Historically, companies benefitted by supporting the policies of the Republican Party. Republicans kept government small, favored fewer regulations on business, treated free markets as sacrosanct, said “no” to deficit spending, and protected the interests of the rich. These policies are still favored by most businesses.
Yet this business legacy produces company blind spots regarding which current legislative proposals would benefit businesses versus hurt them. Here is a brief copy of the proposals of the Biden administration:
“The American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China… The American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.
The United States of America is the wealthiest country in the world, yet we rank 13th when it comes to the overall quality of our infrastructure. After decades of disinvestment, our roads, bridges, and water systems are crumbling. Our electric grid is vulnerable to catastrophic outages. Too many lack access to affordable, high-speed Internet and to quality housing. The past year has …unmasked the fragility of our caregiving infrastructure. And, our nation is falling behind its biggest competitors on research and development (R&D), manufacturing, and training. It has never been more important for us to invest in strengthening our infrastructure and competitiveness, and in creating the good-paying, union jobs of the future.
President Biden’s plan will fix highways, rebuild bridges, upgrade ports, airports and transit systems…Deliver clean drinking water, a renewed electric grid, and high-speed broadband to all Americans… It will put hundreds of thousands of people to work laying thousands of miles of transmission lines and capping hundreds of thousands of orphan oil and gas wells and abandoned mines…create jobs and raising wages and benefits for essential home care workers for children and elders…Revitalize manufacturing, secure U.S. supply chains, invest in R&D, and train Americans for the jobs of the future.
The President’s American Jobs Plan is a historic public investment — consisting principally of one-time capital investments in our nation’s productivity and long-term growth. In total, the plan will invest about $2 trillion this decade.”
This Democratic Party plan is ambitious in addressing many U.S. economic problems. It will cost a lot of money, aiming to collect the needed funds from those individuals, families, and companies that have profited the most in the economy. The public and businesses will ultimately vote on how they size up the benefits against the costs.
Five Policies to Consider
Let’s consider whether American firms are more likely to achieve long term benefit by supporting Democratic proposals than Republican proposals. Let’s
examine five legislative policies of the Democratic party.
1. Tax policies aimed at raising more money from the wealthy.
2. Policies improving the country’s infrastructure.
3. Policies attracting young immigrants.
4. Policies favoring better and more affordable education.
5. Policies lowering the costs of health care.
Tax policies aimed at raising more money from the wealthy
The 25 richest Americans - including Jeff Bezos, Michael Bloomberg and Elon Musk — paid relatively little in federal income taxes between 2014 and 2018. American Capitalism is producing an economy where the rich keep getting richer, the poor receive less than living wages, and the middle class shrinks. The growing concentration of wealth produces jobs in the building of expensive homes, privately-owned airplanes and yachts, and private swimming pools. At the same time, the majority of Americans can only get along on rising credit card debt. Even the middle class is having trouble paying for the rising costs of college education and huge medical costs if stricken with cancer, heart disease or other illnesses.
Businesses would benefit greatly from a more equitable income distribution. Millions of Americans would buy more food, clothing, appliances, transportation, housing and personal services All businesses in these categories would increase their sales and profits.
Rich Americans would have to pay higher taxes. Republicans have done their best to keep wages low and keep taxes on the rich low. It is time for businesses and their associations to start questioning whether low wages and low taxes on the rich produce a better society. Paying higher wages and charging higher taxes on the rich would usher in more widely-shared prosperity.
Policies improving the country’s infrastructure
Most surveys shows that most Americans want more spending to improve U.S. infrastructure. There are too many roads with pot holes, too many unsafe bridges, not enough ports and airports. Civil engineers often grade American infrastructure as C- or D in quality and safety. As America manages to reduce the pandemic problem, more persons will return to commuting as companies cut down “work-at-home” arrangements. More commuting means more traffic congestion, more physical and mental stress, and reduced productivity. Americans have to invest in better and safer systems of transportation. Businesses will get a major payoff from improvements in infrastructure.
Biden’s plan calls not only for a major investment in “hard” infrastructure but also in “soft” infrastructure. The country needs to improve its primary, high school and college education so that Americans are equipped with the skills needed to run a growing digital economy. The U.S. needs to improve child care systems so that both parents can work if they wish. Parents also need help in providing assisted-living homes and nursing homes for their aging grandparents. Improvements in soft infrastructure will make life easier for parents and result in higher motivation and productivity.
