“Public Goals, Private Interests”: In Debt Campaign, Business Executives And Former Legislators Defending Their Narrower Interests
When Jim McCrery, a former Louisiana congressman, urged lawmakers last month to pursue entitlement cuts and tax reform, he was introduced on television as a leader of Fix the Debt, a group of business executives and onetime legislators who have become Washington’s most visible and best-financed advocates for reining in the federal deficit.
Mr. McCrery did not mention his day job: a lobbyist with Capitol Counsel L.L.C. His clients have included the Alliance for Savings and Investment, a group of large companies pushing to maintain low tax rates on dividend income, and the Win America Campaign, a coalition of multinational corporations that lobbied for a one-time “repatriation holiday” allowing them to move offshore profits back home without paying taxes.
In Washington’s running battles over taxes and spending, Mr. McCrery and his colleagues at Fix the Debt have lent a public-spirited, elder-statesman sheen to the cause of deficit reduction. Leading up to the fiscal negotiations, they set up grass-roots chapters around the country, met with President Obama and his aides, and hosted private breakfasts for lawmakers on Capitol Hill. In recent days, Fix the Debt has redoubled its efforts, starting a new national advertising campaign and calling on Mr. Obama and Congress to revise the tax code and reduce long-term spending on entitlement programs.
But in the weeks ahead, many of the campaign’s members will be juggling their private interests with their public goals: they are also lobbyists, board members or executives for corporations that have worked aggressively to shape the contours of federal spending and taxes, including many of the tax breaks that would be at the heart of any broad overhaul. While Fix the Debt criticized the recent fiscal deal between Mr. Obama and lawmakers, saying it did not do enough to cut spending or close tax loopholes, companies and industries linked to the organization emerged with significant victories on taxes and other policies.
“Some of these folks who are trying to be part of the solution have also been part of the problem,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a liberal-leaning advocacy group, and a former economic adviser to Vice President Joseph R. Biden Jr. “They’ve often fought hard against the kind of balance that we need on the revenue side. Many of the people we’re talking about are associated with policies that would make it a lot harder to fix the debt.”
Sam Nunn, a former Democratic senator from Georgia who is a member of Fix the Debt’s steering committee, received more than $300,000 in compensation in 2011 as a board member of General Electric. The company is among the most aggressive in the country at minimizing its tax obligations. Mr. McCrery, the Louisiana Republican, is also among G.E.’s lobbyists, according to the most recent federal disclosures, monitoring federal budget negotiations for the company.
Other board members and steering committee members have deep ties to the financial industry, including private equity, whose executives have aggressively fought efforts to alter a tax provision, known as the carried interest exception, that significantly reduces their personal income taxes.
Erskine B. Bowles, a co-founder of Fix the Debt, was paid $345,000 in stock and cash in 2011 as a board member at Morgan Stanley, while Judd Gregg, a former Republican senator from New Hampshire and a co-chairman of Fix the Debt, is a paid adviser to Goldman Sachs. Both companies have engaged in lobbying on international tax rules.
Mr. Gregg also sits on the boards of Honeywell and IntercontinentalExchange, a company that has warned investors that a tax on financial transactions would lower trading volume and curtail its profits. The two companies paid Mr. Gregg almost $750,000 in cash and stock in 2011.
In all, close to half of the members of Fix the Debt’s board and steering committee have ties to companies that have engaged in lobbying on taxes and spending, often to preserve tax breaks and other special treatment.
Fix the Debt does not endorse specific tax proposals. Instead, it advocates broad principles for debt reduction, including “comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.” A spokesman, Jon Romano, said that the executives involved with the campaign were committed to tax reform, even if it closed loopholes that benefited their companies.
“All the people involved in this campaign have said from the beginning that everything has to be on the table,” Mr. Romano said. “Our C.E.O.’s, our state chapters, our small-business leaders — they are all willing to give something up for the sake of the country.”
Those involved with the campaign say they have tried to separate their advocacy for Fix the Debt and their private work for clients. Vic Fazio, a former Democratic congressman from California who is on the campaign’s steering committee, is a lobbyist at Akin Gump, a firm whose clients include KKR, a leading private equity shop, and the Private Equity Growth Capital Council, an industry trade group.
Mr. Fazio said that he and other people involved with the campaign had tried to set aside their parochial interests and had assumed that any grand bargain between Mr. Obama and Congress would include some elements they did not like.
“The people who have signed up to work with Fix the Debt are people with lots of tax preferences that are important to their business model,” Mr. Fazio said. “But they go along with it because they think there is an overriding benefit to their companies and to the country.”
But so far, at least, the companies and industries most closely linked to Fix the Debt have been aggressive in defending their narrower legislative interests.
The fiscal deal preserved the carried interest loophole, eliminated most of a large prospective increase in dividends taxes and preserved a tax break, known as the active financing exception, that allows G.E. and other multinational companies to avoid paying United States taxes on overseas profits.
The deal also forestalled large automatic cuts in military spending, a boon to contractors like Honeywell. The company’s chief executive, David M. Cote, is a co-founder of Fix the Debt; the group’s “core principles,” which call for retrenchment in entitlement programs like Social Security, make no mention of military spending, which constitutes about a fifth of the federal budget.
