Corporate America this week manufactured some political will that should help Congress and President Obama avoid falling off the fiscal cliff.
The push for a balanced and pragmatic compromise came from the Business Roundtable, an association of CEOs who lead companies with $7.3 trillion in annual revenues and 16 million employees.
Tax increases, which were anathema to the business community during the 2012 campaign, were unveiled Tuesday by the Business Roundtable as an essential element to righting the U.S. fiscal ship.
“Compromise will require Congress to agree on more revenue — whether by increasing rates, eliminating deductions, or some combination thereof,” the big business group said, in letters that were sent to Obama and the Democratic and Republican caucus leaders in the U.S. House and Senate.
The letters were signed by almost 160 top executives, including two prominent Minnesota business leaders — Target CEO Gregg Steinhafel and Medtronic CEO Omar Ishrak.
“We pledge our active support for a compromise that includes comprehensive and meaningful tax and entitlement reforms that result in market-credible spending reductions and revenue growth,” the chief executives said in the letters.
The president of the Business Roundtable is John Engler, a Republican and former Michigan governor. The Roundtable’s chairman is James McNerney, a former 3M Co. CEO who currently leads the Boeing Co. The organization’s executive committee includes executives from Wal-Mart, Dow Chemical and Procter & Gamble.
Expects fiscal solution
This is not a left-leaning organization, but it is a group that expects politicians on the right and left to do their jobs and forge a fiscal solution. If Congress and the president fail to reach a deal before the year ends, automatic tax hikes and deep spending cuts would take effect and could derail the nation’s tepid economic recovery.
“For far too long, political paralysis has fueled global uncertainty that discourages businesses from investing and hiring new workers,” the chief executives wrote. They implored the politicians in D.C. to “turn political swords into governing plowshares.”
The business leaders also are waging a public campaign to bolster broad political support for a solution that will require many Americans to make sacrifices to reduce the federal deficit. For example, they bought a full-page ad in Wednesday’s Wall Street Journal that included the full text of their letter to the Washington politicians. The slogan of the campaign is: It’s time to act.
It appears that a majority of Americans also want an end to political gridlock in Washington. In a Wall Street Journal/NBC News poll released Wednesday, about two-thirds of Americans surveyed want Congress to reach a deficit-reduction deal. The newspaper reported they favor such a deal “even if it means cutting Social Security and Medicare and boosting some tax rates.”
Minnesota’s fiscal problem
When Minnesota’s state budget forecast was revealed last week, uncertainty over the federal “fiscal cliff” was a major worry of Global Insight, Minnesota’s national macroeconomic consultant.
If the U.S. economy falls back into a recession, then Minnesota state government likely would face a much larger biennial deficit than the $1.1 billion that was estimated last week.
Global Insight characterized the federal fiscal cliff and its resolution as “the biggest downside and upside risks to the economy.”
Failure to act would trigger about $680 billion in combined tax increases and spending cuts in 2013, which the state budget forecasters said constitute 4.2 percent of the nation’s gross domestic product.
After enduring years of recession and an exceedingly modest recovery, many Americans who cast their ballots in the November election are looking for decisive action in Washington.
The willingness of corporate titans to open themselves up for higher taxes demonstrates that they are demanding a tax-and-spending solution that addresses the nation’s severe debt problem.
In their plea to Washington’s top politicians, the business leaders wrote: “You can rebuild the trust needed for our political system to function and the confidence needed for businesses to invest in new factories, equipment and employees.”
Fedor can be reached at lfedor@minnpost.com.
Business Roundtable is the Super Committee part II
The cliff would not exist if Obama would have been honest about wanting to make cuts and not delaying any cuts, the way he has. His first distraction was his failed Super Committee and now the Business Roundtable will follow the same fate. He will continue blame others and refuse to accept responsibility. He is just kicking the can down the road and adding to the debt at an alarming rate.
I find it more than ironic
that on the same page of MnPost that Medtronics is through its support toward an income tax rate hike at the same time the have both our US Senators working on removing a tax on medical devices.
If you look a little further into Medtronic’s proxy statements, you will see that the vast majority of Mr. Ishrak’s pay came from exercising stock options, taxed at 15% capital gain rates, rather than as salary and bonus, which would be subject to the higher tax rate he is advocating. Options that he has held for less than 5 years and were granted at a price below market value.
File this one under:
Don’t tax you, don’t tax me, tax that fellow behind the tree”
Or better yet, let’s apply standard tax rates to all capital gains held for less than 10 years. That would raise 100x more money than the increase being purposed.