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United, Yahoo, and "too much politics"

In this Feb. 19, 2014 photo, David Samson, chairman of the Port Authority of New York and New Jersey, speaks to workers from Newark International Airport who attended a Port Authority board meeting in New York.
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In this Feb. 19, 2014 photo, David Samson, chairman of the Port Authority of New York and New Jersey, speaks to workers from Newark International Airport who attended a Port Authority board meeting in New York.

If you believe the presidential candidates or read most of the newspaper editorials, you'll probably get the impression that "Big Business" controls our government and we're all just one more Citizens United-enabled donation away from a total plutocracy.

But two stories that broke late yesterday prove the opposite is much closer to the truth. First was the resignation of United Continental CEO Jeff Smisek and second was Yahoo's decision to give up on its crucial bid for a tax-free spin off of $23.5 billion worth of Alibaba shares. It's the government and individual politicians who have undue influence and policy power over the American economy. And corporations are frequently forced to spend a lot of money, time, and effort to keep Uncle Sam from disrupting their business.

Let's start with the Smisek story, which is inexorably connected to the continuing probe of the "Bridgegate" scandal here in New Jersey. Smisek is most likely out because the investigation into the deliberate blocking of traffic on the George Washington Bridge in September of 2013 led to Port Authority Chairman Dave Samson's resignation. And that resignation provided further evidence to bolster allegations that Smisek yielded to personal pressure from Samson to revive a dormant United flight route to accommodate Samson's trips to his summer home. United Continental discontinued that flight just three days after Samson stepped down, making the whole affair all the more transparent. Not only did this pressure from an allegedly corrupt government appointee lead to Smisek's ouster, but United Continental's top two public relations and government affairs executives are out too.

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It's hard to count all the things wrong with the details of the paragraph above. In addition to the alleged bribery and/or political coercion by and of a vital public corporation, we also have the "accepted normal" that a corporation needs a "government affairs," (really in-house lobbyist), division in the first place. Talk about a recipe for potential ethical problems. The United Continental story tells us a lot about where improper or illegal government-business interactions begin. The news and entertainment media usually leads us to believe it's greedy corporate bosses who start it all by aggressively seeking to bribe or make campaign donations on the way to making a big profit of their own. The newspapers may not be filled with stories of government officials as brazen as Samson is accused of being with Smisek, but you'll find plenty who are if you peruse the public corruption arrest records sometime.

Over at Yahoo, CEO Marissa Mayer got the bad news that the IRS was not going to approve her tax-free Alibaba plan. This story isn't nefarious or wrought with likely criminal activity like the Smisek affair, but it should be just as disturbing to anyone who wants an orderly and healthy economy in America. It's not so much that the IRS ruled or was going to rule against Yahoo's request. It's the fact that a request had to be made in the first place and an agonizingly long time passed before the company got wind of a solid answer. Why is this considered an "okay" status quo? When our nation's tax laws are so complex and the process for even asking a question about them is so tortuous even for a multi-billion dollar corporation, we have a problem. To be more specific, we have a government problem.

Does government have a legitimate and proper role to play in the economy? Yes. We need some form of government to enforce the rule of law that every healthy free market economy needs to thrive. The problems begin not only from corrupt officials and arcane laws, but also from the structural hazards that come from having too many officials and government departments in the first place. Even if only 1% of political appointees and elected leaders are corrupt, we increase the chance of encountering them when we have too darn many of them. Is it any wonder that the Samson-Smisek scandal grew out of the Port Authority? The Port Authority of New York and New Jersey, (even its name is too long), is a redundant bureaucracy if there ever was one. It wields powers that certainly fit better with the already large state, city and federal departments of transportation and commerce. More government = more corruption, believe it.

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And for Yahoo, its ship was thrust on day one of this failed effort into the huge and unnavigable waters of the IRS and its tax code. It's one thing when a business can't predict its future because of the fate of an upcoming election or bill in Congress. It's another when it can't make accurate financial projections because no one can predict how the bureaucracy will interpret and implement existing laws. More government = more confusion. Believe that too.

This is why so many big companies need lobbyists, lawyers, and loads of other experts to help them do business. It's also why so many smaller companies, that can't afford those armies of public affairs and legal aides, don't grow to their full potential.

A common complaint we hear about CNBC is, "you guys do too much politics." But I wonder if that's a complaint about our coverage, or if it's really a lament coming from our business executive viewers who have to deal with "too much politics" every day and are looking for some kind of temporary respite. We could offer that but it would just be an illusion, and we're supposed to leave that to the entertainment division.

Commentary by Jake Novak, supervising producer of "Power Lunch." Follow him on Twitter @jakejakeny.