WASHINGTON — An influential business group called on Congress Thursday to stop playing politics with budget deficits and put “everything on the table,” declaring that both tax increases and spending cuts are needed to restore the nation’s finances.
More than 100 current and former chief executive officers signed a declaration released by the Committee for Economic Development, a nonpartisan policy-research group of business and university leaders.
The initiative is significant because it adds pressure from another influential voice to the political debate over the budget. The group’s push comes at a time when fiscal issues have become Washington’s most prominent topic, one likely to dominate domestic politics through the 2012 elections.
“As leaders in the business community, we expect to share the effects of reductions in public programs or increases in taxes — or more likely, both,” said the statement, supported by CEOs and prominent experts in federal finance. “We do not seek sacrifice for its own sake. But we — and we believe all Americans — are prepared to contribute our fair share to make our country sound, secure and strong again. What is good for America is good for American business.”
The nation is expected to have a deficit of $1.6 trillion in the fiscal year that ends Sept. 30. Total federal debt is around $14.3 trillion. The ratings agency Standard & Poor’s this week issued a negative outlook for U.S. government bonds, raising the chance that it might downgrade the United States’ rating of creditworthiness for the first time. The S&P warning rattled financial markets, underscoring the threat to the U.S. economy if the budget problem is left unresolved.
“Out in the business world when this sort of thing happens, markets are very unhappy and CFOs usually get fired,” Bowman Cutter, the managing director of The Cedars Capital Partners, said Thursday in support of the Committee for Economic Development statement.
Cutter criticized the recent near-shutdown of the federal government in a dispute over less than 1 percent of the budget: “This is the definition of non-seriousness. We don’t yet see on any side of this debate the kind of seriousness that’s going to be required to actually solve the problem.”
President Barack Obama’s National Commission on Fiscal Responsibility and Reform put forth a detailed road map last December on how to shave $4 trillion in federal spending over a decade and reshape the tax code.
Obama ignored most of the bipartisan panel’s recommendations. Instead he offered a plan that raises taxes on the rich and counts heavily on efficiencies and accountability to bring down health care spending; previously both have been elusive.
Republicans in the House of Representatives also ignored the commission. Last week they voted instead for a plan by their Budget Committee chairman, Rep. Paul Ryan of Wisconsin, that would restructure and greatly reduce Medicare and Medicaid while slashing taxes, especially on the rich.
“The two (plans) are almost mutually exclusive. It’s hard to imagine what the long-run middle ground is between the two,” said Cutter, a former budget director under President Bill Clinton. “We absolutely have to put everything on the table, and it’s going to take leadership to do it. We are under no illusion that this is going to be easy.”
Significantly, most of the CEOs who signed on to the Committee for Economic Development declaration Thursday were from the services sector, and don’t rely as heavily on tax credits and exemptions as multinational corporations and U.S. manufacturers do.
The U.S. Chamber of Commerce and the National Association of Manufacturers have given only lukewarm support to promises from Obama and Ryan to lower the corporate tax rate to around 25 percent, offsetting the lower rate by ending tax exemptions and deductions.
Vice President Joe Biden and congressional leaders from both parties are scheduled to begin meeting May 5 on ways to trim the budget. Lawmakers are considering adding spending reductions to legislation that would raise the debt limit, which Congress will take up in May or June.
Meanwhile, the Senate’s “Gang of Six,” a bipartisan group of six U.S. senators, is expected to resume its own set of budget-overhaul talks next week.
Thursday’s business initiative might add important momentum to those efforts.
Publicly, Democrats and Republicans have spent this week traveling the country sniping at each other over the rival budget plans. Republicans also dealt a blow to the Biden talks.
Obama wanted eight-member talks — four from each party — with Biden as chairman and the ninth vote. Democratic congressional leaders named four of their most influential fiscal experts. Republicans countered by naming only two appointees, House Majority Leader Eric Cantor of Virginia, and Senate Minority Whip Jon Kyl of Arizona. Both are considered hard-liners on budget matters.
GOP leaders sent strong signals that they don’t expect much from the discussions. Said Cantor: “I remain skeptical that the administration will take this effort seriously, especially after it all but ignored its previous debt commission and President Obama had to be dragged kicking and screaming to consider minimal spending cuts for the rest of this fiscal year.”
The Senate “Gang of Six,” on the other hand, has been meeting privately since January. While members won’t discuss details, those familiar with the talks said specific proposals were being discussed, staffs were working this week on details and everything was on the table, including taxes, defense, Medicare and other entitlements.
Their goal is to cut $4 trillion from deficits over 10 years; the nonpartisan Congressional Budget Office has estimated that the nation will pile up nearly $7 trillion in deficits over that span. Among the points the gang has been discussing is reducing revenue losses from popular tax deductions such as mortgage interest and property taxes.
Carl Camden, the CEO of Kelly Services Inc., a global temporary-services company, wants bolder action from Washington.
“During the recession, businesses were forced to act quickly and decisively. And I can tell you personally, it wasn’t any fun. I think the country faces a similar flex point,” said Camden, who’s unhappy with what he sees as political theater. “
I don’t feel the sense of urgency around the larger problem that is going to be necessary to address it. A failure to act meaningfully condemns our children and grandchildren to higher tax rates,” Camden said. “This is not a Republican versus Democrat issue. We have to recognize that already uncertainty is depressing job creation.”
The Committee for Economic Development’s call to arms was supported by Erskine Bowles and Alan Simpson, the chairmen of the National Commission on Fiscal Responsibility and Reform, and by Alice Rivlin and Pete Domenici, two Washington veterans who chaired a similar budget-overhaul commission last fall that drew widespread praise for its no-nonsense solutions.
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