Business leaders, conservatives hold fire on deficit reduction plan
In the outcry over a draft proposal released this week by President Obama’s deficit reduction commission, one powerful interest group was more muted: business.
The plan drew denunciations from labor unions, liberals and some Democratic members of Congress, who protested proposals for deep spending cuts meant to reduce deficits that have swelled to more than 9% of total U.S. economic output.
Business groups and their conservative allies in Congress took a more guarded approach, even though the plan calls for nearly $1 trillion in revenue increases over the next nine years.
While business typically resists a heavier tax burden, the draft put forward by the commission’s two co-chairmen relies far more heavily on spending cuts to reach their goal of reducing the deficit to 1.4% of economic output by the end of the decade.
The proposal calls for spending cuts totaling $2.2 trillion through 2020, with revenue increases amounting to $961 billion — a ratio of more than 2 to 1.
“A lot of those cuts are going to come out of programs that help middle-class people,” said Rep. Jan Schakowsky (D-Ill.), a member of the 18-person deficit reduction panel that Obama created in February.
The draft is not the final product. It reflects the thinking of the co-chairmen: Erskine Bowles, a former chief of staff to President Clinton; and Alan Simpson, a former Republican senator from Wyoming. Commissioners will meet again over the next few weeks, debate the proposal and vote on a final report.
If the panel adopts a recommendation supported by 14 of its members by the Dec. 1 deadline, Senate Majority Leader Harry Reid has pledged the Senate would take up the plan later in the month. The House would follow suit.
With the blessing of a bipartisan commission, the plan might stand a better chance of passage than a bill put forward by Obama or either party’s leadership.
In the battle that is shaping up, Obama may find more support from traditional opponents who have fought his agenda over the last two years than from his Democratic base.
House Speaker Nancy Pelosi (D- San Francisco) called the plan “simply unacceptable.” Schakowsky said Thursday, “This report is not going anywhere.”
But business interests and fiscal conservatives seemed more amenable, at least to the initial draft.
An official with the U.S. Chamber of Commerce said Thursday that all sides would need to sacrifice if the U.S. was to slash deficits that posed a mortal threat to the economy.
“The business community is looking at the deficits and debt,” said R. Bruce Josten, executive vice president of the chamber. “We’re completely in the realm of unsustainability. And you’re going to be in a realm that will threaten GDP [gross domestic product] growth here at home. So the business community realizes something is going to have to be done.”
As for the Bowles-Simpson report, Josten said: “They put everything on the table, including the kitchen sink, as a way to cause a debate. We have to have this debate. Something needs to be done to address this issue.”
Another business group, the Business Roundtable, laid out a similar argument.
“Solutions will not be easy; they will require serious thought and open minds on both spending and revenue issues,” said Larry Burton, executive director of the group, which represents chief executives of major U.S. companies. “With debt rising faster than the economy, we cannot wait to take on these challenges years down the road. We must address them now.”
Even Sen. Tom Coburn (R-Okla.), one of the commission’s most fiscally conservative members, acknowledged that raising revenue might be necessary.
“If we do the cuts, we may have to go for the revenues at some point in time,” Coburn said.
The plan lays out a series of tax changes and spending cuts for lawmakers to consider. To cut the budget by $200 billion over the next five years, the report calls for, among other things, paring the federal workforce by 10%, freezing federal salaries, eliminating overseas military bases by a third and reducing military research and development by 10%.
Extra revenue would come from taxing more income. The plan would do away with deductions for state and local taxes, dependent children and interest on mortgage payments.
Eliminating the deductions, in turn, would allow marginal tax rates to be reduced.
As criticism from his own party mounted, Obama urged patience.
Speaking at a news conference in South Korea, where he was attending the Group of 20 economic summit, the president said: “Before anybody starts shooting down proposals, I think we need to listen, we need to gather up all the facts.
“If people are, in fact, concerned about spending, debt, deficits and the future of our country, then they’re going to need to be armed with the information about the kinds of choices that are going to be involved, and we can’t just engage in political rhetoric.”
Lisa Mascaro in the Washington bureau contributed to this report.