‘Embarrassed’ CEOs Silent on U.S. Debt Debate Driven by Republican Demands
With the U.S. government on the verge of a historic default, the country’s largest business lobbying group took to the halls of Congress last week to press lawmakers to support the Panama Free-Trade Agreement.
The U.S. Chamber of Commerce sponsored a “door knock,” with 80 members handing out Panama hats to tout a trade deal with a nation that has a smaller economy than Akron, Ohio. To critics, the Chamber event illustrates what has been a deafening silence from U.S. executive suites on the gridlock in Washington over raising the federal $14.3 trillion debt ceiling.
“They haven’t done nearly enough to sound the alarm,” said Jim Kessler, vice president for policy at Third Way, a Washington research group that describes itself as advocating “moderate policy” and has executives from Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) on its board. Executives “think this is all Washington theater, and it will all get done in the end.”
The Chamber, which last week began to issue almost daily pleas for the debt ceiling to be raised, today urged lawmakers to approve the package worked out by President Barack Obama and congressional leaders and passed by the House. The Senate may vote as early as tomorrow. In the months before the weekend compromise, company lobbyists and executives had mostly steered clear of the fight.
At a closed-door meeting with Chamber lobbyist Bruce Josten last month, Democratic Senators Mark Begich of Alaska and Mark Warner of Virginia upbraided the group and its member companies for not twisting arms hard enough to get a compromise package worked out, according to two people familiar with the discussion who spoke on condition of anonymity because the meeting was private.
Begich contrasted the lobbying, television advertisements and political giving the Chamber invested fighting off health- care legislation in 2009 and 2010 with its “wishy-washy” approach on the debt ceiling.
“I’m amazed,” Begich said in an interview July 27. “They spent millions saying that health care would be the end of all business in America, but the end of all business in America is in five days from now.”
On the debt debate, corporations have kept their lobbying money on the sidelines. Of the 10 companies with the largest lobbying expenditures in 2011, two said they were lobbying on the debt ceiling during the first six months of this year, according to disclosure forms filed with the Senate: insurer Blue Cross/Blue Shield, the third-largest lobbyist, and drugmaker Pfizer Inc., the ninth-largest.
None of the other companies mentioned the issue. Together those 10 spent more than $90 million on lobbying from January through June, according to data compiled by the Center for Responsive Politics, a Washington research group.
With notable exceptions such as Warren Buffett, the billionaire chairman and chief executive officer of Berkshire Hathaway Inc., and David Cote, chairman and chief executive of Honeywell International Inc. (HON), CEOs generally have shied away from speaking out individually on the issue.
“It’s unfortunate that the business interests have not stepped forward as loudly as they should have,” Bill Daley, the White House chief of staff, said in an interview with Bloomberg Television July 26. “You’ve had a silence from the business community to the political establishment over the last number of years that’s been unfortunate.”
‘Embarrassed’ by Republicans
Warren Bennis, a professor of business at the University of Southern California who has written about corporate leadership for four decades, says CEOs may have been silenced by positions advocated by some Republicans, such as Tea Party enthusiasts who support an increase in the debt limit only if it’s accompanied by greater spending cuts than the increase and doesn’t raise taxes.
“They’re caught,” Bennis said in an interview July 29. “They tend to be Republican and they are embarrassed by what they see from Republicans,” Bennis said. “It’s a real stalemate and CEOs want to stay clear of it.”
After negotiations between Republicans and Obama broke down, chief executives of companies such as General Electric Co. (GE), BlackRock Inc. (BLK) and Citigroup Inc. (C) started to push harder for a breakthrough last week, mainly by signing group letters sent to Congress and the administration.
Goldman Sachs Chairman and CEO Lloyd Blankfein and JPMorgan Chase & Co. (JPM) chief Jamie Dimon were among 14 financial executives who signed a July 28 letter by the Financial Services Forum, a Washington trade group that represents the largest banks.
