Posted on 23-10-2002

Business As Usual
By PAUL KRUGMAN, NYT, 22 Oct02

The mood among business lobbyists, according to a jubilant official at the
Heritage Foundation, is one of "optimism, bordering on giddiness." They
expect the elections on Nov. 5 to put Republicans in control of all three
branches of government, and have their wish lists ready. "It's the domestic
equivalent of planning for postwar Iraq," says the official.

The White House also apparently expects Christmas in November. In fact, it
is so confident that it has already given business lobbyists the gift they
want most: an end to all this nonsense about corporate reform. Back in July
George W. Bush declared, "Corporate misdeeds will be found and will be
punished," touting a new law that "authorizes new funding for investigators
and technology at the Securities and Exchange Commission to uncover
wrongdoing." But that was then; don't you know there's a war on?

The first big step in undermining reform came when Harvey Pitt, chairman of
the S.E.C., backtracked on plans to appoint a strong and independent figure
to head a new accounting oversight board.

But that was only a prelude. The S.E.C. has been underfunded for years, and
most observers — including Richard Breeden, who headed the agency when Mr.
Bush's father was president — thought that even the budget Mr. Bush signed
back in July was seriously inadequate. But now the administration wants to
cancel most of the "new funding" Mr. Bush boasted about.

Administration officials claim that the S.E.C. can still do its job with a
much smaller budget. But the S.E.C. is ludicrously underfinanced: staff
lawyers and accountants are paid half what they could get in the private
sector, usually find themselves heavily outnumbered by the legal
departments of the companies they investigate, and often must do their own
typing and copying. Officials say there are investigations that they should
pursue but can't for lack of resources. And the new law expands the
S.E.C.'s responsibilities.

So what's going on? Here's a parallel. Since 1995 Congress has
systematically forced the Internal Revenue Service to shrink its
operations; the number of auditors has fallen by 28 percent. Yet it's clear
that giving the I.R.S. more money would actually reduce the federal budget
deficit; the agency estimates that it loses at least $30 billion a year in
uncollected taxes, mainly because high-income taxpayers believe they can
get away with tax evasion. So starving the I.R.S. isn't about saving money,
it's about protecting affluent tax cheats.

Similarly, top officials don't really believe that the S.E.C. can do its
job with less money; the whole point is to prevent the agency from doing
its job.

In retrospect, it's hard to see why anyone believed that our current
leadership was serious about corporate reform. To an extent unprecedented
in recent history, this is a government of, by and for corporate insiders.
I'm not just talking about influence, I'm talking about personal career
experience. The Bush administration contains more former C.E.O.'s than any
previous administration, but as James Surowiecki put it in The New Yorker,
"Almost none of the C.E.O.'s on the Bush team headed competitive,
entrepreneurial businesses." Instead they come out of a world of "crony
capitalism, in which whom you know is more important than what you do and
how you do it." Why would they turn their backs on that world?

And don't forget the personal incentives. Almost all of those ex-C.E.O.'s
in the administration became wealthy thanks to the connections they had
acquired in Washington; the exception is Mr. Bush himself, who became
wealthy thanks to the connections his father had acquired in Washington.
This process continues. Senator Phil Gramm, who pushed through legislation
that exempted Enron's trading practices from regulation while his wife sat
on the company's board, is retiring and taking a new job: he's going to UBS
Warburg, the company that bought Enron's trading operation. Somehow,
crusaders against business abuse don't get similar offers.

The bottom line is that you shouldn't worry about those TV images of men in
suits doing the perp walk. That was for public consumption; now that the
public is focused on other things, it's back to business — insider business
— as usual