“It’s easier to get face time in Washington as a deficit hawk than as a corporate hack,” said Kevin Connor, the director of the Public Accountability Initiative, a watchdog group. “They are spending millions, but they are protecting billions in defense contracts and tax giveaways that would otherwise be on the chopping block.”
Yet after an election in which many industries, including Wall Street, bet heavily against Mr. Obama, Fix the Debt has also had more credibility among Democrats than some traditional business groups like the United States Chamber of Commerce. The chamber, by far the largest business advocacy group in Washington, staunchly opposed proposals to raise taxes before the fiscal deal.
At a news conference in New York on Tuesday, Mr. Bowles suggested that Fix the Debt was just getting started.
“I’m not a quitter,” he said at the event, which was sponsored by Nasdaq, the country’s second-largest stock exchange. “We’re going to stay until we get the job done.”
By: Nicholas Confessore, Nelson Schwartz, Contributor; The New York Times, January 9, 2013
“An Inane Idea”: With A Trillion Dollar Coin, President Obama Can Fight Dumb With Silly
A trillion dollar platinum coin? Really? Has our politics really reached a point where such an obviously inane idea is gaining traction? Well, yes. When your capitol has become Clowntown, U.S.A., you sometimes need to fight bad ideas with silly ones.
The idea, if you haven’t heard, is for President Obama to defuse the forthcoming debt ceiling crisis Republicans are busily manufacturing by directing the Treasury to mint a platinum coin worth $1 trillion. With an extra trillion on the books, the debt ceiling would no longer be an issue. While the Federal Reserve ordinarily is in charge of printing money, there’s a law on the books allowing the Treasury secretary to produce platinum coinage of whatever value s/he sees fit.
Sure, the purpose of the law was to permit the Treasury to issue commemorative coins. But so what? The purpose of the debt ceiling wasn’t to give one party the leverage for a global, economic hostage crisis. Were the debt ceiling not raised, the Washington Post’s Ezra Klein writes, “the damage to the economy would be tremendous, and it would occur at every level, from individuals looking for a loan to buy a house to hedge funders trying to play the markets.” His full article on what happens if we breach the debt ceiling is worth a read.
So when one political party is acting like a political version of a James Bond villain (“Give in to my demands or I will wreck the world economy!”) maybe the answer is for the president to channel his inner Dr. Evil (“One trillion dollars.”)
Again, it all sounds silly but some very serious folks are lining up behind it, including the New York Times’s Paul Krugman, who has a Nobel Prize lying around his office. New York Rep. Jerrold Nadler is also a fan. And despite some suggestions that none of this is legal because it’s not what the law was intended for, Philip Diehl, a former director of the Mint, told Klein that it’s perfectly legal.
So is it a silly idea? Yes. But Republican extremists have brought us into an age of political asymmetrical warfare, passing off crazy, dangerous ideas as serious. Why should the president unilaterally disarm on that front?
By: Robert Schlesinger, U. S. News and World Report, January 9, 2013
“Highlighting GOP Duplicity And Hypocrisy”: How President Obama Should Open The Debt-Ceiling Negotiations
In the last few days, a number of outlets have started giving serious thought to the “platinum coin” option in the debt ceiling fight. In short, thanks to a loophole, the Treasury could mint a $1 trillion platinum coin to temporarily pay down the national debt until the debt-ceiling standoff has passed.
Defenders of this idea, including Bloomberg’s Josh Barro and my Post colleague Greg Sargent, point out that it is not as absurd as threatening default on the nation’s debts to force policy changes. But they also admit that, fundamentally, this is a gimmick; while the White House might be wise to be ready to mint the coin if absolutely necessary, it would look silly publicly threatening to do so. (And it would hand lovers of “pox on both houses” punditry an easy way out of chiding only Republicans.)
But that doesn’t mean the White House is helpless when it comes to framing the debate — far from it. The best idea remains one that Post columnist Matt Miller proposed last month: Raise the debt ceiling “just by the amount it would take to accommodate the debt Republicans voted for in Rep. Paul Ryan’s budget last year — $6 trillion over the next decade.”
As Miller wrote during the “fiscal cliff” standoff, the idea that Republicans actually care about the deficit is “demonstrably, laughably, even shockingly false.” The party showed absolutely no interest in controlling deficits during its six years in control of Congress and the White House. Several GOP moves since then have only confirmed that Republicans are interested only in using the national debt to try and scare people into adopting their unpopular policies.
After all, the failure of John Boehner’s “Plan B” tax proposal showed House Republicans’ determination to vote down debt solutions that didn’t conform to their tax ideology. The GOP has clung to pushing “chained CPI” as its favorite Social Security reform in this round of negotiations, since it cuts benefits without the politically dangerous headlines of “GOP cuts benefits,” but the Congressional Budget Office has found it’s actually one of the least effective policy options for extending Social Security’s solvency. And on Medicare, Republicans’ (and, unfortunately, some Democrats’) idea of raising the eligibility age would only lead to minimal savings, while hurting minorities hardest.