Policies attracting more young immigrants
Immigrants have been the secret treasure behind the rapid growth of the American economy. Immigrant groups such as the Irish, Italians, Russians, Jews, Chinese and many others came to America, the land of promise, and worked first in our factories where many rose to leadership, and many other immigrants opened small businesses that grew bigger over time.
Without immigrants, America would have experienced slower economic growth. Today, marriage rates and fertility rates are declining throughout the world, including in America. Men and women in America are wondering whether to have children, and if so, how many. People are facing a rising cost of raising children. The cost of raising a child to the age of 18 for a middle-income married couple with two children with childcare and education expense is on average $284,570. Knowing this will enable parents to better control their costs. Women who still want a marriage and children no longer talk about raising a large family. They mostly want two children, a boy and girl. If most married couples aim for two children, this will keep the country’s population fairly constant.
Yet strong economic growth would need a growing population. The answer is to admit more immigrants, especially young and working age people. This would counter the aging of America’s population.
About 11 million people have come into the U.S. illegally. They do their best to be inconspicuous so they are not caught and deported. They often take jobs below their abilities. Among them are 650,000 young people called “dreamers” who came as children. The Daca program (Deferred Action for Childhood Arrivals) allowed them to live and work in the U.S. without fear of deportation.
These dreamers could be a good source of new labor and productivity if they could procure citizenship and legal rights.
American also needs two other immigrant groups. Farm workers are needed to do temporary work during busy agricultural seasons. And businesses need skilled persons in science, engineering, and computers. High tech businesses have particularly been hurt by restrictions against allowing skilled people to come and work in the U.S.
Policies Favoring Better and More Affordable Education
Businesses complain that many job applicants lack the skills and mindsets that they need in their businesses. Children grow up in the U.S. with little understanding of business. They rarely understand the jobs that their parents have. They don’t learn about what it takes to be an engineer, a physician, a lawyer, a skilled carpenter. They don’t learn how to manage money by wise spending, saving and investing. All they know is that they will graduate and need a job and often they are without any idea of what they want to do.
Businesses would benefit if kids would grow up with a better financial education and knowledge of careers and working in groups. The Democratic Party shows a greater interest in investing and improving the education of average Americans.
Policies Lowering the Costs of Health Care
Businesses would benefit from lower costs of health care. Most businesses must offer a health care plan to their employees. They need to share some of the health care costs, especially if they are unionized. Businesses should favor legislation that would reduce the cost of hospitalization, surgery and pharmaceuticals. The Democratic Party is active in defending the Obama Care plan and lowering health care costs.
Consider the Purpose of a Business
Most businesses were raised on the idea of maximizing profits. The profits would go to the owners or shareholders. Profits would be higher if the company could pay low wages and also buy from low cost suppliers of the many inputs needed in the business.
This theory of the purpose of a business is now being questioned. Profits remain the chief business objective but not the only objective. A business will operate better if it satisfies its stakeholders as well as its shareholders. If the business satisfies its employees, suppliers, agencies, and even communities, the stakeholders will have more motivation and identify more readily with the business and its goals.
The book Firms of Endearment describes 25 firms that outperformed their competitors by a substantial amount. All of the chosen firms were beloved by the American public. They were all stakeholder driven, not just shareholder driven. These companies had more happy and motivated employees, happy and loyal customers, innovative and profitable suppliers, and environmentally healthy communities. These “firms of endearment” were highly profitable and outperformed the overall market’s performance by a 9-to-1 ratio over a ten-year period.
The new thinking also calls upon firms to be more conscious of looming social problems such as hunger, poverty, water shortages, and environmental problems. At the very least, they should help reduce the Covid-19 pandemic (encourage masks and vaccinations) and combat climate change that threatened to heat up the planet and cause more floods, fires, and hurricanes. Each business has to decide how it can operate as a better citizen.
In January 26, 2021, over 60 top business leaders committed their company to the core Stakeholder Capitalism Metrics released by the International Business Committee. They adopted stakeholder capitalism and they viewed environmental, social and governance factors (ESG) as critical to the success and long-term viability of all businesses. “Stakeholder capitalism becomes now really mainstream,” said Klaus Schwab, the founder and CEO of the influential World Economic Forum.
All said, businesses are developing an expanded view of their objectives and responsibilities. Each business must decide whether to follow the traditional Republican-oriented view of running a successful economy or give serious consideration to the proposals of the Biden Democrats for building and upgrading America’s competitiveness.