CEOs’ self-serving deficit manifesto

By Felix Salmon
October 25, 2012
WSJ has what it calls "CEOs Deficit Manifesto " -- a copy of the letter, signed by 80-something US CEOs, urging action on the debt and deficit.

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The WSJ has what it calls “CEOs Deficit Manifesto ” — a copy of the letter, signed by 80-something US CEOs, urging action on the debt and deficit. It’s not a particularly impressive document. It starts like this:

Policy makers should acknowledge that our growing debt is a serious threat to the economic well-being and security of the United States.

It is urgent and essential that we put in place a plan to fix America’s debt.

MW-AR995_debt_f_20120607165649_ME.jpgThis is ridiculous. There are lots of serious threats out there to the economic well-being and security of the United States, and the national debt is simply not one of them. Nor is it growing. The chart on the right, from Rex Nutting, shows what’s actually going on: total US debt to GDP was rising alarmingly until the crisis, but it has been falling impressively since then. In fact, this is the first time in over half a century that US debt to GDP has been going down rather than up.

So when the CEOs talk about “our growing debt”, what they mean is just the debt owed by the Federal government. And when the Federal government borrows money, that doesn’t even come close to making up for the fact that the CEOs themselves are not borrowing money.

Money is cheaper now than it has been in living memory: the markets are telling corporate America that they are more than willing to fund investments at unbelievably low rates. And yet the CEOs are saying no. That’s a serious threat to the economic well-being of the United States: it’s companies are refusing to invest for the future, even when the markets are begging them to.

Instead, the CEOs come out and start criticizing the Federal government for stepping in and filling the gap. If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return!

The national-security angle is just silly: there’s no evidence at all that the United States is any more vulnerable at times of high debt than it is at times of low debt. And even if it might be essential that we put in place a plan to fix America’s debt, it certainly isn’t urgent: the bond market is telling us that very clearly indeed. When the 10-year bond yields well under 2%, the market is telling America to borrow more, not less. And central banks around the world have made it very clear that these low rates are going to be around for a good while yet.

The CEOs do concede as much, a little grudgingly, when they say that “this plan should be enacted now, but implemented gradually to protect the fragile economic recovery” — a statement which does rather undercut the “urgent” bit at the beginning. And to their credit, they do say that any successful fiscal plan “must be bipartisan”: I take that to mean that Republican pledges not to raise taxes are idiotic, not least because there’s no way that any such plan will ever get Democratic buy-in.

But when they try to get to the specifics of tax reform, they start falling into blather, asking that it be “pro-growth” (an utterly meaningless phrase), and asking too that it include lower rates and higher revenues.

Maybe they should have just asked for a pony for everybody instead: that would be easier. You can’t have lower rates and higher revenues — not without eviscerating pretty much all of the tax deductions which much of the middle class has learned to rely upon. Mortgage-interest tax relief, the charitable deduction, even the deduction for state and local taxes: pretty much all of them would have to go. That wouldn’t just get blocked by Democrats: it would get blocked by Republicans, too. And because most of these tax expenditures go to the middle class, broadly defined, the one group which would see most of the benefits while bearing very little of the costs would be the top 1%: the very CEOs who signed this letter.

In other words, the letter basically just says “please cut our taxes, raise taxes on everybody else, and cut the benefits they get from Medicare, Medicaid, and Social Security, which are programs we individually don’t rely upon”. It’s gross self-interest masquerading as public statesmanship.

It’s also the latest example of the absolutely enormous influence of Pete Peterson on the public debate. Peterson’s extremely well-funded and highly-focused concentration on fiscal issues has turned worrying about the national debt into a bipartisan pastime, to the point at which debate moderators can simply assume that the national debt in general, and entitlements in particular, are an enormous and urgent problem, and then ask the candidates how they’re going to fix this huge problem which we can all agree exists. The public just nods along.

