Chief financial writer, The Huffington Post
Posted: 11/14/2012 5:25 pm
We know nothing about President Obama's meeting on Wednesday with CEOs to discuss the fiscal cliff. But we can hope is that it was hostile and unproductive, because the CEOs are hypocrites with terrible ideas.
Obama met with the caravan of the corporate chieftains that are part of a supposedly bipartisan campaign to drum up unnecessary deficit panic, called "Fix the Debt," after the group last month penned a letter expressing their deep concern about the federal budget. In said letter, the CEOs argued that it is time for America to put on its big-boy pants and do the hard fiscal stuff like trimming entitlement spending and lowering corporate tax rates.
Which brings us to the hypocrisy: Most of these same corporate chieftains run companies that, while earning billions of dollars per year, pay much lower tax rates than the typical American household does. Some of the companies on the list of deficit cassandras -- including General Electric, Boeing and Verizon -- actually made money off the government at the end of the tax-filing season between 2008 and 2011, according to a recent Citizens for Tax Justice study. If these companies are truly worried about paying down the debt, the good news is that help is much, much closer at hand than they may realize.
But worse than their hypocrisy are their ideas, which they claim to be bipartisan. They dare mention the word "revenue," for example, suggesting they might be willing to see some of their wealthy cohort pay a little more in taxes. As the Wall Street Journal's David Wessel reported last month, their movement is being shepherded by Democrat Erskine Bowles and Republican Alan Simpson, the patron saints of bipartisan deficit agita.
The movement is also bankrolled by Peter G. Peterson, the former Nixon administration Commerce Secretary and co-founder of the Blackstone private-equity group. For decades, Peterson's sole reason for exchanging oxygen for carbon dioxide has been the hobbling of entitlements such as Social Security and Medicare, and he sees the fiscal-cliff panic that he and his buddies in the C-suite (and their house organ CNBC, with its insufferable "Rise Above" campaign) have drummed up as a golden opportunity to finally get his way.
The Huffington Post's Ryan Grim reported last month that Peterson has raised millions -- mainly from CEOs, natch -- for a campaign to push the fiscal-cliff debate in the direction of the plan he favors. That plan is, lo and behold, essentially the Simpson-Bowles plan: a 3:1 ratio of spending cuts to revenue increases, with the cuts mainly coming from entitlements. Revenue would be raised mainly by closing unnamed tax breaks and loopholes, while also lowering tax rates -- very similar to Mitt Romney's mathematically impossible tax plan.
As The Huffington Post's Bonnie Kavoussi wrote on Wednesday, 350 economists have signed a letter calling the CEOs' plan insane, nothing more than a dose of austerity that will wreck the economy. You'd think the CEOs would want to avoid such a thing, having watched their European sales crumble for the past year amid that continent's austerity-fueled recession.
In fact, this sudden, obsessive focus on the deficit is, to use an economic term, lunacy, given that unemployment is still near 8 percent, with 12 million people unemployed. Meanwhile, the "bond vigilantes" that once kept James Carville awake in his batcave are dead and gone: U.S. borrowing costs are near record lows, indicating the bond market is perfectly fine with America's debt.
But these CEOs also have a powerful personal interest in this fight: namely, they do not want their taxes raised, as would happen if Obama simply let the Bush tax cuts for the wealthy expire. And they may also truly believe the Peterson/Bowles/Simpson bedtime story about the magical Confidence Fairy that will piss pixie dust on the economy once the terrible dragon of the deficit is forever slain.
In his press conference on Wednesday, President Obama rejected their approach as a non-starter, a hopeful sign that maybe the CEOs have been unconvincing. But as Salon's Alex Pareene points out, the CEOs, and Peterson, and Simpson, and Bowles, have managed to convince most of Washington, including the journalist corps (and also CNBC), that something close to their way is the best approach to cutting a "grand bargain" to fix the deficit and avoid the "fiscal cliff" of tax hikes and spending cuts looming with the turn of the calendar.
We know Obama would love a grand bargain. The risk is very real that the CEOs will end up getting their way.
The Huffington Post: Here's Hoping Obama's Fiscal Cliff Summit With CEOs Devolved Into Screaming And Dish-Throwing