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Obama's Business Buyout

It made perfect sense for President Obama to speak yesterday to the Business Roundtable. Businesses big and small could use a pep talk just now. Bank lending last year fell the most since 1942. San Francisco Fed President Janet Yellen describes a jobless recovery, with the economy not returning to U.S.-style Mach speed until 2013.

But instead of giving a speech about reviving business confidence in the economy, Mr. Obama gave a speech about reviving business confidence in him.

"I take the time to make these points because we have arrived at a juncture in our politics where reasonable efforts to update our regulations, or make basic investments in our future, are too often greeted with cries of 'government takeover' or even 'socialism.'"

The evening before this speech, Mr. Obama held a small White House dinner for some CEOs from household-name corporations, such as AT&T, Xerox, State Farm, Verizon, PepsiCo and GE. The reason for a linen-tablecloth dinner followed by a big speech to really big business is the White House has concluded it is wrongly seen as antibusiness.

I agree. This White House is pro-business. In fact, it's so pro-business it's proposing a virtual merger with the private sector. Ladies and gentlemen of the business community, meet your new partner—Uncle Sam.

Under the terms of the proposed deal, the White House will drive the locomotive of the American economy and U.S. business will ride in the passenger cars. You're being told to get over it.

Now, the president doesn't talk that way when he speaks, as yesterday, to the Business Roundtable. And some of the "antibusiness" rap is the result of the Obama folks doing what they felt they had to do the past year to get the financial and credit systems back on track.

Along with this came some traditional pistol-whipping of bankers and brokers. Blame transferral is what politicians do. Everyone big enough to be a Fortune 500 CEO understands how this game is played.

But then along came a $90 billion tax on banks? That's a high price for taking a fall.

And how did it come to pass that the just-released Obama budget includes a $122 billion tax on businesses' overseas profits? Business thought it had beaten back this tax last October. What happened?

The answer lies, as it always has, in Mr. Obama's first budget statement—"A New Era of Responsibility: Renewing America's Promise"—released last Feb. 26. This is the most important presidential budget document since Ronald Reagan's April 1981 "Additional Details on Budget Savings." There Reagan offered an explicit philosophical rationale for his reordering of the federal government's role. The Obama statement does the same for events the past year.

"A New Era of Responsibility" describes the years before Mr. Obama as "an era of profound irresponsibility that engulfed both private and public institutions." From this emerged the two core themes of the Obama presidency.

The first is that "government," which Mr. Obama identifies as "we," must "transform our economy for the 21st Century." Thus, the now-familiar initiatives on carbon auctions, a green-jobs economy, and health care. "At this particular moment," Mr. Obama said a year ago, "government must lead the way." This isn't just an antirecession patch, but something new and permanent.

Mr. Obama said yesterday it is not a "government takeover." Nothing so crude at all. It's an M&A agreement between Uncle Sam and the private economy.

This in turn requires what Mr. Obama many times has called "investments": Thus this year's long list of tax increases—the fees, fines and taxes in the health-care bill, the overseas profits tax and the 2011 expiration of the Bush tax cuts.

This is about more than just siphoning tax revenue. It's about big theme No. 2: "For the better part of three decades (my emphasis), a disproportionate share of the nation's wealth has been accumulated by the wealthy. Technological advances and growing global competition, while transforming whole industries—and birthing new ones—has accentuated the trend toward rising inequality."

I take this to mean that while the tax and economic policies of the past four presidencies worked for the economy—birthing whole industries—it was bad for society, as Mr. Obama understands it.

He is proposing that the U.S. government both guide the economy ("the right balance between the private and public sectors," he said yesterday) and do so with a new, aggressively redistributive tax policy, which was made explicit in his just-released budget. Guide and redistribute. Agree or not, it's a bold argument. But will it work?

This is radical, a big change indeed from the past three decades. It's also a roll of the dice with the American economy. But as politics, it isn't working. It has produced anxiety—the state-election surprises, the tea partiers, weak consumer confidence, nervous credit markets and surly executives.

If it were working, Mr. Obama wouldn't have to give speeches to revive public confidence in his new vision for a new era. Could be, most people were fine with the one we had, until now.

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