Businesses urge deficit deal, even with tax hike
By JACKIE CALMES
The New York Times | October 26,2012
The partisan rift over taxes has blocked a deficit-reduction deal for two years, and spilled into the 2012 campaigns. Yet as Republicans and Democrats continue to brawl, business leaders are stepping up pressure on Washington to get a deal even if it calls for more revenues — including higher tax bills for themselves.
On Thursday morning, more than 80 executives of leading U.S. corporations signed a statement calling for a debt-reduction compromise that would “include comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.”
Several members of the group — which included highly paid chief executives of financial and industrial corporations who would stand to pay more if President Barack Obama succeeds in his effort to raise taxes on the wealthy — then helped ring the opening bell at the New York Stock Exchange to draw attention to their coalition, Campaign to Fix the Debt. The group has raised $37 million so far for a nationwide public-education and lobbying effort.
Alarmed last year by Washington’s brinkmanship over raising the nation’s debt ceiling, these executives are mobilizing now to avert another such crisis at the turn of this year. After the election, they plan to press the two parties to compromise on a long-term substitute for the pending “fiscal cliff” — the immediate, across-the-board spending cuts and tax increases that otherwise would hit nearly all Americans on Jan. 1, potentially putting substantial new strain on a still-weak economy.
The business leaders’ message contrasts with the campaign rhetoric in both parties. While the wealthy executives seem to answer Obama’s call for “economic patriotism” by their tentative embrace of higher personal taxes, in interviews many of them reject his “pay your fair share” talk as class warfare, and a good number oppose his re-election.
But the business leaders’ position also contradicts the stand of Mitt Romney and other Republicans, who say that all tax increases are “job killers,” that the annual federal budgets can be balanced with spending cuts alone and that any overhaul of the tax code should be “revenue neutral,” neither raising nor lowering the government’s total tax collection.
“To say that you can solve this without increases in taxes is ludicrous,” said David M. Cote, the chief executive officer of Honeywell, a Republican and a former member of Obama’s 2010 Bowles-Simpson fiscal commission. He added, “Most wealthy people get it. They just don’t want to be put in the position, though, where you pay more in the taxes and the profligate spending continues.”
Thursday’s Wall Street event was just the latest, if the most high-profile, of near-daily developments in recent weeks that have seen prominent figures step out of America’s corporate suites to back a deal. They even indicated a willingness to agree to generating more revenues and by implication higher tax bills on themselves — if those are part of a bipartisan compromise that also reduces the long-term costs of the entitlement programs, chiefly Medicare and Medicaid. Those programs are the single-biggest factors driving projections of future, unsustainable federal debt.
On Monday, Jamie Dimon of JPMorgan Chase hosted a Wall Street lunch for about 75 other chief executives to hear from budget experts, including Sen. Mark Warner, D-Va., and Sen. Lamar Alexander, R-Tenn., about what the business leaders could do to promote a bipartisan deal. How, for example, could they persuade Republicans to drop their anti-tax position?
Business leaders “think it’s just really important that we fix this. They’re not into whether the tax rate for higher-paid individuals is 35 percent or 39.6 percent,” said Dimon, an early backer of Obama whose relationship with the president later frayed. He was referring first to the top Bush-era tax rate that high-income taxpayers now pay and then to the Clinton-era rate they face after Dec. 31 if the Bush tax cuts expire as scheduled, as Republicans oppose and Obama supports for high incomes.
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On Tuesday, attendees at the Securities Industry and Financial Markets Association’s national conference met here with Warner and Sen. Saxby Chambliss, R-Ga. The two belong to the Senate’s “Gang of Eight” that has struggled for nearly two years to draft a spending-and-taxes deal.
“I’m talking to everybody in this room,” Chambliss told his audience. “If you like the package that we ultimately come up with, then we haven’t done our job — because everybody is going to have to ultimately pay a price in this.”
Wall Street and industrial corporations have a clear stake in averting the kind of financial and economic upheaval that a partisan showdown could create. But both businesses and individual executives face losing many breaks they have long enjoyed if there is a deal that involves higher taxes. And at least in the short term, pending an overhaul of the tax code, individuals also could lose their Bush-era tax cuts on annual taxable income over $250,000.
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In interviews, many say their support for that is contingent on reductions in future entitlement program spending.
“The people, including myself, who are willing to give more revenue don’t want to take on the moral hazard” of sending more money to Washington unless the White House and Congress “deal with the pressing need to cut the budget,” said Lloyd C. Blankfein, CEO of Goldman Sachs and a Democrat.
Like others who have privately lobbied lawmakers, Blankfein and Cote reject suggestions that the philosophical chasm between the parties is unbridgeable.
“There are very conservative Republicans in the House who sit there and say, `I would agree to a revenue increase if there was significant entitlement reform,”’ Cote said. “And then you’ll run into Democrats who say there won’t be any entitlement reform unless there’s revenue increases. For most of us in the business community, we say, `It sounds to us like you’ve got a deal. You just need to sit down and flesh out the details.”’
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That, as the Simpson-Bowles commission can attest, is easier said than done.
The panel’s dissenters, who opposed the majority’s recommendations of a $4 trillion, 10-year package to reduce annual deficits with a combination of spending cuts and new revenues, included all three House Republican members. Among them: Rep. Paul D. Ryan, the House Budget Committee chairman who will either keep that job or, as Romney’s running mate, rise to vice president.
After decades in which both parties have complained that business too often sits on the sidelines for budget battles, the Fix the Debt campaign could be among the most muscular interventions by corporate America in memory. More than 100 leaders have signed on, including more than 80 chief executives and some foundation heads.
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The campaign’s inspiration is the dormant Simpson-Bowles framework, and the group’s formation is due in large measure to the nonstop proselytizing of the nation’s business community and fundraising by commission co-chairmen Erskine Bowles, a businessman and the former White House chief of staff to President Bill Clinton, and Alan K. Simpson, a former Senate Republican leader from Wyoming.
“The business community gets it,” Bowles said. “They absolutely get that it has to be a balanced package with revenues and spending cuts both.”
According to the group’s president, Maya MacGuineas, the money raised is paying for a growing staff of about 35 at a downtown Washington “war-room,” chapters in up to 35 states and, ultimately perhaps, television ads and other help for politicians who need support in taking unpopular positions on tax increases or spending cuts. Some in the group say Republicans are especially fearful of drawing a Tea Party opponent in party primaries if they support higher taxes.
Dimon, speaking for JPMorgan Chase, said, “You know, we’re in 1900 hamlets in America. I’d — we’d — be calling them all up, literally we’d start flying people in. It would be a whole different ballgame, I think, if we had something to support, and with the president supporting it.”