Recently, President Obama and Secretary of the Treasury Lew have been pushing back against and seeking legislation to prevent corporations from merging with companies overseas to shield themselves from U.S. tax rates (known as inversion transactions), or leave America altogether, calling for a new sense of "economic patriotism" from business.
Some have argued that the notion of "economic patriotism" stems from fascist rhetoric of the 1930s, and others have argued that patriotism was used to justify President Roosevelt's economic policies during the Great Depression. But we found another interesting early example of a U.S. president invoking patriotism as a means of criticizing businesses who opposed the federal government's economic policies.
U.S. President Barack Obama (C) speaks as outgoing Treasury Secretary Timothy Geithner (L) and Chief of Staff Jacob Lew look on during an event at the White House on January 10, 2013 in Washington, DC. (Image Source: Getty Images)
As free-market journalist and author Henry Hazlitt wrote in Newsweek in 1951, in a June 18 article titled "Price Controllers in a Panic" (which you can find in Hazlitt's collected editorials from 1946-1966, "Business Tides"), President Harry Truman's Economic Stabilization Administrator Eric Johnston declared
that those who oppose the continuance of price and wage controls are led by special interests whose whole attitude is "damn the consumer, and full pockets ahead." They are "grinding their own ax without thought for the welfare of anyone or anything else . . . at a time when men are dying in battle in Korea for a free way of life."
For the president's price-and-wage control law was set to expire on June 30 that year, and so the Truman administration was pushing hard for its extension, arguing that in absence of the president's economic policies, there could be "an unmanageable torrent of inflation."
In an article published shortly thereafter, Hazlitt indicates that Truman himself used similar rhetoric in support of price controls:
Mr. Truman, in his recent radio address, of course utterly ignored the fact that the upward pressure on prices today comes from his own Administration's monetary and fiscal policies. And he went on to imply that those who, like himself, favored the price control, were inspired only by the loftiest patriotism, while those who opposed price control were merely "lobbyists," who "placed private interests above the national interest."
"After the representatives of the Administration testified in favor of a good, strong law," he explained, "the Congressional committees heard from 124 witnesses, representing all sorts of private organizations. And do you know how many of them came out for the bill? Twenty, just twenty." Instead of concluding that this might indicate some possible weaknesses in the bill, or some real dangers to producers and production, Mr. Truman implied that the 104 opposing witnesses were all placing their "private interests above the national interest."
Hazlitt continued: "Mr. Truman's strange idea is that the only way to be a real friend of the consumer is to make things tough for the producer. But it is a little hard to see just how the consumer gains by measures that discourage production."
Lest you think these wage and price controls were a parochial matter, Hazlitt argued that "Nothing...has more clearly signaled the imminent danger to our whole system of private enterprise" than the price controls and regulations trumpeted by President Truman in his 1951 Midyear Economic Report to Congress.
While President Obama and Secretary of the Treasury Lew are not arguing for sweeping wage and price controls, they are seeking to prevent capital from traveling to those places where it can achieve its highest returns -- where businesses are least hampered by taxes and regulations.
President Obama himself implicitly acknowledged weaknesses in the U.S. business climate in a radio address this weekend, noting that "The best way to level the playing field is through tax reform that lowers the corporate tax rate, closes wasteful loopholes, and simplifies the tax code for everybody."
But before looking at the root causes behind why companies are choosing to reorganize their corporations abroad or move altogether, the president argued that "stopping companies from renouncing their citizenship just to get out of paying their fair share of taxes is something that cannot wait."
The president adds, "when some companies cherrypick their taxes, it damages the country's finances. It adds to the deficit. It makes it harder to invest in the things that will keep America strong, and it sticks you with the tab for what they stash offshore."
Whatever one's sentiments on the merits of President Obama's policy, it bears noting that his administration's rhetoric has been invoked previously when businesses reacted negatively to federal economic policy in the eyes of its promulgators.
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