News Column

US Executives Step Into Budget Fight

Nov. 12, 2012

Nelson D. Schwartz, David Kocieniewski

broken piggy bank

In two separate advertising campaigns, American chief executives are seeking to influence Washington as a battle gets under way on how to address the U.S. budget deficit.

As Democratic and Republican leaders stake out their positions in the coming fiscal showdown in Washington, corporate executives are starting a political campaign of their own.

The chief executives taking part in two separate advertising campaigns that were set to begin Monday and Tuesday are walking a delicate balance. They plan to press Congress to act quickly, even as they publicly steer clear of the political firefight surrounding the details of any far-reaching deal to cut the U.S. budget deficit.

Behind the scenes, however, the effort by business leaders could play a crucial role in shaping decisions on U.S. tax policy, including whether corporate tax rates go down even as individuals pay more. By framing the issue as an attempt to balance the U.S. government's budget, the plan also offers some political cover to congressional Republicans who fear that voting for a tax increase could make them the targets of powerful fiscal conservatives.

But a question remains over just how far the business groups will go. In the past, corporations have joined the call for fiscal responsibility, only to resist giving up specific perquisites and programs that benefit their businesses or offering other suggestions for deficit reduction.

The Campaign to Fix the Debt, a new group with a $40 million budget whose backers include Jeffrey R. Immelt of General Electric and David M. Cote of Honeywell, will run more than a million dollars' worth of advertisements. The spots take their cue from campaigns by companies like Nike and Dunkin' Donuts and feature slogans like "Just Fix It" and "Time to Fix the Debt."

Mr. Immelt and Mr. Cote also feature prominently in a more traditional campaign by the Business Roundtable, which represents Fortune 500 companies and is one of the most powerful lobbying groups in Washington.

The Business Roundtable effort, set to begin Tuesday, has a budget of close to half a million dollars and is focused on the news media in the Washington area, including outlets like Politico and conservative talk radio shows.

"America's C.E.O.'s have a message for Washington: Don't take our country over the fiscal cliff," warns a Business Roundtable commercial, referring to the package of tax increases and automatic spending cuts set to go into effect in January if Congress and President Barack Obama cannot agree on a deficit reduction plan.

Experts say that combination would amount to a half-trillion- dollar blow to the economy that could cause a recession in the first half of 2013 -- a threat the Business Roundtable has made the centerpiece of its campaign. "If Congress does not act, growth will stall, jobs will be lost and our nation's credit will be harmed," the radio ad says.

The debut of the advertisements in Washington coincides with the return to work of Congress on Tuesday to take up various issues, including deficit reduction.

John Engler, the president of the Business Roundtable and a former Republican governor from Michigan, said that whatever solution emerged, "the tax code changes have to be permanent, and the budget cuts have to be real."

"Even the president has said the corporate tax rate is too high and needs to come down," Mr. Engler said. "We're in the position of saying everything is on the table."

The new campaign raises the stakes in the fight over U.S. fiscal policy, which is set to dominate the agenda in Washington through the end of the year, and comes during an increase in lobbying by chief executives on Capitol Hill.

"My sense is that their primary motivation is avoiding recession," said Jared Bernstein, a senior fellow at the liberal- leaning Center on Budget and Policy Priorities and a former economic adviser to Vice President Joseph R. Biden Jr. "But I think the key to whether they are serious or just posturing is the question of taxes, and if they're truly willing to support raising more revenues."

Still, big business has plenty to gain if some elements of what the groups are pushing for become law.

The Fix the Debt campaign was created by Erskine B. Bowles and Alan K. Simpson, who were chairmen of a presidential commission charged with developing a blueprint for fiscal change and deficit reduction in 2010, and the group backs many of their recommendations.

The Business Roundtable and Fix the Debt campaigns suggest that they could pay for the corporate rate reduction by "broadening the base," closing loopholes and eliminating many deductions. Some critics say they doubt that would bring in enough revenue to compensate for reducing taxes on corporations, eventually shifting some of the burden to small businesses and individuals.

Advocates for low-income and older people have also criticized the Simpson-Bowles plan, saying it would keep tax rates on businesses and wealthy Americans at levels below the historical average and underwrite that by cutting Social Security, the government retirement program, and Medicare, the government health insurance program for older people and the disabled.

Fix the Debt also has the backing of Peter G. Peterson, who has advocated cutting Social Security and other elements of the safety net to pay for debt reduction. Other corporate backers include Mark T. Bertolini, the chief executive of the insurer Aetna, and Gregory Q. Brown, the chief executive of the electronics manufacturer Motorola.

Maya MacGuineas, the head of the campaign, played down the suggestion that the Fix the Debt campaign had a particular agenda. "We're not advocating specific solutions," she said.

The executives backing the campaign, she said, want to "put in place a debt deal. I see this as people who are focused on what they see as a real threat to their businesses and employees."

With the start of the ad campaigns, chief executives could soon find themselves in the middle of one of Washington's toughest political battles in years.

Politicians from across the spectrum say they wanted to avoid the threat posed by tax increases and budget reductions, but the thorniest issue is likely to be making changes in tax policy. Indeed, even as votes from the U.S. presidential election were still being tallied in some states, Mr. Obama and congressional Republicans began signaling their positions.

The president favors extending Bush-era tax cuts for all but the top 2 percent of earners. John A. Boehner, the speaker of the House of Representatives, said last week that the election had not given a mandate for a tax increase, and he has insisted that tax cuts be extended for everyone.

Those positions are so far apart, and so deeply entrenched, that most in Washington expect some short-term extension of the Bush-era cuts to be passed, giving Congress and the White House time to overhaul the tax system and take on the issue of spending cuts.

Source: (C) 2012 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved

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