On July 27, the Business Roundtable sent House lawmakers a letter supporting a bill pushed by Republican Speaker John Boehner that would cut $915 billion in spending over 10 years in exchange for a two-step process of raising the debt ceiling and considering a balanced-budget amendment. Today, the group representing CEOs backed the compromise package as well.
Some 115 associations, but no individuals, were listed as signees. The Washington-based Roundtable says on its website that it was “founded on the belief that businesses should play an active role in the formation of public policy.”
The Boehner bill passed the House on July 29, only to fail in the Democrat-controlled Senate later the same evening. After weekend negotiations, Obama said last night that leaders of both parities in the House and Senate reached an agreement to raise the debt ceiling and cut the deficit.
“We have a great deal of hard work ahead of us to restore our economy and put our nation’s finances on a sounder footing,” U.S. Chamber President Thomas Donohue said today in a statement. “This agreement takes us a step in the right direction and is the right thing to do.”
‘Shaking Their Heads’
Some corporate leaders interviewed by Bloomberg reporters before the weekend talks that produced the compromise said lawmakers should just agree to raise the limit and move on.
“When I talked to my colleagues, they’re all shaking their heads basically in dismay,” Albert Stroucken, CEO of Owens Illinois Inc., the world’s largest producer of glass bottles, said in an interview.
“I am surprised we’ve gotten this deep and it’s unresolved,” Rockwell Automation Inc. (ROK) Chief Financial Officer Ted Crandall said in an interview as negotiations intensified last week. He declined to say which plan under debate the company may prefer.
Walter Robb, co-CEO of Whole Foods Market Inc., also lamented that “the atmosphere is so hyper-partisan” in Washington. He hasn’t spoken out publicly on the debt issue himself, he said in an interview, because “we’re grocers and we’re really just concentrated on growing the business.”
At United Parcel Service Inc. (UPS), CEO Scott Davis and Chief Financial Officer Kurt Kuehn wouldn’t discuss which debt reduction approach they might prefer, said Norman Black, a spokesman for the world’s biggest package-delivery company.
“Neither Scott nor Kurt have any interest at this point in addressing specific plans, nor have they tried to study all the specifics of some of the proposals that are out there.” Black said in an interview. Executives at 18 other companies contacted by Bloomberg declined to comment or didn’t return phone calls and e-mails seeking comment.
Berkshire Hathaway’s Buffett, one of the CEOs quoted most often on the debt issue, spoke out on the matter as early as last April, saying at the company’s annual shareholder meeting that it was “most asinine” for lawmakers to consider not raising the debt limit.
‘Gun To Head’
“If you don’t get a deal you are putting a gun to your head,” Buffett said in a Bloomberg Television interview July 8. “Nothing may happen, but we don’t have a parallel with it in the past.”
Cote, Honeywell’s CEO, served on Obama’s debt commission and has called for reducing the deficit through tax increases as well as spending cuts in interviews on NBC’s “Meet the Press,” Bloomberg Television and other programs and in op-ed articles.
“For a bunch of people down there who spend all their time talking about job creation, they’re actively on a path to job destruction right now,” Cote said in an interview with Bloomberg News on July 28.
The Chamber of Commerce says it has been pushing in a series of letters this year for Congress to agree to raise the cap. Chamber President Thomas Donohue in April warned that the debt ceiling was a bigger risk to the economy than a possible government shutdown, and vowed to press lawmakers to act.
Knock on Doors
What the group hasn’t done is mobilize local members to knock on doors in the Capitol, the kind of retail-level pressure for which it is famous in Washington.
“It is almost impossible to do things like that when there is no proposal to rally behind or oppose,” Blair Latoff, a spokeswoman for the Chamber, said in an e-mail. Comparing the debt ceiling to the lobbying on the trade deals with Panama, South Korea and Colombia is comparing “apples and oranges,” she said.
There is still “the expectation by the business community that Washington is going to figure this out,” said Ron Bonjean, a lobbyist who was an aide to Dennis Hastert when he was House speaker.
Unlike the lobbying frenzies over health-care legislation and overhauling the financial system in the previous two years, companies just want a deal, Bonjean said in an interview.
“How they get it done, they don’t care.”
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