WASHINGTON (Reuters) - 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 commission 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 investment.
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 trillion.
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.
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.
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 months.
“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.
Additional reporting by Lauren Tara LaCapra in New York; Editing by Fred Barbash,; Eric Walsh and Jan Paschal