Obama and CEOs finish year warmer but still wary
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
President Barack Obama’s meeting Dec. 15 with U.S. business leaders is a symbolic step towards mending the White House’s longstanding rift with Corporate America. That should complement other business-friendly steps, such as a Korea trade agreement and bipartisan tax deal. But to truly narrow Obama’s schism with CEOs, corporate tax and regulation reform need to be high on the administration’s 2011 agenda.
More immediately, CEOs may be mildly disappointed with Obama’s next move, picking a replacement for Larry Summers as director of the National Economic Council. The administration has few members with significant experience outside of government. Summers’ departure created an opening, the chieftains hoped, for someone who has built a business and met payroll. An investment banker isn’t quite what Main Street CEOs probably had in mind. Still, leading candidate and Evercore founder Roger Altman would be preferable to short-listers like Gene Sperling, NEC director under President Bill Clinton; or Yale’s Richard Levin. Altman, after all, runs a successful public company.
Longer term, the more important decision for business will be the White House’s emerging effort at revamping the complex and uncompetitive corporate tax code. If Tokyo follows through on efforts to lower its rates, it would leave Japan tied with the United States as having the highest levy on business among advanced industrial economies. While the Treasury Department is still cooking up a proposal, lowering the top U.S. rate as well as replacing the current system of depreciation allowances with an immediate deduction for investments would be a good bridge to business — and potentially lower unemployment.
Business would also like some regulatory relief after this year’s sweeping rule changes in healthcare and finance. On that front, the White House should consider a proposal from Senator Mark Warner, a Virginia Democrat and cofounder of Nextel. His simple plan: For every new regulation a federal agency wants to impose on business, it must eliminate an existing rule. Republicans would surely applaud. And if the policy focused regulators on truly important matters, it could actually make for more effective regulation.
But dealing with the deficit is still the biggest overhang. In a new report, the Congressional Budget Office notes that under current law, public debt will exceed $16 trillion by 2020, with annual interest payments reaching 3.4 percent of GDP. Just a 1 percent rise in long-term interest rates would tack on another trillion to that total. As the CEOs will surely tell Obama, they’d be unlikely to run their businesses with similar fiscal characteristics.