It's time to act: First the fiscal cliff, then a long-term deal
Business Roundtable-member CEOs are outspoken on the imperative to address the fiscal cliff.
In television appearances and interviews, as well as BRT's "It's Time to Act" campaign, they generally speak in terms of first preventing the economic harm that would result from going over the cliff, i.e., the trillion-plus-dollar tax increases from expiring tax provisions and sequestration's across-the-board spending cuts. Then the President and Congress can work on the larger issues of taxes, entitlements and government spending.
On CNBC this morning, Gary Loveman, president and CEO of Caesars Entertainment, was asked how a short-term deal could better lead to a long-term agreement on fiscal matters. Loveman, who chairs BRT's Health and Retirement Committee, responded:
You have to have the gross anatomy of this put in place early on, which is that the driver of the federal budget problems principally is entitlement problems. You have to address entitlement problems, and you have to feather in a revenue solution at the same time. As an economist, if you want less economic distortion and you want the country to have the biggest pie available for distribution -- however politicians seek to distribute it -- you want to broaden the base, generally seek to reduce rates, generate economic growth and then all of us can fight over how we want to distribute the gains of that.
But this notion of walking up to a cliff at the end of the year that will lead to an immediate reduction in gross domestic product and higher unemployment, that’s just self-immolation. This is a bunch of smart people pouring gasoline on themselves and each holding a match daring to throw it.
In a separate segment, Loveman also addressed the implications of a long-term fiscal deal on charitable deductions and the estate tax.
NASDAQ OMX CEO Robert Greifeld spoke at the Brookings Institution Monday, calling for congressional action and urging lawmakers to think less about "winning." From Reuters, "Nasdaq CEO calls on Washington to rediscover compromise":
"The federal budget must be put on a path to sustainability that can clearly withstand any changes in the political winds that may occur in 2014, in 2016, and beyond. This means additional revenues will need to be raised, including from businesses, by broadening the tax base, while reducing the top rates," Greifeld told an audience at the Brookings Institution, referring to corporate tax rates.
"We also acknowledge that federal spending will need to be curtailed, including spending on our favorite government-funded programs."
Greifeld said the best that the markets can hope for in the short term is for Congress to make a deal to avoid the year-end "fiscal cliff" and then commit to deliver a longer-term "grand bargain" on debt reduction during the first half of next year.
CSPAN has a video of Greifeld's speech and the Q&A.
Speaking to Bloomberg TV from Europe, Brian Moynihan, president and CEO of Bank America, put the fiscal cliff in the context of the Europe's sovereign debt crisis and the uncertain global economy.
Long-term the situation has to be dealt with, the investments to keep our country competitive have to be dealt with, and similarly around the world. But I think short-term it’s really getting through some of these hurdles in front of the people making decisions.
In a separate Bloomberg story, Moynihan said he was optimistic there would be a resolution to the fiscal cliff: "People are taking this very seriously. It makes me optimistic, because at the end of the day it takes difficult negotiations, but it has to be done quickly.’’
The Wall Street Journal last week held its CEO Council meeting, and Alan Murray reported on the results in a special section of the paper Monday. From "CEOs to Washington: Strike a Deal—and Do It Now":
Concerns over falling off the "fiscal cliff" dominated discussions of the fifth annual meeting of The Wall Street Journal's CEO Council last week in Washington, D.C.
Nearly three-quarters of the chief executives attending the event listed the fiscal cliff as their biggest worry on the global landscape—above Europe's financial troubles, a China growth slowdown and uncertainty over conflict in the Middle East...
"Going off the fiscal cliff would create a period of financial and economic instability," the CEOs said in an action item they adopted as their top priority. They urged President Obama and Congress to "take advantage of the chance for a grand bargain" on tax and spending issues "so businesses and consumers can plan for the long term."
Separately, Motorola Solutions Chairman and CEO Greg Brown spoke to WSJ Live's Digits program, "What we're expecting from both the president and Congress is to act, and to act with a sense of urgency. Now that the political calculus and the elections rhetoric is behind us, we need a compromise deal that is a balance of spending reductions and tax revenue increases in a way that will provide stability and certainty for private investment and economic recovery to continue."
Brown reports that he just returned from Malaysia and Cambodia, and senior government officials there first brought up the fiscal cliff before moving on to country-specific issues: "It's not just domestically here it's important for the U.S. economy, but a lot of our international partners look for this kind of decision-making and stability as well, so we can signal that our system still works, we know what we need to do for remediation and to furhter stabilize economic recovery, and it's critical."
Brown is one of CEOs featured in BRT's own "It's Time to Act" campaign, in which our members stress the need for Congress to move on the fiscal cliff during the lame-duck session of Congress. Here's his video and the compilation video.
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