Why U.S. Business Cannot Afford to Ignore Unbalanced Politics

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The U.S. government shutdown last fall revealed that big business may have responsibilities to a functioning political system. After a three-week debacle, the greatest loser is neither a political party nor the American public, but rather big business. Failing to meet a responsibility it has partly taken upon itself, big business failed to help balance legitimate competition in the American political system. This failure has already translated into $24 billion in losses domestically, further losses internationally, and presages more financial difficulties in the future – difficulties that will haunt the bottom line.

With an estimated 70% of political party donations coming from business firms and corporations and ballooning campaign costs, the weight of the business lobby cannot be denied. And while the usual assumption is that most of this goes to Republican candidates, an increasingly large part of funds go to Democratic candidates.

There are indications this pattern may be changing in the wake of the rise of the Tea Party movement in the GOP. President Barack Obama's Oct. 2 meeting with some of the country's top financial leaders lends some credence to a shift to the left in big business political loyalty. This is initially unsurprising given the grassroots, anti-government spending focus of the Tea Party, which decries any dollar spent as a waste. Given the public disgust that erupted in the wake of the bailouts in 2007-2008, polls have already seen the lowest percentage of avowedly Republican citizens in a decade.

Coupled with surging Tea Party support, this could lead to potentially disastrous repercussions in U.S. politics if left unchecked. Given the pattern of activity emerging in big business right now and assuming a resistant-to-change GOP, a heavily dominant Democratic party could cause issues for lack of a credible opposition party. While this seems initially benign, it is likely to produce a lack of predictability for businesses politically and could, in turn, affect the stability of businesses down the road.

The most recent shutdown in perspective

As mentioned above, the recent shutdown cost the American economy $24 billion, estimated at 1% of this year's gross domestic product (GDP). With the realization that such political moves are possible from a Tea-Party dominated Republican Party (at least, in the public eye), businesses face possible future shutdowns from other like-minded people. If a similar shutdown happens again, then businesses will face the possibility of decreased consumer expenditures.

While the recent shutdown only affected a proportionately small percentage of American businesses, consumer confidence was badly shaken and continues to be slow in reacting to a revived government. Such long-term effects may create a return to consumer saving. Even in the best of times, this could return the economy to a slightly recessed state.

Businesses must react proactively to prevent any future shutdowns from occurring as much as is possible. This is not to suggest that businesses do not act in their best interests in the short term by siding with parties in power, but such actions need to be balanced with long-term considerations outside of the bottom line. These include a new and evolving responsibility to regulate (and, perhaps, moderate?) political parties.

This should not lead to the conclusion that big business is the only group ethically responsible for U.S. government operation. Rather, big business is best served when U.S. politics is balanced between major parties. To maintain this parity, it may become necessary for big business to take a more personal hand in balancing major political parties by investing in the campaigns of more moderate candidates and neglecting those further out of the political center. Such an approach has historically served the U.S. well. You need look no further than the U.S. economic surge on the 1990s to observe this phenomenon.

In an era in which campaign contributions are vital in creating a viable political campaign, businesses have a great deal of influence in determining the political future of the country. This is not an international characteristic of business everywhere, and should not be taken lightly. The government shutdown showed that it is time for big business to commit itself more fully to the American political system. Such a commitment must go beyond simply supporting the most marketable candidates to supporting candidates that will encourage a safe, business-friendly government.

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  • Report this Comment On January 27, 2014, at 12:14 PM, TXObjectivist75 wrote:

    "This is initially unsurprising given the grassroots, anti-government spending focus of the Tea Party, which decries any dollar spent as a waste."

    That's a totally fallacious argument. The TP doesn't view every single dollar as a waste, just the ones spent outside the Constitutional purview of the federal government.

  • Report this Comment On January 27, 2014, at 12:31 PM, TXObjectivist75 wrote:

    $24Bil out of ~$16T works out to 0.15% not 1%. Not exactly a mortal wound to the GDP last year.

  • Report this Comment On January 27, 2014, at 12:40 PM, TXObjectivist75 wrote:

    The Tea Party would be a safe, business-friendly government, just not one friendly to GE, Solyndra, GM, or other crony businesses.

    And the Republican party of the mid 1990s was more Tea Party like than centrist. Limited government, balanced budgets and welfare reform all came out of a majority GOP controlled Congress. Clinton saw the signs and tacked more right to secure his own legacy, something the current occupant of the WH would never do.

    And you completely ignore the role Senate Democrats played in the shutdown. Harry "My Way or the Highway" Reid is no centrist, and prolonged the shutdown by refusing to negotiate at all, down to the point of refusing numerous partial authorization bills to fund NIH, etc.

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Kurt Avard

A January 2014 addition to the Motley Fool team, Kurt Avard prefers to focus on the "dark" side of business and how it interacts with politics. Rarely writing on the same thing twice, he feels that, if he manages to convince you that the two are inexorably linked, he has adequately done his job. Follow him on Twitter @kurtsavard

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