Moguls Revolt Against Obama
The White House’s charm offensive toward the business community could have used a representative in Sun Valley last week. While President Obama, Chief of Staff Rahm Emanuel, and Treasury Secretary Timothy Geithner all talked up the economy and the positive impact of the administration’s policies in interviews last week, their words were viewed suspiciously by the titans of media, technology, and finance assembled for Allen & Co.’s annual conference in the sleepy resort town nestled in the crevices of Idaho’s Pioneer Mountains. The most generous comment about the current state of the economy came from Google CEO Eric Schmidt, who serves as an adviser to the president on science and technology, and even then the best he could muster was that, “Everybody is in a sort of funk.”
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In both on- and off-the-record conversations with The Daily Beast, many of the other moguls in attendance—who collectively control hundreds of billions, if not trillions of dollars, of the country’s gross domestic product—were less diplomatic, expressing serious concern about the administration’s motives and openly worrying that its policies will cause sustained damage not just to their consumer-facing businesses, but also to the long-term health of the country.
“To start to have negative relationships with the banks hurts our economy because we depend on them,” said former Yahoo and Warner Bros. CEO Terry Semel. “It would really help if we can get both sides [government and business] to feel good about each other because what’s more important than the short term crisis is the status of our economic power several years from now and how that affects the younger population and our children.”
Added John Hendricks, founder of Discovery Communications: “Government needs to focus on how to incentivize companies because we in business are the ones who create jobs. I’d like to see them come around and be more proactive about free enterprise and this wonderful system we have.”
Despite a 12 percentage point swing in top line growth over the last six months—from negative 6 percent in last year’s fourth quarter to positive 6 percent in the first quarter of this year—none of the moguls we spoke with believe the economy is headed for a full recovery. Indeed, the administration’s response to the global economic crisis cast a pall over what should have been a more upbeat conference than in recent years when the credit market collapse, advertising recession, and continued disintermediation of their businesses from technology caused media company stock prices and deal activity to fall to unprecedented lows. Heading into the conference, stock prices were up about a third from where they were a year ago, after all. (It's also worth noting that the titans were griping while enjoying an all-expense paid retreat—complete with luxury suites, catered meals, free booze, golf and whitewater rafting, and private security detail—easily running Allen & Co. a few million dollars.)
When asked if he thought the administration was anti-business, Time Warner CEO Jeff Bewkes smiled silently for a few seconds then said, “I think it’s time for a glass of wine.”
Instead of deal-making, however, there was only dourness.
“No one is being really expansive,” said Sir Martin Sorrell, CEO of WPP Group, the the world's largest advertising company. “There’s been a sea change in people from being highly energized to pretty demotivated.”
• Lloyd Grove: Trashing Obama’s Economic TeamThere are a myriad of factors contributing to the uncertainty, from the expiration of the Bush administration’s tax cuts and looming tax increases on overseas profits to persistent joblessness and unmanageable deficits in both the U.S. and Europe. The economic contagion spreading across Europe is particularly germane to the U.S., with our recovery being stretched out into a long period of slow growth and slight dips. Hendricks, for instance, predicts that a full recovery could still be another two years away.
The anxiety among executives created by this scenario revolves around the fact that the administration is running up the deficit as we bump along on the path to recovery without addressing the long-term issues in our economic system that really need fixing, such as pension and health-care costs. (Rising health-care costs were the topic of a panel discussion on the conference’s opening day, for instance.)
Former Viacom CEO Tom Freston says of the deficit: “It just seems so unhealthy, so large, and so scary that I don’t see how you can keep piling on.”
According to Haim Saban, the billionaire creator of the Mighty Morphin Power Rangers and a staunch Democratic supporter, the administration did the right thing by providing stimulus packages in March and June even if it didn’t achieve the hoped for results. Now it must choose between cutting the deficit or throwing more money at the problem, to juice consumer spending and job creation.
While most of the moguls understand that President Obama inherited a financial crisis without precedent, they also note that his administration’s heavy-handed rhetoric has positioned it, from a corporate-relations perspective, as anti-business. That sentiment was palpable among the executives at Sun Valley, even though none of them would say so on-the-record (this was a media-savvy crowd, after all). When asked if he thought the administration was anti-business, Time Warner CEO Jeff Bewkes smiled silently for a few seconds, then said, “I think it’s time for a glass of wine.” News Corp. CEO Rupert Murdoch, who is never shy to voice his opinion on world leaders, said “definitely not” when asked to comment on President Obama’s relationship with corporate America. And while Liberty Media CEO Greg Maffei fielded questions from the media for a good 10 minutes by the Duck Pond on the conference’s first day, the only one in which he declined comment was about whether the administration was anti-business or not.
“I do think the administration will blame business for things too quickly,” said a brave Peter Chernin, the former News Corp. chief operating officer and heavy Democratic donor. “I don’t think they are anti-business, it’s more nuanced than that, but they appear that way because they jump too quickly on the bandwagon.”
So bad is the administration’s current relationship with corporate America that even the typically Democratic-leaning media moguls are suggesting that the independent electorate is unsettled enough to tilt the upcoming November elections in favor of the Republicans. In fact, that was the hope of one cynical mogul looking to jumpstart his business.
“I hope there’s more gridlock so that business could get on with what it wants to do rather than being interfered with,” said this source.
Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, Black Men, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.