Tags: us | ceo | taxes | deficit

US CEOs Call for Higher Taxes to Reduce Federal Deficit

Thursday, 25 Oct 2012 11:04 AM

 

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Chief executives of more than 80 big U.S. corporations, including Goldman Sachs, Cisco Systems and Boeing, joined forces to press Congress to reduce the federal deficit in a rare show of broad corporate unity.

Though the list largely excludes the energy and technology sectors, an omission organizers say they are trying to fix, the U.S. corporate chiefs who did take part said it was urgent to put in place a bipartisan plan to shrink America's debt.

"We are one deal away from fixing the debt and putting our nation back on a stronger economic footing that can restore us to greater job growth," Aetna CEO Mark Bertolini said in a statement on Thursday backed by 86 other CEOs.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

"If the Congress can commit to a plan outline as early as possible after the election, it will restore business confidence in our economy and investment will follow," he added.

If Congress fails to reach a deficit reduction deal by the end of the year, it will automatically trigger big spending cuts and tax increases in 2013. This so-called "fiscal cliff" would hit the still-recovering U.S. economy hard.

Economic data out Thursday indicated that business investment showed signs of stalling in September, with new orders for nondefense capital goods, excluding aircraft, unchanged in the month.

While it is too early to know how much impact the CEOs could have on the public debate, their unified message might strike a chord with an electorate dismayed by the deeply divided Congress. Only one in five Americans approve of the job Congress is doing, according to the latest Gallup poll.

Congressional sources said the CEO call was unlikely to hurt matters but may not have much influence either.

"I don't think it really changes anything. The business community has never been the stumbling block when it comes to revenues, it's always been the Tea Party. Hopefully it helps, but we'll see," said one senior Senate Democratic aide, speaking on condition of anonymity.

'A POTENTIAL DISASTER'

In a conference call featuring a number of the CEOs, Honeywell boss Dave Cote said Congress should reach an agreement during the "lame-duck" session after the election to come up with a more long-term solution early next year.

Washington observers broadly assume that that is precisely what Congress will do, essentially a "down payment" of some kind during the post-election session to buy time until the presidential inauguration and start of a new Congress.

"From my perspective, there's a potential disaster, or a potential opportunity here," Cote said. "If we go off the fiscal cliff, we could have a recession that in my view is worse than any economist is forecasting today."

The U.S. deficit this year will top $1 trillion for a fourth straight year, pushing the national debt past $16 trillion. While the United States currently borrows at record-low interest rates, investors worry this will change.

President Barack Obama said this week he expected to have a "grand bargain" deficit-reduction deal within six months of starting a second term, a bold prediction that does not seem to have dissuaded the CEOs from pushing harder for a solution.

One element of that solution, which has been anathema to Republicans, is more revenue. While not expressly calling for higher taxes as such, the CEO group is endorsing the principle of a broader tax base that generates higher revenue.

Such an openness to more taxation may seem antithetical, but a growing number of corporate chiefs, including Goldman's Lloyd Blankfein and GE's Jeff Immelt, have said in recent months they were willing to pay that price to solve the problem.

It also stands in some philosophical contrast to business groups like the U.S. Chamber of Commerce, which has described the fiscal cliff as a "Taxmageddon" that would lead to the largest tax increase in history.

'FIX THE DEBT'

The CEOs' statement was organized by a group called "The Campaign to Fix the Debt," which is urging Washington to set aside partisan differences.

The group is essentially a single-issue coalition, comparable to others that have cropped up over the years on other controversies. Its leaders include big-name political and business figures from both parties, and former government officials, among them Robert Zoellick, former president of the World Bank, and Alice Rivlin, former head of the White House Office of Management and Budget.

Billionaire investment banker Peter Peterson, who has devoted millions of dollars to raising public awareness of the deficit, has been the major underwriter of the coalition.

Other trade associations and business groups, such as the Business Roundtable and the U.S. Chamber of Commerce, are lobbying on the cliff as well. But such existing organizations tend to be constrained by the sometimes conflicting views of dues-paying members and corporations.

The new group came in for immediate criticism from one of the Senate's most outspoken members.

"There really is no shame," said Senator Bernie Sanders, a Vermont independent, in a statement. "The Wall Street leaders whose recklessness and illegal behavior caused this terrible recession are now lecturing the American people on the need for courage to deal with the nation's finances and deficit crisis."

MORE CEOS

This new campaign is now working on adding more CEOs, particularly in sectors that are not well represented like energy and technology. Some prominent names in those spaces say they have not even been approached.

"We never got a call. We never were invited," said John Roper, spokesman for Houston energy company Apache Corp.

While some doubt how receptive companies like Apache might be to a plan that includes higher taxes, the Silicon Valley high-tech community is expected to be more open to the pitch.

The group said any fiscal plan must be bipartisan, tackle all areas of the budget and include tax reform. It also urged the government to reform and improve the efficiency of healthcare programs like Medicare and Medicaid.

"This is about putting the country back on a path that's sustainable for us and for our children," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said on the conference call. MacGuineas, known as a key Washington budget player, is thought to add an extra gravitas to the new organization.

The CEO group said recommendations of the bipartisan Simpson-Bowles Commission provided an effective framework for a fiscal plan. The proposal has several options, including trimming tax rates for all income groups.

Simpson-Bowles also calls for slashing many popular tax deductions and adding them back only selectively. Honeywell's Cote, who was a member of that panel, said something like Simpson-Bowles should become a mandatory fallback if Congress cannot reach an agreement on its own soon.

A spokesman for the group said the $30 million raised so far would fund digital, print and TV ads, as well as 20 to 25 state chapters planned nationwide. Chapters are already open in Tennessee and New Hampshire, he said.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

© 2014 Thomson/Reuters. All rights reserved.

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