C.E.O. Deficit Fears Dissolve With the Prospect of Corporate Tax Cuts
In mid-October 2012, Jamie Dimon, chief executive of JPMorgan Chase, hosted a luncheon on the 49th floor of the firm's Park Avenue headquarters. The guest list was a boldface roll call of corporate executives and policymakers: Lloyd C. Blankfein of Goldman Sachs, David M. Cote of Honeywell, the Democratic senator Mark Warner of Virginia and the Republican senator Lamar Alexander of Tennessee, among others.
The topic over lunch was "Fix the Debt," a nascent effort by like-minded executives — all of whom had signed on to the campaign — to urge lawmakers to address the nation's growing debt. Erskine Bowles, the former chief of staff for President Bill Clinton who was an inspiration for the group along with Alan Simpson, the former Republican senator from Wyoming, had just called the nation's debt "a cancer that will destroy this country from within."
Mr. Dimon, along with dozens of other executives, took up the challenge. "The inability to face our fiscal reality is a concern," he wrote in his annual letter to investors that year, lamenting the failure to adopt the Simpson-Bowles plan to reduce the debt by $4 trillion, in part by increasing taxes, closing loopholes and reducing entitlements. "I believe that if we had adopted some form of the Simpson-Bowles plan to fix the debt, it would have been extremely beneficial to the economy."
Fast forward to this month: With a few exceptions, the community of chief executives that once championed reducing the debt as the nation's top priority is taking up a position on the other side of the issue. They are advocating an overhaul package that will reduce corporate taxes, even though both the House and Senate plans will increase the national debt by an estimated $1.5 trillion over the next decade.
You've heard nary a peep from the business community about that. The silence is deafening.
"Passing tax reform is the single most important thing that Congress can do to make American companies more competitive, boost the economy, create jobs and spur wage growth," Mr. Dimon, who is also the chairman of the Business Roundtable, which represents some of the largest companies in the nation, said in a statement this month. "The House and Senate continue to move forward to deliver tax relief for hard-working American families, and business leaders will continue to advocate for comprehensive pro-growth reform."
He is hardly alone in his support for the tax plan. Hundreds of chief executives have come out in favor of the proposal, which, among other things, will reduce the corporate tax rate to 20 percent, from 35 percent, as well as allow multinational businesses to repatriate income from abroad at a one-time rate of only 12 percent.
Steven Rattner, the former auto czar under President Obama who now oversees Michael R. Bloomberg's wealth and was on the steering committee of the Fix the Debt campaign, said he was no fan of the current tax plan. But he said he understood why some executives who once placed so much emphasis on the mounting debt problem would now focus on tax cuts — and how many of them feel that the two positions did not contradict each other.
"It's not completely irrational to say the tax code is a disaster," Mr. Rattner said. "What's going on here is that the importance of reforming the tax code trumps, excuse the pun, fixing the debt."
Mr. Rattner said that for many chief executives, "the choice is between this and no tax bill." In other words, there is not another option on the table, nor is there one on the horizon. Still, Mr. Rattner said he could not support the current tax overhaul plan.
In fairness, the position of Mr. Dimon and others may not be completely at odds with their previous views. Despite the stated goal of the Fix the Debt campaign five years ago, insiders say it was as much a rallying cry for Washington to come together on financial policy as it was about immediately addressing the debt. And much of the campaign was predicated on meaningful corporate tax reform and spending.
Chief executives like Mr. Dimon and Mr. Cote offered to pay higher individual tax rates — which the Simpson-Bowles plan called for — but significantly cutting corporate taxes was always a central tenet of the "fix the debt" effort. And with the current tax plan, Mr. Dimon and others have not taken a public position on anything but the corporate tax reduction element; they have not spoken out about the individual rate or other elements.
Still, members of the Fix the Debt campaign were critiqued at the time as a group "acting in their economic self-interest by laying groundwork for lower corporate taxes and deep cuts to entitlement programs that primarily benefit the working and middle classes," as New York magazine asserted then.
Only a handful of public company executives have raised questions about the viability of the tax plan and its impact on the long-term fiscal health of the economy. One of them is Howard Schultz, executive chairman of Starbucks, who told me two weeks ago: "If you talk about tax reform, which is in the news every minute of every day, this is not tax reform. This is fool's gold."
When I asked him about Mr. Dimon's support for the tax plan, he said: "He's a lot smarter than me, but I don't agree with him."
Peter Peterson, the co-founder of the Blackstone Group and the founder of the Peterson Foundation, which has long campaigned against the growing national debt, had some harsh words for his peers who had turned away from "revenue neutral policy."
"Mortgaging our fiscal future for trillions in temporary tax cuts will hurt our economy over time, and every C.E.O. should know that," he said. "True business patriots need to advocate for their country as well as their company."
In the end, Mr. Peterson is right. The country — and businesses — will ultimately do better if the nation's balance sheet is not bloated with debt. Part of the issue is generating enough revenue from taxes, and part is dealing with costs like health care and entitlements, which the tax overhaul plan does not even begin to tackle.
In the meantime, it would be nice to see more chief executives articulate the message that they were so vocal about years ago when they spoke about the importance of ensuring the long-term economic health of the country.