CEO Group Warns Washington to Avoid Impending ‘Fiscal Cliff’ Politics

By Andrew G. Simpson | July 17, 2012

The Business Roundtable, which represents U.S. CEOs in Washington, on Tuesday called on Congress and the President to enact a stopgap measure to avoid the “crisis” of a “fiscal cliff” of major tax hikes and spending cuts, saying the uncertainty was slowing economic growth and job creation.

In a letter, released and signed by its chairman, Boeing President and CEO W. James McNerney, Jr., the group said “the current political paralysis” in the nation’s capital “has fueled needless economic uncertainty that impedes a more robust economic recovery. Without effective action soon, this uncertainty will spawn a dangerous crisis, threatening our economy, businesses and workers.”

Action must come before the lame duck session of Congress — the period between the November election and the start of the new Congress in January — because the threat by itself was having a harmful impact, the group said.

“Further delays in addressing the relevant issues will only increase the economy-chilling uncertainty,” it said.

The plea was part of an accelerating campaign mounted by a diverse collection of interest groups concerned about the consequences of massive federal budget cuts and tax increases that will be triggered at year’s end barring action by Congress.

Teachers, scientists, labor unions and other organizations whose voices have previously been drowned out by warnings of looming cuts in defense spending, banded together last week to warn that their programs, too, were in peril as a result of the automatic budget cuts set for January.

They face unprecedented across-the-board cutbacks as a result of the “sequestration” mechanism put in place by Congress in 2011 as part of its solution to an impasse over raising the U.S. government’s debt ceiling.

The National Education Association, for example, has released a 41-page report detailing the “disastrous impact” the automatic cuts would have on education.

Federal aid would drop to 2003 levels, even though 5.4 million more students are enrolled in U.S. schools, the organization said. The teachers’ union estimates that more than 80,000 education jobs would be lost due to the spending cuts.

Research America, a non-profit health research advocacy group, concluded in a report that the cuts would bring disease prevention, food and drug safety and health research to “the breaking point.”

The spending cuts would “delay scientific discoveries that could lead to new treatments and cures for deadly diseases,” the report said.

ADVOCACY GROUPS PUSH

A letter last week to lawmakers signed by 3,000 groups said spending on non-defense programs is already set to drop to its lowest level in 50 years over the next decade when compared to the overall size of the economy.

That reaction was precisely what some Congressional leaders said they wanted when, in 2011, they mandated the automatic cuts in the belief that pressure from the defense and non-defense sectors would prevent them from happening.

But that was before a congressional super committee created in the Budget Control Act in 2011 failed to agree on a more calibrated plan for reducing the deficit, leaving any rescue up to a deeply divided Congress in an election year.

The law requires about $1.2 trillion in mandated savings over 10 years, starting with the automatic cuts in 2013. Half of the automatic cuts are to come from defense and the other half from non-defense areas.

“Non-defense discretionary is hundreds of things and we’ve never been together as a community and never thought about it as being in it together,” said Emily Holubowich, executive director of the Coalition for Health Funding, one of the groups spearheading the effort.

Holubowich said the groups cannot match the lobbying power of the defense industry. With a shoestring budget they hope to mobilize a grassroots effort much in the same way Tea Party conservatives joined forces to advocate against taxes and government spending ahead of the 2010 congressional elections

“We do not have the budget of the defense industry to match them dollar for dollar on a Washington-centric approach. What we do have is people,” she said in an interview. People worried about the impact of across-the-board spending cuts on domestic programs are being urged to show up and express their views at town hall meetings that lawmakers, in their bids for re-election in November, like to hold during August.

The push by advocacy groups against further domestic program cuts comes as Democrats step up their efforts to wring concessions from Republicans in the bid to reduce budget deficits which have topped $1 trillion annually since 2009.

Democratic Senator Patty Murray drew a line in the sand on Monday saying Democrats would not go along with plan that spares defense from automatic cuts at the expense of non-defense programs.

Republicans and Democrats remain divided on taxes as well, the other element of the fiscal cliff scenario.

The potential for simultaneous tax increases comes from the expiration at the end of the year of broad but temporary tax cuts that originated during President George W. Bush’s administration.

Republicans want the tax cuts extended for all income groups while Democrats oppose extensions for the wealthy.

The Business Roundtable letter urged extension of the expiring provisions through 2013 as a “a stopgap measure until comprehensive tax reform can be enacted.”

[Property/casualty insurer members of the Business Roundtable include ACE, Allstate, C.V. Starr, The Hartford, Liberty Mutual, State Farm and Travelers.]

 

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