Why Are Corporate Titans So Clueless at Politics?
The Business Roundtable, an association of chief executive officers of the largest U.S. companies, held a lunch for reporters this week on what's wrong with the economy. A better question might be what's wrong with the country's chief executives.
In the face of persistently high unemployment and slow economic growth, the two executives hosting the lunch (the Roundtable insisted they not be identified) didn't talk about this year's government spending cuts, the best course for monetary policy or even reducing regulations. Instead, they talked about theirplanto cut Social Security and Medicare, which they called a drag on economic growth.
If that argument sounds familiar, you may be having a flashback to last year's election. In fact, the Roundtable's proposal to replace Medicare with a system of vouchers is the same as Mitt Romney's. They even go one step further, calling for raising the eligibility age for Social Security and Medicare to 70. Even Paul Ryan's 2014 budget proposal didn't go that far.
There's no question that Medicare and Social Security need to be addressed. And there's no question that business executives have a role to play. That's why it makes so little sense for the Roundtable to squander its influence this way.
First, their argument that the programs are depressing the economy right now is tenuous at best. The U.S. government can borrow at historically low rates, so there's no sign that future obligations are making credit more expensive. And if the recent cuts in federal spending through sequestration haven't produced a surge in economic growth, then cutting future spending is even less certain to do so.
The bigger problem with the Roundtable's approach is its obliviousness, whether willful or accidental, to political reality. One of the executives called the proposals "non-controversial," which is like describing Washington summers as non-humid. For a group that likes to talk about the importance of leadership, advancing proposals that were trounced at the polls just eight months ago is anything but.
If business leaders really wanted to shore up Medicare, they could throw their weight behind cost-cutting mechanisms that are already in law but face enormous political opposition, such as the board of experts charged with limiting the rise in Medicare spending to just 1 percent more than gross domestic product growth. If they really wanted to ensure Social Security's solvency, they could support eliminating the cap on income subject to the Social Security tax, which now stands at $113,700.
That the Roundtable chose instead to push ideas that even Republicans seem to have quietly shelved says more about its members than the state of debate. It doesn't matter whether these proposals are a heartfelt but unpromising attempt to fix the economy, or simply the Roundtable providing a soapbox for its members' views about the role of government. The effect is the same: It isn't likely to accomplish much.
Business leaders have an important contribution to make in these debates. Three-quarters of Americans say the strength of the country is mostly based on the success of business, a level unchanged since before the recession. That public support gives groups such as the Business Roundtable the potential to shape the policy conversation.
The question is how its members want to use that influence. Arguing for compromise solutions that draw on the best of both parties' ideas could break the policy-making logjam. Even better, the Roundtable could devote equal attention to joblessness and slow growth. By contrast, advocating partisan solutions for future problems could be the least useful way to fix current economic woes. Somebody should tell the country's CEOs.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Christopher Flavelle at firstname.lastname@example.org