The Political War in Washington is Damaging Business

The Republican Party claims to be the party of business - well, maybe big business since GOP policies sure don't do much for small "mom and pop" businesses - but it's efforts to shut down the U.S. government and push the nation into default are taking a toil on business and helping to create an atmosphere where business are inclined to sit on cash due to uncertainty of where the economy is headed under a system that is focused on anything and everything except the economy despite lip service to the contrary. So says the venerable British magazine The Economist. And the fault rests primarily on the GOP which continues to pander to crazies and extremists. Here are some story highlights:

THE great Calvin Coolidge reputedly said that “the business of America is business.” These days the business of America is carpet-chewing rage. American politicians are intent, not on improving their country’s competitiveness, but on gouging each other’s eyes out.

Businesspeople still enjoy huge advantages from being in America. Business is part of its DNA in much the same way that la dolce vita is part of Italy’s. America has a disproportionate number of the world’s most innovative businesses, from greybeards such as 3M to toddlers such as Salesforce.com.

Yet America’s politicians are intent on squandering this painfully accumulated capital. As it revoked America’s triple-A credit rating on August 5th, Standard & Poor’s explained that the gulf between the political parties was becoming unbridgeable, and that policymaking was becoming unpredictable. Other sober institutions concur. The World Economic Forum has downgraded America from second place in 2009 to fourth place in 2010 in its annual global competitiveness rankings. By the forum’s reckoning, America comes a lowly 40th for the quality of its institutions, 54th for trust in its politicians, 68th for government waste and a dismal 87th for its macroeconomic environment. The World Bank sees a relentless decline in various indicators of American governance.

This ideological civil war has led to the marginalisation of corporate America. In the Republican Party country-club types have been elbowed aside by Rush Limbaugh listeners. . . . . The civil war is creating two obvious problems for American business: paralysis and uncertainty. The Obama administration is still pockmarked with vacancies because Congress refuses to approve routine appointments. Important trade deals have been languishing for months. The Republicans are fighting a war of attrition against Barack Obama’s health-care reforms and his new Consumer Financial Protection Bureau. All this has immediate consequences for business.

The direst consequences of all this lie in the future, however. America’s health-care system consumes a sixth of GDP but produces only mediocre results. America’s schools produce run-of-the-mill results despite generous funding. The immigration system leaves 11m people in the shadows and condemns many of the brightest graduates of American universities to years of grovelling before bureaucrats if they want to stay in America. Many give up and take their skills back to India or China.

American companies are sitting on a gigantic pile of cash; Apple alone has $76 billion in the bank. Why won’t corporate America invest in America? It does not help that domestic demand is feeble, and that the global economy is in turmoil. But American politicians deserve some of the blame. Their unpredictability erodes confidence.

Even more dangerously, the gulf between business and the rest of the country is widening: opinion polls show that American businesspeople are losing faith in their country even as ordinary Americans are losing faith in business. Calvin Coolidge’s statement was once denounced as the height of bourgeois complacency. Today it sounds like a reminder of an America that is in danger of disappearing.