http://crfb.org/blogs/bowles-and-simpson-announce-campaign-fix-debt-cnbcs-squawkbox CEOs......unite
While the national net public debt is worrisome today at over $11tn (73 per cent of gross domestic product), it will become an unconscionable $21tn (about 85 per cent of GDP) in 10 years, according to the bipartisan Committee for a Responsible Federal Budget. Our income tax system is erratic and uncompetitive and our entitlement spending commitments will crush the system as the baby boomer generation retires.
The lack of political will to address our debt problem creates significant uncertainty for companies making investment and hiring decisions. Without resolution, it could doom us to five years of 2 per cent real GDP growth and 8 per cent unemployment – or even worse: another financial crisis. I agree with those who stress that the government must do more to secure our short-term recovery. However, it is not only possible but essential to preserve a fragile recovery while reducing significantly the US’s longer term debt profile.
The problem can be addressed in one of two ways. The first is proactively and thoughtfully, the way a great nation does. The second is to wait until the bond market forces us to do it. This is not just a Wall Street problem. If 10-year US Treasury bond yields hit 7 per cent, home mortgage rates will reach 10 per cent and car loans will hit 13 per cent. That’s a Main Street problem.
The solution must involve a vastly simplified tax system that yields greater receipts, and vastly simplified less costly Medicare and Medicaid programmes.
There is no time to waste. As we approach the end of the year, we get closer to the edge of the “fiscal cliff”. If there is no political deal, the US will face a triple witching hour of automatically triggered spending cuts, the expiry of tax cuts, and a failure to raise the debt ceiling. We all saw what happened during the last debt ceiling “discussion”. It wouldn’t be a surprise to see the same dysfunctional process or another agreement to “kick the can down the road”, as they say in Washington.
CEOs can no longer stand on the sidelines. We need to ensure debt resolution is a core part of the presidential election campaign.
One of the three televised presidential debates should focus exclusively on debt, using an agreed baseline of fiscal numbers. This debt debate should be simple, focused and allow both candidates to explain their visions for the future based on the evidence. It would allow the candidates to “Reaganise” their plans: speaking simply and holistically about the magnitude of the issue and not just “hyperbolising” about tax increases and benefits cuts. The debate should inform rather than polarise, capturing the importance of the debt issue for the voter.
Markets will not wait for our political system to get its act together. The crisis may not wait for the elections either. If the bond market herd moves, it’s too late. We cannot be complicit in the political silence about our biggest economic issue. US CEOs should do five things to put pressure on Washington.
First, bring up the issue at every discussion with a politician. Second, bring it up in every external speech. Third, educate your employees and encourage them to contact their congressional representatives. Fourth, advocate for the Debt Debate. Fifth, support the Campaign to Fix the Debt, directed by Erskine Bowles and Alan Simpson, who co-led a bipartisan commission on the topic.
Many people wonder if the US’s time has passed and whether we have lost the political will to compete. I don’t believe that and neither do most US CEOs. But there isn’t a moment to lose: now is the time to speak up.
The writer is the chief executive of Honeywell
http://www.ft.com/intl/cms/s/0/bda5a264-cb50-11e1-b896-00144feabdc0.html#axzz20ViRnrDI