Reuters

(Reuters)

No Turning Point Yet in Obama Relations With Business

By Features Reuters

U.S. businesses are heartened by President Barack Obama's push to extend Bush-era tax cuts, but they are not ready to declare a breakthrough in an often-tense relationship with the White House.

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Obama's first two years in office have been characterized by conflict with companies over policies ranging from his controversial healthcare law to financial regulation reform.

When Democrats lost their majority in the House of Representatives to Republicans in the November elections, a chastened Obama promised to would work harder to reach out to the business community, an important constituent in his drive to boost the economy.

The tax cut package is part of that process. The compromise bill would extend low tax rates for two years for all income levels, including the wealthiest Americans and small business owners who fall into a high-income tax bracket.

Obama disliked extending the cuts for higher earners as Republicans demanded but agreed to do so in order to secure middle class tax relief and unemployment insurance extensions.

Companies welcomed that move.

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"He certainly came out and compromised on the big tax deal ... to keep tax rates low for business owners," said Chris Walters, manager of legislative affairs at the National Federation of Independent Businesses (NFIB), a lobby group for small companies that have an average of 8-10 employees.

Walters said it was too early to tell whether a major change between Obama and business had taken place.

"The proof will be in the pudding for what types of actions the administration makes working with the new Congress next year," he said.

The White House believes progress has been made already. It points to Obama's recent business-oriented trip to Asia and successful negotiation of a free trade agreement with South Korea as evidence of a business-friendly administration trend.

Further, on Wednesday the president will meet with 20 chief executives from corporations such as Dow Chemical Co, Google Inc, and Boeing Co to discuss job creation, export promotion, tax reform, and deficit reduction.

"The president believes a robust economic recovery will only come through a partnership with the public and private sector," White House spokeswoman Jen Psaki said.

"The working session (with CEOs) is an opportunity for the president to continue building strong partnerships in the business community toward that goal."

NOT A THAWING OF RELATIONS

That gesture may be effective for some, but not everyone in the business world is impressed.

Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce, a lobby group that has clashed repeatedly with the White House, said the tax package and Korea trade pact were only two items on a long wish list.

"In two areas where the business community has been, for two years, calling for action, we're seeing some action take place," he said. "I don't know why everyone in the press would suddenly consider this a thawing of relations."

Josten pointed out that the Korea trade pact was not a done deal and the tax cut bill had not yet passed. The U.S. Senate is expected to approve the tax package by an overwhelming margin on Wednesday.

Paul Merski, chief economist at the Independent Community Bankers of America, a group that represents 5,000 smaller banks nationwide, said businesses would be watching Obama's choice to replace outgoing economic adviser Larry Summers for further evidence of a business-friendly evolution.

The tax cut bill, in the meantime, was a positive signal.

"It's definitely a step in the right direction to help support the business community, particularly the small business owners nationwide that would be seriously injured by the tax increases," Merski said.

"It remains to be seen whether, you know, this is just kind of a deal that happened because it's crunch time ... or whether these are pro-growth tax measures that are genuinely supported by the administration."

The administration supports the package now, but Obama has said he will not support extending tax relief for the wealthiest Americans again in two years.

That doesn't sit well with companies that would like certainty for business planning over a longer time horizon.

"We would like to start there and hope that the president is going to be willing to work with the Congress to extend those rates into the future," said the NFIB's Walters.

"This is only a two-year tax plan."

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