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Where is our economic policy? Chief executives say the Bush Administration lacks a viable strategy for U.S. competitiveness

Chief Executive, The, June, 2005 by Peter Galuszka

For President George W. Bush, the night of January 20, 2005, was one to remember. Nine gala balls were held around Washington, D.C., amid blazing fireworks in celebration of his second inauguration. Of the lot, the snazziest shindig was the Black Tie and Boots Ball, put on at the Marriott Wardman Park Hotel by the Texas Society. Featuring exotic animals from Bush's home state, including an armadillo and an alligator, the event was a fast sellout. By some accounts, tickets sold online at prices of up to $4,000 were gone in 40 minutes.

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Corporate leaders greatly preferred Bush to Democrat John Kerry, but since federal laws prevented their companies from donating directly to the Bush campaign, funding the inauguration was one way to show gratitude. Companies lined up to bankroll the events: ExxonMobil gave $250,000 plus another $50,000 just for the Black Tie and Boots Ball, and Altria Group and Time Warner each supplied another $250,000.

Six months later, however, a quiet but stunning realization has crept in: It seems corporate leaders have serious doubts about Bush and his economic team in their second term. Although few chief executives will speak about the issue publicly, they worry that Bush continues to ignore critical issues while he spends time and political capital on more ideologically driven matters such as Social Security reform and building democracies around the world.

Left to languish are issues of equal or greater economic importance, such as America's eroding competitiveness, a decline in R & D and work force education, and a slowdown in high technology efforts aimed at promoting broadband and the Internet. Bush's economic policy team has also failed to address, at least to the satisfaction of CEOs, other serious issues such as the ballooning federal budget deficit, health cost burdens on companies and soaring energy prices.

"Bush seems to have been re-elected on the basis of the fear of terrorism, Iraq and overall security," says one reader, who requested anonymity, in Chief Executive's most recent CEO Confidence Index poll. "But we have the most unbalanced budget, a tax policy that favors the wealthy, declining public schools, a health care system in worsening condition, a trade imbalance with just about every country, oil prices at all-time highs [and] no real alternative energy or conservation plan."

Asked to grade Bush's economic policy, 593 respondents gave the president a grade point average of a C. The highest grade he received was a B- for his tax policies, but on other issues, the President received only passing marks (see report card, left).

At the same time, the magazine's overall CEO Confidence Index witnessed its largest drop ever. The index fell 16.8 points to the lowest level since November 2003. Attitudes toward employment also deteriorated, indicating that no significant increase in hiring is foreseeable (see charts, page 32). Contributing to the doubtful climate in the corner office has been a burst of statistics that show slowing economic growth, weakening capital-goods orders, stock market declines and chaotic energy prices. At the same time, the Federal Reserve seems determined to keep raising interest rates, raising fears of "stagflation," or stagnant growth and high inflation.

It's difficult for chief executives to publicly disparage Bush because many depend on solid relations with the government agencies. Criticizing a sitting president isn't exactly good for business. Also, the majority of chief executives polled are Republicans who support Bush overall; one respondent said he was "100 percent" behind Bush, while another called himself a "devoted Republican."

Yet on economic issues, there remains a notable lack of support. "Republicans have forgotten their economic policy foundations," one respondent wrote. "The loss of manufacturing to subsidized imports will turn us all into hairdressers and used car salesmen making no products, with no research and development."

Who's in Charge?

The blame for the business community's queasiness rests with Bush's economic brain trust. While former President Bill Clinton received raves for economic policy stars such as Goldman Sachs' Robert Rubin and bright academics like Lawrence Summers, Bush's economic policy team garners little such praise.

The titular head of Bush's team is John Snow, the former CEO of the CSX rail company, toting a Ph.D. in economics. Regarded as an affable team player. Snow came onboard in 2003 after Bush fired Paul O'Neill, the outspoken former CEO of Alcoa, who ran afoul of the President's inner sanctum. Another key post, the director of the National Council on Economics, is held by a relative newcomer, Allan Hubbard, a businessman and Bush backer from Indiana with limited Washington or economic policy experience. Observers note that Snow and Hubbard hail from mainstream business backgrounds rather than from economic think tanks or financial agencies. "Clearly," says Diane C. Swonk, chief economist at Mesirow Financial in Chicago, "economists do not have the same role as they did in the early 1990s when a lot of crises hit."

Business Services Industry

Where is our economic policy? Chief executives say the Bush Administration lacks a viable strategy for U.S. competitiveness

Chief Executive, The, June, 2005 by Peter Galuszka

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