Download Section Outline (PowerPoint file - Faculty Directory | Berkeley-Haas

Week 4: Political Theories and
Institutions
BA 107
Section Outline, 9-24-04
• Administrative Matters
– Email list
– Grading for Section Participation
• Review
– Conditions fostering the rise of big business in
late 19th century America
– Rise of big government in response to the rise
of big business
Today’s Agenda
• Identify key policies that affect business in the
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Democratic and Republican Party Platforms
Identify common grounds in both platforms
Identify primary differences in the two platforms
Implications for business
– How these policies affect a company’s bottom line
– But also consider non-market issues, such as
legitimacy and effect on stakeholders
– For both perspectives, maybe advantageous to divide
into long-term, medium-term, and short-term effects
What are the key policies that
affect business?
Democratic Party Platform
Democratic Party Platform
• Job Creation
– Tax Reform
• Close tax loopholes for big corporations; tax cuts for small and
medium-sized businesses
– New investment corporations
• to extend capital to SMB
– Uphold trade agreements
• protection of international workers’ rights and environmental
standards
– Invest in technology
– Enhance transportation system
– Promote Small business
• (double funding to use technology to grow)
– Reduce health care costs to companies
Democratic Party Platform
• Protecting the Middle Class
– Cutting taxes for the middle class
– More federal assistance (economic downturn;
retirement benefits)
– Raise minimum wage
– Tax incentives for home ownership
– Fiscal discipline (pay as you go)
– End corporate welfare
Democratic Party Platform
• Protecting the Environment
– Clean air, water
– Reject false choice between healthy economy
and healthy environment
• Tax credits for private sector investments in clean,
renewable sources of energy
– Improving fuel standards
– (Cf. Republican market-based approach)
GM Is Getting Sick of High
Health-Care Costs
• LAS VEGAS — National health-care coverage should be
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an issue in this year's presidential campaign, says Gary
Cowger, president of General Motors Corp.'s North
American operations.
“We need to start a discussion on it now,” he tells a J.D.
Power & Associates' International Automotive
Roundtable held in conjunction with the 2004 National
Automobile Dealers Assn. convention here.
Cowger says GM, the nation's largest purchaser of
health-care insurance, is suffering from the burden of
spending $4.5 billion annually covering 1.2 million
workers, retirees and their spouses.
--keepmedia.com
Democratic Party Platform
• American businesses pay more than competitors
for health care, reducing competitiveness
– Bush policies favor HMO, drug companies
– How to cut health care costs? Lift burden on families,
businesses, and the self-employed by picking up tab
for highest-cost medical cases.
• Use technological know-how to reduce administrative costs
• Cut prescription costs
• Invest in science to combat disease
• Expanded coverage for all – but where will money come from?
What are the policies that
affect business?
Republican Party Platform
Republican Party Platform
• Economic Growth
– Lower taxes –panacea GDP would have been
lower had it not been for tax cuts
– Tax Reform – make tax cuts permanent
– Simplify tax code
– Reindex Alternative Minimum Tax
– Fiscal Discipline
Republican Party Platform
• Fiscal Discipline
– How to justify largest deficit in US history?2000 downturn,
terrorism, war on terror at fault. Also, view deficit in terms of
relative size to GDP. Well within historical ranges. Fiscal
discipline in right direction
– Proposed methods
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Pay-as-you-go
Cap on discretionary spending
Line item veto
Sunset commission
Management agenda
Corporate Accountability
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Making CEO, CFO vouch for truth and fairness of disclosures
Independent Board to oversee accounting
New tools to root out corporate fraud
Enhanced penalties against corporate misfeasor
Republican Party Platform
• Reform Litigation System
– Frivolous law suits driving up costs of doing
business in America by forcing companies to
pay excessive legal expenses to fight off or
settle baseless lawsuits
– Meaningful Tort Reform
• Medical Tort Liability Reform
– OB/GYNs unable to practice because of high
costs
Republican Party Platform
• Health Care
– Shifting costs to federal government will not solve
problem, will just increase taxes.
– Aid small businesses in offering health care to
employees; empower self-employed through access
to affordable coverage; putting patients and doctors
in charge of medical decisions (this will increase cost),
reducing law suits and punitive damages (will not
discourage malpractice); AHPs (small businesses pool
together to offer health insurance)
– No government-run universal health care
Republican Party Platform
• Protecting Rights of Workers
– Right-to-Work laws: protect workers who do
not wish to join unions (Issue framing)
– Workplace safety, overtime protection,
protection of pensions
• Environment
– Market-based approach
Remarkable Similarity
• Private sector, not government, as engine of growth.
Government’s role is to create environment that will
promote private sector investment, foster competition,
and strengthen the foundations of an innovative
economy
-- Democratic Party Platform
• Small businesses are the most potent force of economic
growth and job creation in America
--Republican Party Platform
To varying degrees, both parties have accepted the role of
government intervention in the market place
What are the Primary Differences
between the Democrats and the
Republicans?
Primary Differences
• Republicans
– Tax cut as primary tool
– More likely to adopt market, or quasi-market
approaches
– Tort reform
• Democrats
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Greater willingness to tax
Apparent favor for SMB over larger corporations
Greater emphasis on protecting the “little guys”
Greater emphasis on protecting the environment
Greater willingness to intervene when markets fail
How to reconcile …
• The apparent aberrations of some
“industries,” voting against their interest
• The enigma that “pro-business”
Republican presidents tend to perform
“worst” economically than Democratic
presidents