But the fact is that nothing is remotely so obvious. The really huge and important and urgent issue facing the US right now is the problem of unemployment, and specifically of long-term unemployment. A plan to stabilize the debt would be a welcome thing; we could get a lot of the way there by capping deductions, a la Romney, and then putting in a few Pigovian taxes on things we don’t want, like carbon emissions or high-frequency trading. And if you want to strengthen Social Security, Medicare, and Medicaid, then one way of doing that is to go the European route and pay for them with a VAT. But nobody is suggesting that as an option.

In any case, both the global economy and the US economy are very fragile right now, and every central banker in the world is begging for help from fiscal policymakers. Which is to say, higher deficits, not lower ones. The problem is that Pete Peterson seems to be much more effective at corralling CEOs than Ben Bernanke is. More’s the pity.


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Thank you!

Finally some sense to combat deficit hysteria.

Posted by petertemplar | Report as abusive

I’ve got my own manifesto for the CEOS – stop hoarding your f*ing profits. If you want the government to cut its deficits, then spend or distribute your profits, and let them be used somewhere, instead of puffing up your balance sheets. If you don’t know what to do with all that money (which is at an all-time high), then let somebody else figure it out (i.e., pay a dividend or higher salaries or cut your prices, or quit). But every time you cut spending by reducing your headcount, you put more of the burden of insuring domestic tranquility and providing for the common welfare on the government (if the latter is taken care of, the former will require attention). Every dollar you suck out of the economy and put on a shelf somewhere needs to be replaced in the economy by somebody else, and that somebody else is the government.

If profits are being extracted from the flow of trade and held out of circulation, the only way to even maintain the current level of individual income, much less grow the economy to match population, is if the government steps in (unless people can mine precious metals in their backyards). Cutting taxes doesn’t create jobs, and even people working for less money won’t create new jobs. The only way to create more jobs is for those who have money to invest or spend more of it. Deficits are not good, but when the underlying economy of every major currency is relying on deficits, it’s a sign that not enough capital is being re-circulated, and the only answer short of violence is deficit spending.

If you want the government to spend less, you CEOs need to spend more. Your call.

Posted by KenG_CA | Report as abusive

that should be “if the latter is NOT taken care of, the former will require attention”. I should proofread before I post, but the editing window sucks.

Posted by KenG_CA | Report as abusive

Excellent article, well written and informative. Sadly the people who most need to read it a) won’t read it and b) won’t believe it even if they do. Sadly politics is becoming far more partisan and divisive, and while rich men fund idiots like the Tea Party and the mainstream press is controlled by their sympathisers, nothing’s going to change.

There are just too many people who hate the idea of a black President.

Posted by FifthDecade | Report as abusive

So these CEO’s of big corporations tell us the Fedl. Govt. should be more fiscally responsible??

Perhaps we should begin with:

Ex-Im Bank export subsidies: Boeing, GE, Caterpillar

Bank Bailouts: J. P. Morgan Chase, B of A, Goldman Sachs

Farm and ethanol subsidies: John Deere, Continental Grain

Life Insurance as a tax shelter: Aetna, State Farm, Allstate

‘Carried Interest’ tax treatment: Knight Capital, Pershing Square

Mortgage Interest deduction: Weyerhaeuser

And, if you must ask: “broaden the tax base” is a faintly-disguised euphemism for higher taxes on low income workers.

Posted by Ed62 | Report as abusive

Where were these guys when Bush/Cheney were putting in place massive structural deficits during an economic expansion? When their buddies in the finance industry were busily loaning trillions of dollars into a housing bubble? Now they are lecturing us about debt? Wretch.

Posted by stevedwight | Report as abusive

Who wrote this article…The re-elect Obama campaign?? Utter economic idiocy. First, where did they dream up that chart? In the last 4 years the national debt had grown from $11 Trillion to $16.2 Trillion. GDP was $13.2 Trillion in 2008 vs. 13.5 Trillion today!!! I don’t know what this 3 and 4 silliness is on the y-axis of the graph. Don’t people watch the news? The economy has been poking along at 2% annual growth for the past several years while the debt has been growing at an annual clip of 11% (5 times as fast) That all ignores the $43 Trillion unfunded liability of Medicare and the $17 Trillion unfunded Social Security unfunded liability. In total, the US has $75 Trillion of obligations, a fact that is never discussed. Don’t take my word for it, google “financial statements of the United States” and get these numbers directly from the US Treasury Department in the annual report signed by Mr. Obama’s own Treasury Secretary.
The people who commented on this article should use screen names as should the author as they embarrass themselves by showing extreme economic ignorance and pro-Obama blindness.

