By Nina Easton, Washington editor
Last Updated: April 20, 2009: 10:04 AM ET
(Fortune Magazine) — Barack Obama has been more critical of corporate America than any recent President. After his speech on the economy on April 14, Washington editor Nina Easton submitted written questions about his views on business. The answers he sent Fortune sounded notably conciliatory. Excerpts:
How can corporate America redeem itself? You reportedly told bankers in a private meeting recently that your administration “is the only thing between you and the pitchforks.” Could you broaden that message for the Fortune 500?
The causes of this economic and financial crisis are complex, and extend from Washington to Wall Street to Main Street. Americans are angry at the extent of the damage that has been done to our economy, and justifiably so. Understanding that frustration is important in restoring confidence and helping our economy and our businesses recover.
The truth is that there is plenty of blame to go around. Many Americans took out loans that they could not afford. Others were enticed into loans they did not understand by lenders trying to make a quick profit. Investment banks bought and packaged these questionable mortgages into securities, arguing that by pooling the mortgages, the risks had been reduced. Credit agencies stamped these securities with their safest rating when they should have been labeled “Buyer Beware.” And as the bubble grew, there was almost no accountability or oversight from anyone in Washington.
Addressing this crisis will require change across the spectrum, not just from corporate America but from Washington and Main Street as well. We need to update our regulatory structure with sound rules of the road that reward drive and innovation instead of shortcuts and abuse. We also need to invest in the drivers of productivity that will make our businesses more competitive in areas like health care, energy, and education.
You said you’d like to see “our best and brightest commit themselves to making things” rather than responding to a culture that celebrates “those who can manipulate numbers.” In what ways do you want to foster companies that make things?
One of the goals of my economic policy is to help lay the foundation for durable economic growth, which drives innovation in our businesses and helps nurture the next generation of homegrown scientists, engineers, and innovators. But as we move forward in this effort, we cannot ignore the fact that our education system is not adequately preparing our workers for a 21st-century economy. Our businesses cannot compete and win in the global economy without a more effectively trained workforce – especially in areas like math and science. That is why so many corporate leaders are advocating for more effective investments in education – from early-childhood education to cultivating more homegrown engineering talent. And that is why I have set a goal that will greatly enhance our ability to compete for the jobs of the 21st century: By 2020, America will once again have the highest proportion of college graduates in the world.
Much of the business community is alarmed over tax increases in your budget. A coalition of business groups argues that this will impede an economic recovery. Do you believe there is validity to this concern, and do you continue to entertain the possibility of lowering the U.S. corporate tax rate?
I have long advocated a fairer, simpler tax code. That’s why my administration has taken far-reaching action to cut taxes in ways that will spur an economic recovery. We have enacted a tax cut for 95% of working families. We passed a recovery act with $75 billion in tax cuts to help businesses create jobs over the next two years. And we are helping small businesses keep their doors open so they can weather this economic storm. Instead of the normal two years, small businesses are now allowed to offset their losses during this downturn against the income they’ve earned over the last five years. Going forward, I’m committed to reforming our tax code to remove the distortions and complexities that get in the way of businesses investing in expanding operations and creating jobs here in the U.S.
The economic crisis has compelled the administration to assert itself over corporate America in ways that Americans aren’t used to. How permanent will this be?
I did not invite the crises that I inherited, and I have always believed that our role as lawmakers is not to stifle the market, but to strengthen its ability to unleash creativity and innovation. But I also have a responsibility to take aggressive action to avoid an even deeper recession and to move this nation toward recovery. History has shown repeatedly that when nations do not take early and aggressive action to get credit flowing again, they have crises that last for many years instead of many months. My hope is that by taking the steps we are taking today, from stabilizing our financial system to helping our auto industry restructure to become more competitive, it will help speed the day that the government can get out of the way and let the private sector do what it does best – innovate, create jobs, and grow the economy.
Many economists seem to think that while the recession is bottoming, the real problem is that we will have a very weak recovery. Do you agree?
While there have been some encouraging signs that our economy may be stabilizing, the risks remain real and significant. We’ve already taken important steps to address our economy’s weakness, including a recovery act that will help create or save 3.5 million jobs and a financial stabilization plan that is expanding credit for homeowners and small businesses. But there is substantial work left to be done – not only to repair the immediate damage, but to ensure that we emerge from this recession with an economic model that leads to durable, sustainable growth.
We’ve heard much about what corporate America does wrong – greed, excessive debt, shortsightedness. What do you believe Fortune 500 leaders do well?
American businesses and workers will remain the very engine of America’s progress – the source of a prosperity that has gone unmatched in human history. Even amid our current downturn, we continue to have the deepest pool of innovators and entrepreneurs of anywhere in the world, many of whom have nurtured strong companies represented on the Fortune 500. These leaders are second to none in creating good jobs, innovative products, and services for consumers and long-term value for their shareholders. And U.S. companies have been on the cutting edge of productivity advances across a range of industries, which is at the heart of sustainable prosperity in the long run.
As many corporate leaders themselves have recognized, in recent years our economy has fallen out of balance. But as we restore this balance, I look forward to working in partnership with America’s business leaders to help repair our broken economy and ensure that we emerge from this recession stronger and more prosperous than before.
First Published: April 19, 2009: 10:49 AM ET