Hear ye, hear ye! The country’s CEOs will now address the peasantry!
That’s kind of how it feels when you read the recommendations from the Fix the Debt campaign, an organization made up almost entirely of the nation’s top CEOs, including Lloyd Blankfein of Goldman Sachs, Mark Bertolini of Aetna, John Chambers of Cisco, and David Cote of Honeywell, among a parade of others.
You may not have heard of Fix the Debt yet, but you will as we get closer to the end of the year and the “fiscal cliff.” To be certain, you should view their recommendations with extreme caution.
The precursor to Fix the Debt was the Simpson-Bowles debt commission, the recommendations of which were eventually voted down at the end of 2010. One of the reasons Simpson-Bowles was defeated was that many felt its conclusions were unfair and lopsidedly targeted the social safety net.
Well, the more things change, the more they stay the same, and Fix the Debt isn’t hiding its intentions at all, as their exclusive targets remain:
- In order to develop a fiscal plan that can succeed both financially and politically, it must be bipartisan and reforms to all areas of the budget should be included. The plan should:
- Reform Medicare and Medicaid, improve efficiency in the overall health care system, and limit future cost growth;
- Strengthen Social Security, so that it is solvent and will be there for future beneficiaries; and
- Include comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues, and reduces the deficit.
It’s like a broken record: Medicare, Medicaid, Social Security and tax “reform.” No mention of increasing the tax rates on the wealthiest, which are now paying less in taxes since the 1950s and not a peep about the bloated defense budget.
So what’s the early word on Fix the Debt and their proposals? The Institute for Policy Studies has labeled it a “Trojan horse for massive corporate tax breaks” (emphasis added):
The Fix the Debt campaign has raised $60 million and recruited more than 80 CEOs of America’s most powerful corporations to lobby for a debt deal that would reduce corporate taxes and shift costs onto the poor and elderly.
- The 63 Fix the Debt companies that are publicly held stand to gain as much as $134 billion in windfalls if Congress approves one of their main proposals — a “territorial tax system.” Under this system, companies would not have to pay U.S. federal income taxes on foreign earnings when they bring the profits back to the United States.
- The CEOs backing Fix the Debt personally received a combined total of $41 million in savings last year thanks to the Bush-era tax cuts. The top CEO beneficiary of the Bush tax cuts in 2011, Leon Black of Apollo Global Management, saved $9.9 million on the Bush tax cuts. The private equity fund leader reaped $215 million in taxable income last year just from vested stock.
- Of the 63 Fix the Debt CEOs at publicly held firms, 24 received more in compensation last year than their corporations paid in federal corporate income taxes. All but six of these firms reported U.S. profits last year.
The full report from the IPS, also breaks down the “lingo” of Fix the Debt’s recommendations:
1. “Pro-growth” corporate tax reform. This is Washington-speak for cutting corporate tax rates and shifting to a “territorial tax system” that would permanently exempt from U.S. taxes all offshore income earned by U.S. corporations.
2. “Reforming” earned-benefit programs. This means cutting Medicaid, Medicare, and Social Security benefits. While these CEOs have offered few details on how they would cut costs with these reforms, it would likely be by limiting access to these programs paid for by all working Americans and by yet again raising the retirement age.
They also present the particulars of the potential tax savings these companies could receive should their plan be implemented:
|Fix the Debt Member Company||Offshore Profits||Potential Tax Savings|
|General Electric||$102 billion||$35.7 billion|
|Microsoft||$60.8 billion||$19.4 billion|
|Merck||$44.3 billion||$15.5 billion|
|Cisco Systems||$41.3 billion||$14.5 billion|
|JPMorgan Chase||$21.8 billion||$4.9 billion|
|Goldman Sachs||$20.6 billion||$3.3 billion|
|Bank of America||$18.5 billion||$2.5 billion|
|Qualcomm||$16.4 billion||$5.7 billion|
|Corning||$10.8 billion||$3.8 billion|
|Dow Chemical||$10.0 billion||$3.5 billion|
What a racket, eh?
So, as we all prepare to take a swan dive off the fiscal cliff, thanks to the fact that our lawmakers can’t get their crap together, be very wary when you hear the proposals of Fix the Debt being floated as a possible solution. It’s nothing more than a case of “same shit, different day.”