Posted by financebrains | Report as abusive

Notionally, someone needs to explain to these C.E.O.s:
0.) The Paradox of Thrift
1.) Taxation and the lowered marginal utility of the billionth dollar.
2.) Huge fortunes (and their reliable transmission to heirs), intellectual ‘property’, protection in bankruptcy, and limited corporate liability: all things impossible in the State of Nature, with us made possible by government and so establishing a just debt to the government and its polity
…—only ‘notionally’ because they already know these to be true, but it is in their self-interest that they and those worshipping them are none the wiser.

Posted by SockPuppetno23 | Report as abusive

Lots of words but no real substance behind your opinion piece. You haven’t made the case for you POV. The long term threat to our security would result from a collapse of the dollar. Continuing our current course will ultimately result in an interest burden that can only be resolved by the Fed’s QEternity policy. If the Fed keeps buying the debt, the end result will be out of control inflation. If the Fed stops, interest rates skyrocket. The only resolution is to reduce the debt and deficit.

Posted by jaycee49 | Report as abusive

If they are so terrified of the deficit then why did they also object to reversing all the structural deficit item, ie the Bush tax cuts and the excessive military spending. Those two items are 60% of the deficit, call 20% of the deficit from the recession and you’re left with a $200b deficit. Hardly end of the world stuff. Frankly, as Americans pay off more and more of their debt… well, there’s an end to that rainbow and all that beautiful money that was paying off debts every month is gonna start coming back into the economy. As that really takes off, everyone can afford to pay some more taxes. In my opinion it’s beginning to happen already, and so this fiscal cliff is a godsend – a way for politicians to raise taxes and slash military spending without saying so.

Posted by CDN_Rebel | Report as abusive


The large cash balances on corporate books are largely beyond our reach. KO, AAPL, GE and most large companies make the vast majority of sales and profits outside of the United States. They would be fools to repatriate those foreign profits and volunteer to pay US taxes on products made abroad and sold abroad.

Short of one world government, the US can no longer tell AAPL what to do with their cash. If we tried they would just leave. If you want the US treasury to get more out of the Fortune 500 you would need to levy a national sales tax.

Posted by y2kurtus | Report as abusive

1). 1. Bank of America CEO Brian Moynihan
Amount of federal income taxes paid in 2010? Zero. $1.9 billion tax refund.
Taxpayer Bailout from the Federal Reserve and the Treasury Department? Over $1.3 trillion.
Amount of federal income taxes Bank of America would have owed if offshore tax havens were eliminated? $2.6 billion.

2). Goldman Sachs CEO Lloyd Blankfein
Amount of fed
eral income taxes paid in 2008? Zero. $278 million tax refund.
Taxpayer Bailout from the Federal Reserve and the Treasury Department? $824 billion.
Amount of federal income taxes Goldman Sachs would have owed if offshore tax havens were eliminated? $2.7 billion

3). JP Morgan Chase CEO James Dimon
Taxpayer Bailout from the Federal Reserve and the Treasury Department? $416 billion.
Amount of federal income taxes JP Morgan Chase would have owed if offshore tax havens were eliminated? $4.9 billion.

4). General Electric CEO Jeffrey Immelt
Amount of federal income taxes paid in 2010? Zero. $3.3 billion tax refund.
Taxpayer Bailout from the Federal Reserve? $16 billion.
Jobs Shipped Overseas? At least 25,000 since 2001.

5). Verizon CEO Lowell McAdam
Amount of federal income taxes paid in 2010? Zero. $705 million tax refund.
American Jobs Cut in 2010? In 2010, Verizon announced 13,000 job cuts, the third highest corporate layoff total that year.

6). Boeing CEO James McNerney, Jr.
Amount of federal income taxes paid in 2010? None. $124 million tax refund.
American Jobs Shipped overseas? Over 57,000.
Amount of Corporate Welfare? At least $58 billion.

