In recent blog posts, we've reported on the comments of Business Roundtable-member CEOs who are troubled by the government shutdown, but are more seriously concerned about the possibility of the U.S. defaulting on its obligations. To wit:
- Default: ‘Unthinkable’
- ‘This is Not an Ideological Issue For Us’
- CEOs: Uncertainty Worsens with Shutdown, Debt Ceiling Impasse
- And below, in an update, remarks from Honeywell CEO Dave Cote.
Business Roundtable President John Engler has reaffirmed their strongly held views in recent media interviews...
Speaking to Politico's Morning Money, Engler said:
I have not heard a single CEO say not raising the debt limit and having a default, technical or otherwise, would be a good thing. There is great apprehension and very serious concern if we ever went down that path. Boehner’s comments were very reassuring. … On the budget you get a bunch of different points of view but everyone thinks it’s pretty embarrassing not to be able to do the basics of governance and the attitude is ‘a pox on everyone’s house.’...
Everything right now seems a bridge too far when you can’t even agree on the most basic of things. … Corporate tax reform would absolutely be a positive for job creation. We’ve lost in 13 years more Fortune 500 companies that anywhere else in the world.
Engler appeared on Bloomberg-TV's "In the Loop" program Monday with host Betty Liu, who asked about CEOs' views on the current conflict in Washington. Engler:
They're just flat-out appalled at the lack of leadership. They cannot believe that if you look at the United States as a big corporation, the biggest in the world, that we're not - our board of directors and the Congress, our CEO, the president, aren't sitting down together and working this out. It needs to be resolved. And we have so many challenges on the economic front. Our organization is committed, passionate about growth. We want to see the economy moving.
Go behind closed doors and "get it done," Engler added. (More at The Hill, "Business groups frustrated over lack of progress on budget, debt ceiling.)
Engler also appeared on Larry Kudlow's "Kudlow Report" Monday evening, part of a two-day New York City that included meetings with top journalists and financial reporters. Having recently returned from Austria, Romania and Mexico City, Engler told Kudlow that the current shutdown was damaging America's global reputation. As for the impact of the shutdown:
I think there are businesses, obviously, that do business with the government, they're getting impacted right away. There is a lot of other business that deals with people who are themselves trying to lobby the government, whether it's a hotel chain: Nobody's coming to Washington anymore. But across the country, this further undercuts the idea of confidence in government; certainly competence of government taking a big hit.
On the debt ceiling: "From the business perspective, there's a sense, yeah, we're going to get a budget at some point. You ought to do it on time, you ought to do your job. The debt ceiling is the one that is the big dark place that nobody really wants to go because of the uncertainty that surrounds that."
The Daily Telegraph (U.K.) today added more evidence to Engler's view of the damage to America's global reputation. From, "Sir Martin Sorrell: 'Brand America' tarnished by budget dispute":
“Our allies, and those who are not our allies, are looking at this with a raised eyebrow, saying ‘What is going on here?’,” [Engler] said. “If you want to be one of the economic leaders of the world, and you want your opinions to be respected, then you’d better act better.”
Sir Martin Sorrell, BTW, is chief executive of the world's biggest advertising agency, WPP.
Video of the Bloomberg interview is below:
UPDATE (3:20 p.m.) Bloomberg's Trish Regan hosted a "CEO Summit" on the debt ceiling Sunday, with CEOs David Cote of Honeywell, Mort Zuckerman of Boston Properties, and Jim Tisch of Loews. (Video) Excellent discussion, with some tough calling to accounts.
Responding to the opening question, Cote -- a vice chair of Business Roundtable -- described the impact of businses of the conflict in Washington: "We have this period of uncertainty that hurts business. If they default, it makes it even worse, because now you're starting a fire. You have no idea whether it will be a small fire or a big fire. Some will argue one way or the other, but you know it's not going to be good. So you look at all that and go, ahh, I think I'm going to wait and see. There's no sense in investing now, whether I should be hiring now, I'm better off just waiting to see where things go."
But we should also look beyond the immediate crises, Cote argued:
On the long-term issue, the real concern is that if we take a look at the entitlement problems, Medicare, Medicaid, Social Security, they're going to just explode in spending because the baby boomer generation is retiring. This is a demographic time bomb that people have known about for at least 20 years. This is not a surprise. Everybody's known this is coming. Well now it's finally here. That's the thing that has to get addressed.
And while it looks manageable in this decade when you look at the Congressional Budget Office, it really just tears you apart in the second decade as we start to go beyond 100 percent of debt-to-GDP. That's the big nut that needs to be addressed. Now it needs to be addressed now in this decade because you can make changes now before people are into the system and understanding how it works before. And it gives time for the people who are providers to be able to adjust and adapt to the new system and new approach, but you need to make those changes now, not when it's all of the sudden on top of you.