* Uncertainty over fiscal cliff hurts investment -Engler
* CEOs back Simpson-Bowles type of plan, raising revenues
* Business Roundtable hopes for lame-duck debt-limit rise
By David Lawder
WASHINGTON, Oct 15 Corporate chief executives
ramped up their calls on Monday for Congress to reach a
compromise deal that keeps the looming "fiscal cliff" from
crushing the U.S. economy and starts to shrink U.S. debt levels.
CEOs of some of the largest U.S. companies said that
Congress will need to raise taxes on the wealthy and cut federal
benefit programs like Medicare and Social Security to
effectively shrink federal debt and safeguard economic growth.
Their message runs squarely against long-held partisan
positions on Capitol Hill, where Republicans have resisted any
revenue increases to reduce deficits and Democrats have largely
vowed to maintain popular entitlement programs.
"There has to be shared pain," Robert Greifeld, chief
executive of stock exchange operator Nasdaq OMX Group Inc
, told a Bloomberg Television roundtable.
"It's very difficult for politicians to run on a platform
where they're getting everybody mad at them. But for us to
address this, there's going to have to be revenue increases.
There are going to have to be spending cuts," Greifeld said.
"We need compromise," added Scott Davis, CEO of United
Parcel Service Inc.
"It's not going to get solved on one party's wishes.
Simpson-Bowles lit the path forward. It was a good plan," Davis
told the Bloomberg Roundtable, referring to the 2010
presidential comission that recommended both tax hikes and
spending cuts. Simpson-Bowles' prescriptions were never adopted.
The corporate chieftains are among 100 CEO members of a
campaign called "Fix the Debt," which is urging Washington to
set aside partisan differences to put the United States on a
sustainable fiscal path.
Steven Rattner, head of Willett Advisors LLC and the former
U.S. Treasury's auto industry "restructuring czar," said that
CEOs were converging on solutions that are "balanced and where
everything is on the table."
"For the first time, there is tremendous support in the
business community even if it isn't exactly what everyone in the
business community would want to see," Rattner said.
The head of corporate America's most prominent CEO lobbying
group also chimed in, warning on Monday that uncertainty over
the year-end fiscal cliff - some $600 billion in looming tax
hikes and automatic spending cuts - is choking off hiring and
Business Roundtable President John Engler, a former
Republican governor of Michigan, also called for compromise -
Simpson-Bowles style - in a speech to the Detroit Economic Club.
"I think the American people care about the future of their
country, and they understand there's going to have to be a
compromise," Engler said. "Our present course is unsustainable
and unfair to future generations."
Republicans in Congress have long resisted any revenue
increases - especially through higher tax rates - as part of any
deal to cut deficits, which just ended a fourth year above $1
President Barack Obama's Democrats have been pushing for
higher tax rates for those making over $250,000. However, in a
debate last week, Vice President Joe Biden said he wanted higher
taxes on those making over $1 million.
EARNINGS CALLS SEEK CLARITY
As corporate America's third-quarter earnings season
gathered steam this week, CEOs emphasized the importance of
Congress shielding the fragile U.S. economy from massive tax
hikes and spending cuts.
"In the U.S., there are promising signs that more robust
economic growth is within reach, assuming the resolution of the
fiscal cliff," Citigroup CEO Vikram Pandit told a
conference call. "Lack of a resolution of the cliff situation
would be highly disruptive."
Engler warned that uncertainty over future taxes, from
individual rates to capital gains to research and development
tax credits, was seriously reducing CEO expectations for hiring,
capital investments and sales.
"The bottom line: We really don't have a tax code in this
country today. It's no wonder there's uncertainty," he said.
"It's no wonder businesses are reluctant to invest, even when
they have cash on their balance sheets."
While CEOs have been voicing concern about the fiscal cliff
for months, U.S. consumers do not appear fazed yet. U.S. retail
sales rose more than expected in September, with increased
purchases of everything from cars to electronics, in a sign that
consumer spending is driving faster economic growth.
The 1.1 percent jump in September retail sales reported by
the Commerce Department beat forecasts and was powered partly by
the release of Apple Inc's new iPhone 5, analysts said.
It comes after U.S. consumer sentiment on Friday spiked to its
highest level in five years in a Thomson Reuters/University of
Michigan Survey taken following a drop in the unemployment rate.
Economists, like CEOs, warn that consumer spending could be
hurt by job cuts triggered by fiscal tightening and a snap-back
in payroll tax rates that could slice $1,000 off of an average
family's take-home pay.
LAME-DUCK HIKE IN DEBT LIMIT?
Engler said he doesn't expect Congress to resolve all of its
fiscal issues during a short lame-duck session after the
election. He is mainly hoping for temporary fixes that let a
larger tax reform deal get done in 2013.
These include short-term extensions on expiring tax rates,
and putting off the automatic spending cuts that were set in
motion by last year's landmark debt limit deal.
He also said he would like Congress to raise the debt
ceiling again, which would allow the government to continue
borrowing. The government is expected to reach the $16.4
trillion debt limit close to the end of this year, with the
Treasury Department able to take emergency cash management
measures to avoid a default for a couple of months into 2013.
Businesses are fearful of a spike in interest rates that
could occur if the United States is again brought to the brink
of default and its credit rating is cut further.
"If we can finish just these items, the real challenges will
still be waiting," Engler said.
Obama and congressional Republicans wrangled for months last
year over whether to raise the federal debt limit. The impasse
ended in August with Obama signing a debt-ceiling increase, but
Standard & Poor's downgraded the U.S credit rating shortly
after, citing political gridlock in Washington and the nation's
long-term fiscal challenges.
Two Republican senators on Monday demanded that Treasury
Secretary Timothy Geithner give them more information on his
plans for avoiding a debt limit-related default in coming
"With more complete information about when the debt limit
may next be reached, we hope to aid decision-makers and pre-empt
any need for such a contingency plan in the future,"
said Senator Orrin Hatch, the top Republican on the Senate
Finance Committee, and Senator Jeff Sessions, the top Republican
on the Senate Budget Committee.