7). Microsoft CEO Steve Ballmer
Amount of federal income taxes Microsoft would have owed if offshore tax havens were eliminated? $19.4 billion.

8). Honeywell International CEO David Cote
Amount of federal income taxes paid from 2008-2010? Zero. $34 million tax refund.

9). Corning CEO Wendell Weeks
Amount of federal income taxes paid from 2008-2010? Zero. $4 million tax refund.

10). Time Warner CEO Glenn Britt
Amount of federal income taxes paid in 2008? Zero. $74 million tax refund.

11). Merck CEO Kenneth Frazier
Amount of federal income taxes paid in 2009? Zero. $55 million tax refund.

12). Deere & Company CEO Samuel Allen
Amount of federal income taxes paid in 2009? Zero. $1 million tax refund.

13). Marsh & McLennan Companies CEO Brian Duperreault
Amount of federal income taxes paid in 2010? Zero. $90 million refund.

14). Qualcomm CEO Paul Jacobs
Amount of federal income taxes Qualcomm would have owed if offshore tax havens were eliminated? $4.7 billion.

15). Tenneco CEO Gregg Sherill
Amount of federal income taxes Tenneco would have owed if offshore tax havens were eliminated? $269 million.

16). Express Scripts CEO George Paz
Amount of federal income taxes Express Scripts would have owed if offshore tax havens were eliminated? $20 million.

17). Caesars Entertainment CEO Gary Loveman
Amount of federal income taxes Caesars Entertainment would have owed if offshore tax havens were eliminated? $9 million.

18). R.R. Donnelly & Sons CEO Thomas Quinlan III
Amount of federal income taxes paid in 2008? Zero. $49 million tax refund.

Eighteen of the 80 CEOs who signed the call for deficit action are actually some of the biggest outsourcers and tax cheats in America. First, they crashed the economy in 2008. They followed that up by taking billions in taxpayer bailout dollars. Their next step was to outsource jobs and evade taxes. Now they are calling for action on a deficit that they helped create over the past four years.

Bernie Sanders is exposing the hypocrisy of these CEOs, and every American should understand that if Mitt Romney is elected president, these Corporate welfare recipients see potential for unlimited feeding from the taxpayer trough. Only by standing together can we tell these CEOs that the bill has come due, and it is time for them to pa

Posted by jimingrapevine | Report as abusive

y2k, they are still accumulating profits from US operations. I understand the issue with repatriating profits, but even without those profits, they still have enough cash to spend in the U.S.

I’m not suggesting the government tell companies what to do with their cash, but rather that if they don’t put their profits back in circulation, and the government doesn’t replace those profits, there will be consequences that are far worse than deficits. And I’m not suggesting that taking the money via a tax a the solution, but rather a tool to get businesses to re-invest or share more of their profits.

Posted by KenG_CA | Report as abusive

This article is garbage. I can say this since the simple minded premise it is based on, that the yield curve is giving us a usable signal is total folly. The yield curve is being manhandled by a fed that just wants to give a short term boost to the economy. Saying that the “market” is “begging” CEO’s to borrow is ludicrous. And the issue with not being urgent, I think most in the room will look way into the future and determine that global warming will be a problem, but on the debt issue you won’t look past your nose at the Wall Street Journal and read about Greece, Spain and Italy. These countries debt levels are too high and their borrowing cost are going up. The U.S. is on that trajectory, and by the time the rating agencies and the “market” signal trouble, that snowball will be rolling and it will be hard to stop, thus it is absolutely crucial to start early. Put a credible plan together to control the debt, decide on a reasonable tax plan, finalize financial regulation, get a credible energy plan in place, stop high jacking healthcare and maybe then businesses will decide that they can invest in America. The U.S. business man can deal with anything; they just need to know what it is they are dealing with.

Posted by ad_mnres | Report as abusive

I can’t believe the pure communist jiberish I am reading here. Have any of you yahoos ever studied economics? Who are you people and for that matter who is this idiot author. If being a CEO is so easy, you should build a company and become one. Oh, I forgot, you would just rather criticize others who have achieved success.