Given that Republicans’ priorities are their policies first, the debt a distant second and the health of our economy an even more distant third, Miller’s idea should be at the center of the White House’s strategy on the debt ceiling. Remember, the GOP caucus has repeatedly backed Ryan’s budgets, the latest of which, to repeat, adds $6 trillion in debt over 10 years. By continuously highlighting Republican duplicity and hypocrisy, the White House can give itself the most room to make the best deal for the American people.
By: James Downie, The Washington Post, January 8, 2013
“Catastrophically Dangerous”: What Happens If The GOP Shoots The Hostage?
Sen. Saxby Chambliss (R) of Georgia raised an interesting point this morning about the Republican debt-ceiling hostage crisis.
To translate this a bit, Chambliss is embracing the hostage strategy with both arms. From 1939 to 2010, the debt ceiling was raised without preconditions by both parties 89 times, but in 2013, Chambliss and his cohorts are demanding a ransom: painful-but-unspecified cuts to Social Security and Medicare.
And if the president refuses to meet the Republicans’ demands, and GOP policymakers follow through on their threats, Chambliss thinks it’s Obama who’ll “suffer the consequences.”
Except, whether he understands the issue or not, Chambliss is mistaken. If Republicans refuse to allow the nation to pay for the money it’s already spent, and in the process push the nation into default by trashing the full faith and credit of the United States, it’s not the president who’ll “suffer the consequences”; it’s the rest of us.
Obama will be fine. Chances are, Saxby Chambliss will get by, too. But if Republicans refuse to do their duty, conditions for the national and global economy will get “very bad, very fast,” including “financial-market chaos.”
“Think about what we’re talking about here,” Steve Bell, director of economic policy at the BPC, told Ezra Klein yesterday. “We’re talking about the reserve currency of the world. We’re talking about the deepest and most liquid markets in the world. And we’re sitting here wondering if we’ll cover our obligations?”
The consequences would be brutal and long-lasting. America’s reputation, global standing, and stability would very likely never — ever — be the same.
So, Sen. Chambliss should probably take five minutes to understand that the fire he’s playing with is catastrophically dangerous. Because at this point, the Republican senator isn’t just threatening to hurt America on purpose, he’s under the misguided impression that Obama’s the one who’ll suffer.
By: Steve Benen, The Maddow Blog, January 7, 2013
“Calling The Great Turtle’s Bluff”: President Obama Should Raise The Debt Ceiling Himself
The budget deal that just averted the supposed fiscal cliff was only a warm up. The next fiscal cliff is the $110 billion in automatic budget cuts (sequesters) that last week’s budget deal deferred only until March. But, as long as we are using topographic metaphors, this is less a cliff than a bluff.
On the Sunday talk shows, Republican leaders were full of bravado and swagger. Representative Matt Salmon of Arizona, on CBS “Face the Nation” said it was about time “for another government shutdown.”
Senate Minority Leader Mitch McConnell, speaking with ABC’s George Stephanopoulos, ruled out any further tax increases, declaring that “the tax issue is finished, over, completed.” He insisted, “Now it’s time to pivot and turn to the real issue, which is our spending addiction.”
But is spending really the problem? For most the postwar era, federal tax revenues hovered around 19 percent of GDP, and spending a bit more than that. But for the four years since the financial collapse, federal revenues have been under 16 percent of GDP, thanks to the Bush tax cuts and the weak economy. It’s true that spending is up—it peaked at 25.2 percent of GDP in FY 2009, mainly because of the stimulus. But if it were not for the stimulus, unemployment would be even higher and growth even lower.
The point is that none of these fiscal issues caused the financial collapse, nor are they retarding the recovery. Were Congress to reduce the budget deficit, it would weaken, not strengthen the recovery. That is the real danger of the so-called fiscal cliff.
Spending relative to GDP was as high as 23.5 percent in the Reagan years, a shade above its projected level for this year. So there is no “addiction to spending.” If a free society wants to tax itself more to pay for decent retirement and health benefits, that is a political choice. Even with the slight tax increase of last week’s budget deal, limited to the top one percent, we still have the lowest tax rates of any wealthy country.
Seemingly, the Republicans hold a much stronger hand in the next round of budget talks: If Congress does nothing, the automatic cuts of the sequester take hold.
But Republicans have been blustering on taxes and spending for years. They were never going to raise taxes (Sorry, Grover), but when Obama decided to hang tough they turned around and voted to hike taxes on the richest one percent.
Obama needs to call McConnell’s bluff. On the issue of the debt ceiling, he can invoke his authority under the Fourteenth Amendment, which provides that the U.S. government’s debts must be honored. He’d get wide backing.
On the sequester, Obama can keep Social Security and Medicare cuts off the table. There is more than one way to balance accounts going forward. One way is to raise the ceiling on incomes subject to payroll taxes. That would be a lot more popular than cutting benefits.
And does McConnell really want the sequester to bite, with its $60 billion in Pentagon cuts? In the great budget showdowns of the mid-1990s with Newt Gingrich, Bill Clinton got the GOP to blink first.
If Clinton could achieve that with the Great Newt, Obama can do no less with the Great Turtle.
By: Robert Kuttner, The American Prospect, January 7, 2013
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