A dozen CEOs and business leaders rang the opening bell at the New York Stock Exchange Thursday morning with a message for lawmakers in Washington: Come November, you’re going to be hearing a lot more from corporate America about getting the nation’s finances in order.
The business executives were visiting the heart of global capitalism to kick off the more than 80-strong CEO Council of the Fix the Debt campaign.
Fix the Debt, an offshoot of a Washington think tank, is committed to pushing Washington toward a deficit-cutting “grand bargain” to solidify America’s finances for the next several decades.
Fix the Debt was co-founded by former Clinton White House chief of staff Erskine Bowles and former Republican Sen. Alan Simpson, who together co-chaired the bipartisan National Commission on Fiscal Responsibility and Reform at the behest of President Obama.
The CEOs will play an integral part in a post-election advocacy campaign by raising the issues of long term debt and deficits with members of Congress, holding town halls with their employees and the public, and working with members of Congress to develop policy solutions, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, the think tank behind Fix the Debt.
The group advocates for an approach to fixing the nation's debt problems that takes no political totems as sacred, breaking with many other business coalitions in advocating both for the necessity of some form of higher taxes – not just more tax revenue through economic growth, as many conservatives desire – and reforms to treasured social programs like Medicare that many Democrats find abhorrent.
The roots of corporate involvement in America's long-term debt picture issue lie in Washington’s last financial debacle. Several executives said they felt singed by the harrowing negotiations over raising the debt ceiling in 2011 and chastened by criticism that the business community was asleep while the American economy hurtled toward disaster. They vowed to prevent the country’s financial soundness from being taken to the brink again, alluding to the sustained threat of a default during the debt-ceiling debate.
“We don’t have the right to be that reckless,” said Paul Stebbins, the executive chairman of World Fuel Services. “When you see what happened back in” August 2011, “it would be irresponsible to not be more proactive about that now. Business doesn’t get a pass – nobody gets a pass.”
“If you go back to the debt ceiling discussion, that really shocked many of us in the business community,” concurred Dave Cote, the CEO of Honeywell, a Fortune 100 global industrial conglomerate, and a former member of Mr. Obama’s debt commission, which came to be known as Simpson-Bowles.
“We just thought this was a normal political moment [Washington was] going through, we never thought you’d be this reckless or irresponsible with the country’s finances,” Mr. Cote continued. “Well, we now have a bunch of people who are trying to say ‘We are going to pay attention.’ ”
The CEOs’ attention comes at a crucial moment for Washington and the nation’s financial future. A looming “fiscal cliff” of more than $600 billion in higher taxes and lower spending is set to hit the nation’s economy come Jan. 1 with the expiration of the Bush tax cuts and the implementation of the “sequester,” the automatic spending reductions mandated as part of the 2011 debt ceiling deal.
Were America to go off the cliff, the nonpartisan Congressional Budget Office estimates, the nation would likely be thrown back into a recession.
Meanwhile, another fight over the debt ceiling looms: many budget experts expect Congress to have to raise the limit again come February of next year.
And all the while the national debt churns north of three quarters of America’s gross domestic product (GDP), approaching levels where economists expect it to begin choking off economic opportunity.
“If the last debt ceiling discussion was playing with fire, this time they’re playing with nitroglycerin,” Mr. Cote said. “It’s important to recognize that the stakes have gone up across the board when you combine the debt ceiling with the fiscal cliff.”
But the path to $4 trillion in debt reduction over the next decade that economists and budget watchers think is necessary to stabilize the country’s fiscal condition, though, doesn’t run through corporate boardrooms. It runs through Congress and the White House.
The CEOs believe they can play a constructive role in the debate by serving as highly-visible nonpartisan referees.
As Steve Rattner, an investment banker who administered the bailout of the auto industry for Obama, said, “CEOs can do math.”
And when you do the math, the CEO Council argues, the orthodoxy of partisans in both the Democratic and Republican camps of only increasing taxes or only reducing government spending simply don’t add up.
Yet the political calculus of advocating for such one-sided proposals does.
That’s where the CEOs come in. They hope to be able to stand up for members of Congress who have the courage to step into the political minefield of fixing the nation’s finances.
“You need somebody who is going to stand behind you and say ‘you’re doing the right thing,’ ” as former Republican Sen. Judd Gregg, a co-chairman of the Fix the Debt effort, put it.
That’s well understood by the members of the CEO coalition.
“The political process needs cover,” said Stebbins in an interview on the floor of the NYSE. “You’ve got a highly polarized electoral climate. It’s not for us to tell Congress or the policymakers what to do, but it is important to give them a framework that sets sort of the boundaries, if you will, for a conversation.”
But the group faces a medley of challenges including a partisan, gridlocked Congress, expectations for tax reform on a timeline that many in Washington find overly ambitious, and the extreme difficulty of working out the specifics of the grand debt reduction deal they seek.
But they’re clear about the goal line that they’re putting their time and money (Fix the Debt has raised some $30 million to fund its advocacy) toward.
“Some companies tinker, just sort of tinker around the edges,” said Jimmy Lee, vice chairman of JP Morgan, the largest US bank by assets. “Other companies on the other hand really recognize the problem… and start thinking about the 20-, 50-, 100-year future of the company and spend some time trying to fix it in a really big, material way.… What we’re hoping for is the latter.”