WASHINGTON -- Arguing that business uncertainty over Washington's year-end "fiscal cliff" is choking off hiring and investment, the head of the most prominent CEO lobbying group on Monday called on Congress to compromise on tax cuts, spending cuts and revenues.
Business Roundtable president John Engler, a former Republican governor of Michigan, joined a growing chorus of chief executives imploring Congress to set aside partisan arguments and reach a deal to put the United States on a firm fiscal footing.
In a speech prepared for delivery to the Detroit Economic Club, he said that many chief executives are encouraging talks among Democratic and Republican senators to develop a new deficit-cutting plan based on the 2010 Bowles-Simpson commission, which prescribed a mix of revenue increases and spending cuts.
"I think the American people care about the future of their country, and they understand there's going to have to be a compromise," Engler said. "Our present course is unsustainable and unfair to future generations."
Many members of Engler's group, which represents chief executives of the largest U.S. corporations, have been individually urging Congress to act. They have been warning that the nearly $600 billion of tax hikes and spending cuts set to take effect at the end of the year would devastate the economy.
Goldman Sachs Chief Executive Lloyd Blankfein last week said that he would be willing to pay 5 percent more in taxes if it became necessary for Congress to reach a deal, adding that there would be a "huge" positive impact on the economy if a bipartisan compromise were reached.
Republicans in Congress have long resisted any revenue increases - especially through higher tax rates - as part of any deal to cut deficits, which just ended a fourth year above $1 trillion.
President Barack Obama's Democrats have been pushing for higher tax rates for those making over $250,000. However, in a debate last week, Vice President Joe Biden said he wanted higher taxes on those making over $1 million.
As corporate America's third-quarter earnings reporting season gathered steam this week, chief executives emphasized on conference calls the importance of Congress shielding the fragile U.S. economy from the massive tax hikes and spending cuts.
"In the U.S., there are promising signs that more robust economic growth is within reach, assuming the resolution of the fiscal cliff," Citigroup CEO Vikram Pandit said on Monday. "Lack of a resolution of the cliff situation would be highly disruptive."
Engler warned that uncertainty over future taxes, from individual rates to capital gains to research and development tax credits, was seriously reducing CEO expectations for hiring, capital investments and sales.
"The bottom line: We really don't have a tax code in this country today. It's no wonder there's uncertainty," he said. "It's no wonder businesses are reluctant to invest, even when they have cash on their balance sheets."
While CEOs have been voicing concern over the fiscal cliff for months, U.S. consumers do not appear fazed yet. U.S. retail sales rose in September, with increased purchases of everything from cars to electronics, in a sign that consumer spending is driving faster economic growth.
The 1.1 percent jump in September retail sales reported by the Commerce Department beat forecasts and was powered partly by the release of Apple Inc's new iPhone 5, analysts said. It comes after U.S. consumer sentiment on Friday spiked to its highest level in five years in a Thomson Reuters/University of Michigan Survey taken following a drop in the unemployment rate.
Economists, like CEOs, warn that consumer spending could be hurt by job cuts triggered by fiscal tightening and a snap-back in payroll tax rates that could slice $1,000 off of an average family's take-home pay.
LAME-DUCK DEBT LIMIT HIKE?
Engler said he doesn't expect Congress to resolve all of its fiscal issues during a short post-election, lame-duck session. He is mainly hoping for temporary fixes that allow a larger tax reform deal to be accomplished in 2013.
These include short-term extensions on expiring tax rates, and "backing away from sequestration" - or putting off the automatic spending cuts that were set in motion by last year's landmark debt limit deal.
He also said he would like Congress to raise the debt ceiling again, which would allow the government to continue borrowing. The government is expected to reach the $16.4 trillion debt limit close to the end of this year, with the Treasury Department able to take emergency cash management measures to avoid a default for a couple of months into 2013.
Businesses are fearful of a spike in interest rates that could occur if the United States is again brought to the brink of default and its credit rating is cut further.
"If we can finish just these items, the real challenges will still be waiting," Engler said.
Obama and congressional Republicans wrangled for months last year over whether to raise the federal debt limit. The impasse ended in August with Obama signing a debt ceiling increase, but Standard & Poor's downgraded the U.S credit rating shortly after, citing political gridlock in Washington and the nation's long-term fiscal challenges.
Two Republican senators on Monday demanded that Treasury Secretary Timothy Geithner provide them more information on his plans for avoiding a debt limit-related default in coming months.
"With more complete information about when the debt limit may next be reached, we hope to aid decision-makers and preempt any need for such a contingency plan in the future," said Orrin Hatch, the top Republican on the Senate Finance Committee, and Jeff Sessions, the top Republican on the Senate Budget Committee.
In a letter, they asked Geithner to respond to them by Nov. 1 with a forecast on when Treasury will have to use special measures to avoid defaulting on its debt. The presidential and congressional election is on Nov. 6.
Copyright 2010 by Reuters. All rights reserved.
Copyright 2014 Thomson Reuters. Click For Restrictions