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.”
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