Bite You,” January/February 1990.) Instead, business PACs generally bankroll whoever’s in office, regardless of their voting records.

Rather than being motivated by the political bottom line-whether they’re helping to elect people who really believe in a freely competitive market economy-too many business executives are happy merely to buy “access,” a nifty Washington code word for, “Well, they voted against us again, but at least they’ll answer our phone calls.”

LEGISLATIVE BURDENS

Consider two new laws that will cost consumers and business billions of dollars and further sap U.S. competitiveness-the Clean Air Act, a complex set of regulations designed to reduce air pollution, and the Americans with Disabilities Act (ADA), a law allegedly designed to improve access for the handicapped (from which, incidentally, Congress exempted itself).

The Business Roundtable funded a study that found that the Clean Air Act will cost business at least $46.6 billion a year and force the layoff or reduction in work time of 750,000 workers. The ADA will require companies, large and small, to add elevators to many buildings that do not currently have them (cost: about $25,000 per floor), widen existing entrances (cost: about $3,000 dollars per door), and provide other expensive amenities even if they don’t have any handicapped workers.

These two laws are, of course, just the tip of the iceberg. Congress has been pushing hard for many other measures this year that will slow down production and add financial and regulatory burdens to the cost of doing business in the United States. I’d be willing to bet that the Japanese are laughing in their sake.

BIPARTISAN MILKING

Without intending to sound partisan, let’s face facts: The U.S. House and Senate are captives of special interests that oppose competition with the same fervor that Nobel economists Milton Friedman and Friedrich Hayek favor it. As long as the special interests “get theirs,” they don’t care much how anybody else is affected.

According to the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB), House Majority Leader Richard Gephardt (D-Mo.) votes against key business legislation 70 percent of the time. Did this cost him business support? Nope, business gave him more than $750,000 during his last campaign, according to recently published information. Organized labor, which would benefit most from the protectionist, or “managed,” trade policies Gephardt champions, chipped in another $308,000.

The story is the same over and over again, cutting a wide swath across party lines. Senate Majority Leader George Mitchell (D-Maine) votes against business 65 percent of the time, according to the Chamber and the NFIB. Business PACs gave him $416,000. Senate Majority Whip Alan Cranston (D-Cal.) votes against business 80 percent of the time, the record shows. His reward: $598,000. And on and on.

The Competitive Enterprise Institute, a free-market research group, rates numerous Republicans as “free-enterprise foes,” including Rep. Silvio Conte of Massachusetts, ranking Republican on the Appropriations Committee, Rep. Robert Davis of Michigan, Rep. Hamilton Fish of New York, Rep. Joseph McDade of Pennsylvania, and Rep. Matthew Rinaldo of New Jersey. But they’re incumbents, and that-not their voting records-is what appears to count to the people who dish out the political largesse.

Now I’m not in the election business. The Heritage Foundation does not get involved in partisan politics. We don’t give out money; we don’t give out any endorsements; and we don’t give out ratings. Furthermore, I’m not about to suggest who you should support.

But I am in the business of asking the kinds of tough questions that occasionally make people squirm.

A list of 1987-1988 contributors to the campaign war chest of Sen. Howard Metzenbaum (D-Ohio) reads like a Who’s Who of Fortune 500 companies: Dun & Bradstreet, American Airlines, Columbia Pictures, Chicago Board of Trade, First Boston, Drexel Burnham Lambert, Federal Express, Gulf & Western, Chrysler/Gulfstream Aerospace, and Chemical Bank. Yet, the Chamber and the NFIB say Metzenbaum votes against business 80 percent of the time. Sort of gives new meaning to “Pac Man Fever,” doesn’t it?

LEARNING FROM ORGANIZED LABOR

I’m of the old school; I think business should act in its own self-interest. Business does best by doing what it does best-generating the earnings that reward workers, investors, and entrepreneurs. If the powers that be think they are benefiting by investing in incumbency protection, so be it. But you don’t see Lane Kirkland and the AFL-CIO’s PAC, known as COPE, supporting Sen. Jesse Helms (R-N.C.), do you? Wrongheaded as it may be, at least the officials of organized labor stand for something.

Just what is the logic of giving money to an incumbent on an important committee who votes against you 93 percent of the time? Is business willing to settle for only 7 percent?

Business leaders say they support incumbents because they’re afraid of antagonizing them. After all, the chances that they’ll be back again in the next session of Congress are pretty high. But one wonders what these lawmakers could do to hurt business that they’re not already doing.

Hasn’t anybody stopped to consider the fact that incumbents would no longer have a 98 percent reelection rate if business withdrew its support?

Organized labor understands how the game is played. In addition to all the money meted out by union PACs, organized labor also gives millions of dollars worth of “soft money” to political campaigns-providing volunteer workers, free office space, union-staffed phone banks, get-out-the-vote drives, printing, mailing, and publicity. Estimated worth in 1988: $350 million.

REFUND EMPLOYEE UNION DUES

Revealing court cases show that unions spend-illegally, I might add-as much as 80 percent of members’ dues on political activity. Here, too, business could do something about it, but appears reluctant to act.

According to the Supreme Court in the 1988 Beck decision, which was won by the National Right to Work Defense Foundation after 13 years of litigation, union members can insist that their unions refund any dues money not used for legitimate bargaining-related activities. And yet, almost two years later, virtually no corporation has taken the modest step of informing its employees of their right not to fund union lobbying and politicking.

A little initiative on this point would have a dual effect: Not only would anti-business legislation be curtailed, but it wouldn’t exactly hurt employee morale if they found themselves getting to keep a little more in wages-wages that rightfully belonged to them in the first place until every paycheck was lowered by both excessive union dues and higher taxes for anti-business programs.

If business would start acting in its own self-interest, it might make at least a few members of Congress think twice before delivering pro-business speeches at Chamber of Commerce dinners, then voting for higher taxes and more red tape in Washington.

As long as American business is willing to settle for 7 percent of a bad deal, it will remain a fat, docile cash cow. And members of Congress will always be more than willing to milk it for a few more bucks.


Edwin J. Feulner, Ph.D., is president of The Heritage Foundation, a Washington, D.C.-based public policy research institution. He also serves on the board of several other foundations and research institutes. Dr. Feulner is the author of Conservatives Stalk The House.

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