Paul Krugman is a clown. He won a Nobel prize, remember, these people gave Obama one in his first year because of a speech.

These dedicated professionals are doing this because they are patriots and not because the are greedy bastards you imply. Obama and his snakes in Chicago, have ruined our capitalism model.

Posted by fitz2 | Report as abusive

The author is not a businessman.

I am a CEO, while we don’t have offices in the US, I can tell you our decision to put off expansion into the US came two years ago when the Tea Party and repulicans walked away from a tax reform bill. Some how the American media has made the heros in that drama.

As CEO, we have a responsibility to our employees and customers. We also have to manage investment and growth. The US is a choice in a world economy, not the only one. The reason the US growth has been so stunted in the last two years happened that day and somehow you missed it.

Your article mentions employment as the major problem: that is partially correct. The major problem, and what the letter I suspect was trying to say, though it doesn’t do a good job is that CEOs in your country and others that want to do business, expand, grow and hire in the US, aren’t. Why?

If we commitncapital and the tax code changes, we may not be able to recover. If we comit the capital and the fiscal cliff come along, we may not be able to recover. So two years congress effectively told CEOs America is closed for business investment and growth until further notice.

That’s the message that was sent out. That’s the message received. So we wait until we know and move to other countries. Don’t like it, don’t vote for the guy who walked on that deal, or will on the next one; you got the ball.

Posted by Fpc01 | Report as abusive

I see the economic illiterates are out in full force. Oh well, no wonder Americans are slipping into abject failure. Half the people, the left half, are know nothings.

This post got destroyed by Coyote 12/10/you-ungrateful-slobs-should-be-tha nkful-that-the-federal-government-is-run ning-up-huge-debt.html, but there is plenty to add, especially about the comments.

Hey there, jimingrapevine, a few questions. Who wrote America’s byzantine and stupid tax code? Was it lefties calling for special rules for their pet political causes? Was it faux conservative corporate cronies pretty much bribing congress critters? Does it make a difference? What did Obama and the Dems do about it when they owned the executive and both houses of congress? Did they do nothing and in fact worsen things with the further tax and regulatory madness of Obamacare? If they really wanted medical coverage for the poor, why didn’t they pass a two page bill saying so?

Calling people “tax cheats” for obeying the tax laws is insane, not? You seem to think that there is some hidden intent in the tax laws that taxes be paid how you think they ought to be. You’re wrong.

Posted by Observito | Report as abusive

I don’t think you get it. It’s not the tax code. Yes it’s bad, yes it is unnecessarily complicated. It’s been that way for a long long time. Yes it’s unfair in a whole raft of areas. It’s been that way on and off since tax was collected. What was it that made CEO’s start hoarding cash and stop hiring?

It’s not the Democrat’e or Republicans. It makes no difference to the CEO’s out there whether Obama or Romney win. Sure some have the pet projects for their own reasons. Thats not why balance sheets are expanding and investing and hiring are on hold across most industries.

What plunged all CEO’s into a ‘no hire – no investment mode’ is the sequester. You’ve basically told every capital market in the world that the US political system is so dysfunctional that you’d plunge your country into a 3-5% self imposed GDP reduction for no particularly good reason. So why would I commit to capital expansion now into the US?

Each candidate is using this as a poke at the other: It’s congress, and congress is dysfunctional, completely, blindly irresponsible and that is not likely to be resolved in this election. You have candidates who have signed odd agreements not raise taxes or discuss it in any way and blame the other parties. Well, that is not how comprise works. You’re country is in a revenue crunch and yes that will affect what you can do in the world, so perhaps it is a security threat to the US.

Remember: The US dollar is currently the world reserve currency. I can however see a day where that is stripped away. And I can see that day coming much faster if the sequester actually goes through.

That is a game changer and the next stop for the US would be hyper inflation and depression: That is what got put into motion two years ago when they walked on the deal Boehner and Obama put together. Now?…good luck: Let us know when you are open again, serious again, and are done playing around.

Posted by Fpc01 | Report as abusive