A powerful group of big business CEO’s, under the leadership of Erskine Bowles and Alan Simpson, of Simpson-Bowles fame, has sent a letter calling for a solution to the debt and deficit problem in the United States. The letter calls for deficit reduction through spending cuts and revenue increases. Of course the notable news is that business leaders accept the need for additional revenues, and in fact say that solving the deficit cannot be done with just spending cuts. (CEO’s understand math.)
The CEOs who signed the manifesto deem tax increases inevitable no matter which party succeeds at the polls in November. “There is no possible way; you can do the arithmetic a million different ways” to avoid raising taxes, said Mark Bertolini, CEO of Aetna. “You can’t tax your way to fix this problem, and you can’t cut entitlements enough to fix this problem.”
Before Democrats start clicking their heels in joy at the capitulation of business leaders to economic reality it should be noted that entitlement reform is part of the letter as well. The CEO’s, as you might expect from a group put together by Alan Simpson and Erskine Bowles, largely support the Bowles-Simpson framework, which includes entitlement reform that has been rejected by many Democrats. Under that framework revenue increases are driven by tax reform that broadens the tax base but reduces marginal tax rates, as well as the corporate tax rate. The CEO’s took no position on any specific policy proposal, including President Obama’s call for higher tax rates on top earners.
Blowback? You bet! First from the right, as Grover Norquist slammed the effort. From the Wall Street Journal:
“When bipartisan deals are struck promising to cut spending and raise taxes, the spending cuts don’t materialize but the tax hikes do,” Grover Norquist of the anti-tax Americans for Tax Reform, has said.
And Bernie Sanders of Vermont hit from the left. From the Sanders web page:
Sen. Bernie Sanders said corporate leaders should look in the mirror before lecturing the American people on ways to tackle the deficit. After the heads of more than 80 big companies issued a statement Thursday on deficit reduction, Sanders released a report detailing how many of the companies headed by the same CEOs have avoided taxes, sent American jobs overseas and took taxpayer bailouts. “There really is no shame,” Sanders said. “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. Before telling us why we should cut Social Security, Medicare and other vitally important programs, these CEOs might want to take a hard look at their responsibility for causing the deficit and this terrible recession.”
I can just imagine that the lame duck session of Congress will be a difficult one, regardless of who wins the Presidency. The fiscal cliff lies ahead.
Here is the list of CEO’s who participated.