As the lawmaking body of the U.S. national government, Congress is responsible for all legislation that affects American business. Its investigative powers and role in the appointment process also affect business.
Since the adoption of the U.S. Constitution in 1789, Congress has had a powerful impact on economic policy in the United States. That impact has generally increased, largely in response to economic problems such as depressions, business scandals, or the public’s desire to improve the social welfare of the American people. Members of Congress have generally been quite supportive of business interests, although some business leaders have been critical of some efforts at regulation or taxation.
For most of the nineteenth century, Congress rather than the president shaped economic policy. Congress’s approach to American business during the nineteenth century was essentially laissez-faire–a hands-off, supportive attitude that did not interfere in business operations.
Congress’s approach, however, was not entirely laissez-faire. To support nascent American industry during the early years of the republic, it adopted a policy of protective
In the years before the U.S. Civil War, Congress rarely acted to regulate the American business community, nor did it impose taxes that might have inhibited business profitability. Congress established the Second Bank of the United States in 1816 as a means of providing a national currency, but President Andrew Jackson allowed it to lapse. In the absence of a centralized approach to banking, Congress left banking regulation to state governments, often producing a chaotic approach to finance.
Congress began to change its approach during the Civil War, when the financial stress of the war prompted Congress in August, 1861, to create an
In 1862, Congress acted to support the settlement of the West with the Homestead Act that provided for free land for people who settled on it for a period of time. In 1864, Congress provided for subsidies for American
Businesses, such as steamship companies or textile mills, were allowed to operate with no national governmental oversight, in spite of poor safety records or unsafe working conditions. Only when some aspect of the business world, such as railroads during the 1880’s, became so abusive as to be harmful to other segments of the economy did Congress try to apply any sort of regulation. Congress passed the
Congress went further in 1890, passing the
In the first decade of the twentieth century, Presidents Theodore Roosevelt and William Howard Taft used the Sherman Antitrust Act to break up various monopolies such as the Standard Oil Trust. As was often the case with much of the legislation affecting business, Congress legislated, but the executive branch was responsible for enforcement. The election of several progressives to Congress during the early twentieth century, coupled with the activism of Presidents Roosevelt and Taft, led to congressional action to protect American consumers from abusive practices by business and to enable the market to work more efficiently than was the case under the increasing power of monopoly capitalism. Although some business leaders such as the banker J. P. Morgan were critical of this government intervention, most Americans saw it as necessary to deal with an increasingly complex economy.
The legislation establishing the ineffective Interstate Commerce Commission had been one of Congress’s first efforts at regulating an industry. The
During the twentieth century, it was often presidents who took the lead in establishing economic policy, as they sent legislative packages to Congress. Individual representatives and senators continued to be protective of business interests in their home states, but the balance of policy-making power was slipping into the hands of the presidents.
Spurred on by President Franklin D. Roosevelt, Congress took major action after 1933 in trying to find means to bring the United States out of the
In the years after World War II, Congress, often in response to presidential legislative initiatives, continued to be supportive of American business although it also displayed a concern for consumers and workers. For example, some business owners criticized congressional increases in the minimum wage, the imposition of health and safety standards in the workplace, or consumer product safety legislation, but the majority of Americans considered this sort of legislation necessary to even the balance among business and labor and consumers. Congress continued to be supportive of low corporate tax rates and still protected favored industries from foreign competition.
Late in the twentieth century, Congress began to produce
The operation of NAFTA helps illustrate the impact of Congress on American business. Legislation has, at times, benefited particular industries to the disadvantage of others. On occasion, Congress has granted special benefits to certain industries, often as a result of lobbying by these businesses. The American sugar industry, for example, has long benefited from protective tariffs that have kept the price of sugar artificially high. Lobbyists for the sugar industry have been quite effective at influencing enough members of Congress to maintain this situation.
Congress during the early twenty-first century remained supportive of American business but also tried to maintain a broader view that takes into account the concerns of all Americans. Senators and Representatives were also responsive to nonbusiness interests among their constituents. Political scientists have long labeled this situation “interest group pluralism” to describe the various influences brought to bear on Congress. Even during the early years of the republic, business interests were often balanced by other interests, such as those of farmers. Some business leaders, aware of the benefits that may accrue to themselves from this balance, have been supportive of this balanced path followed by Congress.
Arnold, R. Douglas. The Logic of Congressional Action. New Haven: Yale University Press, 1990. Develops a theory of congressional policy making with two chapters devoted to economic and tax policy. Burda, Joan M. An Overview of Federal Consumer Law. Chicago: American Bar Association, 1998. Practical guide prepared by the American Bar Association. A useful overview of the types of laws passed by Congress that affect business. Bureau of National Affairs. U.S. Environmental Laws. Washington, D.C.: Author, 1988. Compilation of laws passed by Congress that affect the environment. Davidson, Roger H., Walter J. Oleszak, and Frances E. Lee. Congress and Its Members. 11th ed. Washington, D.C.: CQ Press, 2007. Standard institutional analysis of Congress and its lawmaking activities. Gordon, John Steele. An Empire of Wealth. New York: Harper Collins, 2004. Comprehensive history of American economic development that often emphasizes the role of congressional action. Quirk, Paul J., and Sarah A. Binder, eds. The Legislative Branch. New York: Oxford University Press, 2005. Part of a three-volume set dealing with three branches of government. Several useful chapters concerning the legislative role of Congress and its impact on economic policy. Vogel, David. Fluctuating Fortunes. New York: Basic Books, 1989. Examination of the political power of American business.
U.S. Civil War
Sherman Antitrust Act
Supreme Court and banking law
Supreme Court and commerce
Supreme Court and contract law
Supreme Court and labor law
Supreme Court and land law