Bush Walks Delicate Line on Business

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Bush walks delicate line on business

Corporate ties, pro-business policies could become liability

By Dana Milbank and Mike Allen

THE WASHINGTON POST

July 8 — While President Bush worked with aides on his upcoming speech addressing mushrooming corporate scandals, a question arose about whether the administration could look hypocritical because of the ongoing federal probe of Halliburton Co.’s aggressive accounting while Vice President Cheney was in charge of the firm.

“THERE ARE good actors and there are bad actors; he’s one of the good guys,†Bush said of Cheney, according to an aide.

The White House is anxiously hoping the American public embraces that distinction.

A year ago, Bush’s status as the first MBA president was an asset, and his administration full of corporate executives symbolized efficiency and good stewardship. The dozens of industry-favored laws and regulations Bush proposed were indications that the administration would expand the economy. But now that Wall Street and corporate America have been tarnished by a wave of accounting scandals, the Bush administration’s corporate background and pro-business policies are a potential liability.

Bush’s speech on Tuesday to 1,000 business executives on Wall Street begins a delicate task for the president. He must make a credible denunciation of corporate wrongdoing and offer reform proposals to calm stricken markets and boost investor confidence. To do so, he must overcome questions about his administration’s strongly pro-business record, as well as the records he and his administration officials compiled as corporate executives before coming to power.

Discussing the matter last week in Cleveland — a message he will repeat tomorrow — Bush said, “You need to know that by far the vast majority, by far, of corporate America are above-board and doing their job just the way you’d expect them to do.â€

Bush’s opponents are eager to point out that his administration has been an ally of business at almost every turn, in areas of energy, the environment, health care, labor and financial regulations, and taxes. In boom times, when corporations are admired, such charges have had little impact. In a down market, when executives are suspect, they are more menacing. Among the items Democrats, environmentalists and labor groups are citing:

In the area of business and the environment, Bush has proposed ending the Superfund cleanup tax, which would save money for oil and chemical companies and shift the burden to taxpayers. The administration has relaxed clean-air enforcement rules governing old coal-fired power plants, saving the utility and refinery industries from adding costly antipollution equipment. Bush’s Environmental Protection Agency has proposed rules to let mining companies dump dirt and rock waste from mountaintop coal mining into rivers and streams.

In energy policy, Bush pulled out of the Kyoto global warming protocol and dropped his earlier plan to regulate carbon dioxide as a pollutant. Both actions save U.S. industry from restraints that could have limited its energy use. Bush’s national energy policy, developed in consultation with industry, included many proposals that would boost energy companies: drilling in the Arctic National Wildlife Refuge, easing restrictions on expanded petroleum and electricity transmission, and tax incentives for producing alternative fuels.

The administration did not favor higher fuel-efficiency standards, which automakers opposed.

In health care, Bush has lobbied for a prescription drug plan for senior citizens that is backed by industry over a costlier Democratic alternative. Bush negotiated a compromise HMO patients’ bill of rights that prevented Congress from passing a measure that would have been costlier for health care providers. The administration also proposed easing confidentiality rules governing Americans’ medical records, a decision that was hailed by the insurance industry.

‘ZERO GROWTH’ FOR SEC

In labor policy, Bush signed legislation repealing workplace ergonomics rules, saving businesses $4.5 billion yearly and replacing the rules with voluntary standards opposed by labor unions. The Labor Department eased its enforcement of workplace rules after lobbying by business groups. The Bush administration also suspended a Clinton administration rule that directed federal agencies to see whether prospective contractors violated workplace safety laws.

In the area of financial and tax policy, Bush had proposed a “zero growth†budget for the Securities and Exchange Commission for next year. The SEC’s chairman asked Congress for $91 million more to increase staff and pay, and Congress’s General Accounting Office warned in March that the “SEC has been faced with an ever increasing workload and ongoing human capital challenges,†which “adversely affects SEC examination and inspection functions†and raises “concerns about enforcement.â€

Last fall, Bush endorsed a House economic stimulus package that would have provided $70 billion in corporate tax cuts.

