What goals for business lobbyists now? After scoring recent gains, NAM is focusing on exports, tax question
Manufacturers used to regard themselves as victims of the federal government. Nowadays that persecution complex has faded. Businessmen have won many of their policy battles in Washington.Skip to next paragraph
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Under Presidents Carter and Reagan, business got a sharp increase in depreciation allowances that have dramatically reduced corporate tax levels; it has also succeeded in obtaining a substantial cutback in the amount of regulation and red tape it faces.
These changes are reflected here at the headquarters of the National Association of Manufacturers (NAM). Certainly the 14,000-member organization still has a list of legislative desires. For example, Alexander B. Trowbridge, NAM president, has been suggesting as partial remedies for the United States trade deficit the need for a more aggressive provision for export credits, for ''clarifying language'' amending the Foreign Corrupt Practices Act, for abolition of the so-called ''unitary tax'' that some states place on major corporations, and so on.
The association has also been studying a long-discussed proposal for an important shift in the nation's tax system to one based on consumption (what the individual spends on goods and services), rather than on income. That would likely involve the introduction of a tax on valued added, a type of national sales tax. The NAM has not yet made a decision on its desirability.
Having helped persuade the government to improve the lot of business, the NAM now is eager to protect those gains.
The NAM's chief economist, Jerry J. Jasinowski, commented: ''Efforts to deal with the federal deficit should not focus on taxes on capital. That would hurt productivity and international competitiveness.''
Already, he argued, larger depreciation allowances for business have encouraged capital spending. He notes how the most recent McGraw-Hill survey indicates that business plans to spend an extra 11 percent, in real terms, on investment this year.
Mr. Jasinowski, former assistant secretary for policy at the Department of Commerce, joined the NAM three years ago. He is part of the association's efforts to improve the quality of analysis and argumentation behind its policy positions.
One key congressional aide dealing with taxes noted that, compared with 10 years ago, ''the business lobby in Washington has got a lot more sophisticated.'' And that, he added, includes the NAM.
The business representatives think carefully of what they want, build coalitions to press for these proposals, and are persuasive with the administration and Congress, he said.
He held, however, that the business lobby made ''a mistake'' in 1981 when it won such ''hefty'' tax cuts for business. ''The public perception is that business is not paying its fair share of taxes,'' he said. Thus business may find it tough to save all its tax improvements.
Congress, of course, backtracked somewhat in 1982 legislation on business taxes. And now the Senate and House deficit-reduction bills include some measures that would raise the tax bills of business. For instance, the Senate bill includes a provision to stretch out gradually the period over which real estate investors can write off their costs from 15 to 18 years.
Many companies have their own economists or seek out the advice of consulting or bank economists, or other sources of economic opinion and research. But many cannot afford to hire an economist to give another view, and providing that analysis is one of Mr. Jasinowski's jobs. Here's how he sees the current situation:
* The rapid 8.3 percent annual growth rate in the nation's output in the first quarter partly reflects an inventory buildup and some accounting quirks involved in the PIK (payment-in-kind) agricultural program. ''The economy is on a trajectory of slowing down for the rest of the year.'' Growth in the current quarter should run at an annual rate of about 5.5 percent.
''That's almost a perfect rate,'' Jasinowski says.
* ''Inflation will not raise its ugly head this year.'' Prices will rise somewhat faster, to around a 5 percent rate. But slack in the economy, including continued relatively high unemployment, plus good productivity gains, should prevent a return to the price escalation of the late 1970s.
* The Federal Reserve System cannot do much either to raise or lower interest rates substantially. ''The Fed's hands are pretty well tied.''
The Fed faces the constraints of an election year, in that if it forced a major boost in rates it could prompt a downturn in the economy and jeopardize the administration's reelection effort. Such monetary restraint would cause an outpouring of criticism from both the White House and the Congress. Moreover, the Fed is also constrained from tightening monetary policy by international liquidity problems - the debt crisis of several important developing countries.
On the other side, having let money grow relatively rapidly in the last 12 months, the Fed cannot substantially loosen monetary policy and lower interest rates without heightening concern about reigniting inflation. The huge federal deficit further handicaps the Fed.
''So the Fed will stay about where they are,'' Jasinowski said. ''They are in a difficult box.''
* The recovery will continue throughout 1984, and there may not even be a recession in 1985. ''The economy will be more sustainable if (the recovery) slows down,'' said the NAM economist.
That's a fairly cheerful forecast from the NAM's top economist.