The corporate CEOs who have made a high-profile foray into deficit
negotiations have themselves been substantially responsible for the size
of the deficit they now want closed.
The companies represented by executives working with the Campaign To
Fix The Debt have received trillions in federal war contracts, subsidies
and bailouts, as well as specialized tax breaks and loopholes that
virtually eliminate the companies' tax bills.
The CEOs are part of a campaign run by the Peter Peterson-backed
Center for a Responsible Federal Budget, which plans to spend at least
$30 million pushing for a deficit reduction deal in the lame-duck
session and beyond.
During the past few days, CEOs belonging to what the campaign calls its CEO Fiscal Leadership Council
-- most visibly, Goldman Sachs' Lloyd Blankfein and Honeywell's David
Cote -- have barnstormed the media, making the case that the only way to
cut the deficit is to severely scale back social safety-net programs --
Medicare, Medicaid, and Social Security -- which would
disproportionately impact the poor and the elderly.
As part of their push, they are advocating a "territorial tax system"
that would exempt their companies' foreign profits from taxation,
netting them about $134 billion in tax savings, according
to a new report from the Institute for Policy Studies titled "The CEO
Campaign to ‘Fix’ the Debt: A Trojan Horse for Massive Corporate Tax
Breaks" -- money that could help pay off the federal budget deficit.
Yet the CEOs are not offering to forgo federal money or pay a higher
tax rate, on their personal income or corporate profits. Instead, council recommendations include cutting "entitlement" programs, as well as what they call "low-priority spending."
Many of the companies recommending austerity would be out of business
without the heavy federal support they get, including Goldman Sachs and
JPMorgan Chase, which both received billions in direct bailout cash,
plus billions more indirectly through AIG and other companies taxpayers
Just three of the companies -- GE, Boeing and Honeywell -- were handed nearly $28 billion last year
in federal contracts alone. A spokesman for Campaign To Fix The Debt
did not respond to an email from The Huffington Post over the weekend.
The CEO council recommends two major avenues that it claims will
produce "at least $4 trillion of deficit reduction." The first is to
"replace mindless, abrupt deficit reduction with thoughtful changes that
reform the tax code and cut low-priority spending." The second is to
"keep debt under control over the long-term by focusing on the long-term
growth of entitlement programs."
CEOs are encouraged to present a Fix-The-Debt PowerPoint presentation
to their "employee town hall [meetings and] company meetings." To
further help get the word out, the campaign borrowed a page from the
CEOs this fall who wrote letters encouraging their employees to vote for
Mitt Romney, or face job cuts. This time, the CFD has created two
templates for bosses to use at their companies.
But in the past week, in order to make their case to the millions of
Americans who don't work for them, CEOs fanned out into television, to
convince the rest of the country that slashing the social safety net is
the only way to reduce the deficit.
In an interview aired Monday,
Goldman Sachs chairman and CEO Lloyd Blankfein said Social Security
"wasn't devised to be a system that supported you for a 30 year
retirement after a 25-year career." The key to cutting Social Security,
he said, was simply a matter of teaching people to expect less.
"You're going to have to do something, undoubtedly, to lower people's
expectations of what they're going to get," Blankfein told CBS, "the
entitlements, and what people think they're going to get, because you're
not going to get it."
Blankfein and Goldman Sachs don't have to worry about lowering
expectations. After receiving a $10 billion federal bailout in 2008, and
paying it back a few years later, Goldman Sachs recently exceeded Wall
Street analysts' expectations by announcing $8.4 billion in third quarter revenues for 2012. On the heels of a great year, Blankfein is expected to take home an even larger salary than he did in 2011, when he made $16.1 million.
To understand the importance of banking profits to the members of the
deficit council, one need look no further than the two top-ranking
members of the Campaign To Fix The Debt's steering committee, former New
Hampshire Sen. Judd Gregg (R) and former Pennsylvania Gov. Ed Rendell, a
Democrat. Gregg is currently employed as an international adviser to
Goldman Sachs, while Rendell collects his paycheck from the boutique
investment bank Greenhill & Co.
Following Blankfein's evening news appearance on Monday, Cote, the Honeywell CEO, sat down with the same network on Tuesday, and said essentially the same thing that Blankfein did.
Cote ranked 11th on a list compiled in a recent study conducted by
the Institute for Policy Studies of executives who have saved the most
from the Bush tax cuts. According to the IPS, Cote's taxable
compensation for 2011 was a bit more than $55 million, and he did not
pay about $2.5 million thanks to the Bush tax cuts.
After mentioning a few scary-sounding deficit statistics, he
suggested the government raise revenue by ending individual tax credits
and deductions, which he said amounted to a $1 trillion "giveaway" in
2011. It was clear, however, that Cote hadn't come on the show to talk
"The big nut is going to have to be [cuts to] Medicare/Medicaid …
especially with the baby boomer generation retiring. It's going to
literally crush the system."
But while Cote strongly recommends cutting those benefits, when it
comes to the tax obligations of corporations, he's clear about what he
wants: a corporate tax rate of zero.
"From a fairness perspective, nobody would be able to stand [a zero
tax rate on corporate profits]," but if the U.S. really wanted to create
jobs, he said this spring, "we would have the lowest rate possible."
At Honeywell, Cote practices what he preaches. Between 2008-2010, the
company avoided paying any taxes at all. Instead, the company got
taxpayer-funded rebates of $34 million off of profits totaling nearly $5 billion.
Part of what makes the lobbying blitz around the fiscal cliff so
complex for CEOs on the Fiscal Leadership Council is that many of them
need more than just low tax rates. They also need Congress and the White
House to maintain current defense spending levels so they can continue
winning enormous contracts.
In 2011, $40 billion of taxpayer money was divided among just nine
CFD member companies, led by defense giant Boeing, which raked in $22 billion
in federal contracts alone, more than the other eight companies
combined. For his efforts as CEO, Boeing's Jim McNerney took home nearly
$23 million in compensation last year.
But even as McNerney lends his name to the deficit commission, his company has quietly begun laying off U.S. workers
ahead of defense cuts that are expected to be part of a deficit
reduction deal. The company denies that federal spending has anything to
do with the job cuts, but defense industry analysts aren't convinced.
At least one faction of Boeing's workforce is thriving: Boeing lobbyists in Washington have made $12 million since January fighting proposed cuts to defense and aerospace projects.
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