July 5, 2011

Big Business Leaves Deficit to Politicians By DAVID LEONHARDT

WASHINGTON
If you want to understand why cutting the deficit is so hard, you can’t do much better than to look at the Business Roundtable.
The roundtable is one of the more moderate big-business lobbying groups. Its president is John Engler, the former Michigan governor, and its incoming chairman is James McNerney, the chief executive of Boeing. When roundtable officials talk about the deficit, they use sober, common-sense language that can make them sound more reasonable than either political party.
But the roundtable is actually part of the problem.
Rhetoric aside, it consistently lobbies for a higher deficit. The roundtable defends corporate tax loopholes and even argues for new ones. It pushes for a lower corporate tax rate. It favors the permanent extension of the Bush tax cuts. It opposes a reduction in the tax subsidy for health insurance, a reduction that was part of the 2009 health reform bill. Oh, and the roundtable also favors new spending on roads, bridges and other infrastructure.
It’s easy to look at the squabbling politicians in Washington and decide that they are the cause of the country’s huge looming budget deficit. Certainly, they deserve some blame. The larger problem, though, is what you might call roundtable syndrome.
In short, there isn’t much of a constituency for deficit reduction. Sure, plenty of people and special-interest groups say that they are deeply worried about the deficit. But they are not lobbying for specific spending cuts or tax increases. They aren’t marshaling their resources to defend politicians who take tough stands, like President Obama’s 2009 Medicare cuts or Rand Paul’s proposed military cuts.
Instead, many of the officially nonpartisan groups in Washington are even less fiscally responsible than the partisans. Public sector labor unions have fought changes to pensions and work rules that could lead to less expensive, more effective government. Private sector unions — along with the roundtable — have defended the huge tax subsidy for health insurance, which drives up health costs.
Labor groups have at least been willing to push for some tax increases. Today’s business groups struggle to come up with any specific deficit plan. Last year, the Business Council — a group of top corporate executives headed by Jamie Dimon of JPMorgan Chase — and the roundtable released a 49-page plan that simultaneously warned that projected deficits would “retard future growth” and called for policies that would add hundreds of billions of dollars a year to the deficit. That’s the essence of roundtable syndrome.
When I ask roundtable officials and other lobbyists about this contradiction, they show an impressive ability to avoid specifics and stick to their talking points. Mr. Engler, by e-mail, said, “A simpler, flatter tax system can be enacted in a fiscally responsible manner that better serves American workers and supports economic growth.”
Taken by itself, this statement is entirely accurate. The corporate tax code is a mess. A better code, say both conservative and liberal economists, would be flatter — that is, have a lower rate and fewer loopholes. Companies would then waste less time complying with the code and could still help reduce the deficit.
But the roundtable is not pushing for the simpler, flatter, fiscally responsible code that Mr. Engler mentions. It’s pushing for tax cuts for its members: a lower rate, the continuation of existing loopholes and the creation of new ones, like a permanent credit for research and a tax holiday for overseas profits. Mr. Engler and his colleagues, in other words, are lobbying for a more complex, less fiscally responsible tax code.
Given how much we’re going to talk about the deficit, I’d suggest requiring any self-proclaimed fiscal conservative to give specifics. You’re against the deficit? Great. How do you want to cut it?
The fact is, naming specific ways to reduce the deficit is no more technically challenging than naming new spending programs or tax cuts. To take the current debt ceiling negotiations as a benchmark, White House officials and Congressional leaders are looking for about $200 billion a year in deficit reduction. They could get it any number of ways.
Two different bipartisan groups — the Bowles-Simpson deficit commission and the Sustainable Defense Task Force — have called for roughly $100 billion a year in cuts to the military budget. Getting rid of farm subsidies would save about $15 billion. So would cutting the federal work force by 10 percent.
Allowing the expiration of the Bush tax cuts on income above $250,000 a year would raise about $60 billion a year. The expiration of all the other Bush tax cuts would bring in another $200 billion or so. Various changes to Medicare and Social Security — raising the retirement age, reducing benefits for the affluent, cutting back on some forms of health care — could cut spending even more. In the long term, with projected deficits well above $1 trillion a year, such changes will surely be necessary.
By the standard of specificity, a few of the most prominent politicians in the deficit debate end up looking more serious than many outside groups. Representative Paul Ryan, the Wisconsin Republican who heads the House Budget Committee, has called for the effective elimination of Medicare for everyone under 55 years old. Mr. Obama favors some Medicare cuts, the closing of several modest tax loopholes and tax increases on the affluent.
There are many potential objections to the Obama plan and to the Ryan plan. And neither would eliminate the deficit. But both plans would at least reduce it, which is more than you can say about corporate America’s deficit plan.
The deficit is one of those national challenges that will require tough choices and courageous leadership. Many of those choices and much of that leadership will have to come from politicians. But I’m guessing we won’t solve the deficit until the politicians get some help — and simply calling yourself a fiscal conservative doesn’t count as help.