Labor leaders and environmentalists say the administration routinely favors industry. “The administration has sided with workers when the interests of workers have coincided with the business agenda,†said Bill Samuel, AFL-CIO legislative director. “When there’s an issue that has divided business and labor, they have sided with business.â€

Business leaders acknowledge they have a reliable ally in Bush. “The attitude of the business community is the president can always do more, but that’s part of the game,†said R. Bruce Josten, U.S. Chamber of Commerce executive vice president for governmental affairs. He said business has “clearly appreciated†a number of Bush policies, particularly regarding the environment.

The administration and its ideological allies say Bush’s support for business is not blind. While acknowledging that industry has embraced most Bush policies, administration officials maintained that they have also rejected entreaties by business. One of the biggest, they said, was the White House decision not to embrace the House GOP plan to retroactively repeal the corporate alternative minimum tax, which could have resulted in huge government payments to some companies.

After Sept. 11, Bush supported a $15 billion bailout of the airline industry, but refused to follow with similar packages for the hospitality industry, among others that were suffering in the aftermath of the terrorist attacks. And his acceptance of federal airport security screeners and a homeland security bureaucracy that will impose more restrictive Customs and immigration rules has worried some free-market proponents.

‘FRUSTRATING ADMINISTRATION’

Wayne Crews, who examines federal regulations at the libertarian Cato Institute, said the tilt toward business has not been pronounced. He said pages of new regulations dropped 13 percent during the first year of the Bush administration. But the costs of these regulations, $800 billion a year, were “roughly flat,†he said. Businesses “are in the very same position they were before,†Crews said.

Often, Bush actions that boost one business hurt another. His $1.3 trillion tax cut was a boon for small-business owners because it reduced individual tax rates and eliminated the estate tax — but it contained little relief from corporate taxes. Bush’s move to protect U.S. steel from cheap imports pleased steelmakers but angered manufacturers who buy steel. And the administration’s antitrust enforcers have surprised some business interests by continuing the Microsoft case and blocking United Airlines’ acquisition of US Airways.

“It’s a frustrating administration,†said Fred Smith, head of the free-market Competitive Enterprise Institute. “I was more optimistic a year ago than I am now.â€

Bush aides hope they can convince the public that administration support of business is balanced. “We tried to put in place policies that help grow the economy,†said one. “That doesn’t mean we’re sanctioning anything illegal. Who’s prosecuting these cases? We are. If anybody turned the other cheek or didn’t look at it, it was the Clinton administration.â€

One impediment to making this case is the corporate past of Bush and Cheney.

A top concern at the White House is Halliburton. The SEC is investigating possible irregularities in how the energy company began booking cost overruns on energy-related construction jobs when Cheney was chief executive. A Halliburton official said the accounting change had been widely made within the construction industry and said the decision was made by the company’s financial group, most of them accountants, and not at Cheney’s level. A Halliburton spokeswoman said the company has met with SEC investigators and is cooperating.

Bush had his own brush with the SEC 10 years ago: He was cleared during his father’s presidency of insider trading when he was a director of an energy company. Bush had been tardy in disclosing his sale of a large chunk of shares in the company, Harken Energy, before it announced a large loss. The company was also forced to reverse a practice of accounting for income that should have been included in future years, at a time Bush was on the board’s audit committee.

Senate Majority Leader Thomas A. Daschle (D-S.D.) said on CBS’s “Face the Nation†yesterday that he had “real questions†about the Harken transaction and said Bush “would do well to ask the SEC to release the file, release it all, let everybody see just what is there.â€

Given the competing pressures on the Bush administration, the president faces a challenging task tomorrow. He must convince the public that he is taking serious action against corporate miscreants without betraying his innate trust in the free market.

White House officials said Bush plans to propose criminal penalties — jail time, not just fines — for chief executives who file misleading financial reports. But the officials said Bush’s policy will stress that the inaccurate filings must be intentional — which may be difficult to prove.

“We can’t legislate good judgment, but we can have punishment for bad ethics and illegality,†a White House official said. “The enforcement needs to be improved. The punishments can be expanded. The deterrence needs to be greater. But you can’t go overboard and have a political reaction and impute more uncertainty and confusion into the markets, which will hurt the economy.â€