White House officials have quietly lobbied Wall Street and the business community over the last several months to support President Barack Obama’s plan to impose higher taxes on the wealthy to cut the deficit and avert going over the fiscal cliff.
Treasury Secretary Timothy F. Geithner, Jeff Zients, acting director of the Office of Management and Budget, as well as Chief of Staff Jack Lew and National Economic Council Director Gene Sperling were key administration officials dispatched before the election to meet with top business and finance leaders, according to people familiar with the meetings.
With corporate executives among those expressing concern that the $607 billion in automatic tax increases and spending cuts known as the fiscal cliff risks tipping the economy into another recession, the administration has been working to enlist their support before negotiations with Congress begin.
Tomorrow will provide the first test of whether that effort is bearing fruit. That’s when the president meets at the White House with the heads of some of the biggest U.S. companies, including General Electric Co. Chief Executive Officer Jeffrey Immelt, Ford Motor Co. CEO Alan Mulally, Honeywell International Inc. CEO David Cote, and American Express Co. CEO Kenneth I. Chenault. He’ll also hold his first news conference since winning a second term on Nov. 6.
“Now that the election is out of the way, people will feel that it’s easier to get down to the specific plan for how to approach this,” said Kathryn Wylde, CEO of the Partnership for New York City, an association of corporate chief executives. “There will be a lot of support for the president because his leadership is the only way that this is going to get done.”
Obama is counting on the executives to help put pressure on lawmakers to reach a deal before the start of the new year, when the higher taxes and lowered federal spending are scheduled to kick in. He is also meeting with labor leaders today at the White House.
Both sessions precede Obama’s opening talks on the fiscal cliff on Nov. 16 with the top two congressional Republicans, House Speaker John Boehner and Senate minority leader Mitch McConnell, as well as Democrats Harry Reid, the Senate majority leader, and Representative Nancy Pelosi.
Administration officials contacted by phone and e-mail yesterday declined to comment for this story.
While members of the business community stayed on the sidelines during the failed debt negotiations last year between Obama and Republican leaders in Congress, they now are pressing to ease the economic uncertainty caused by the prospect of another political deadlock over taxes and spending.
The Standard & Poor’s 500 Index slid 3.4 percent in the three days after the Nov. 6 election, and investors retreating from risk pushed the yield on the benchmark 10-year Treasury to 1.61 percent from 1.75 percent. The S&P closed up less than 0.1 percent at 1,380 at 4 p.m. yesterday in New York. U.S. bond markets were closed for the Veterans Day holiday.
Amid Obama’s fight for re-election against Republican challenger Mitt Romney, his aides were waging a separate campaign. The Partnership for New York City, a nonpartisan organization for New York-based corporations, has emerged as a central avenue for the administration’s business outreach.
As recently as September, Zients met with executive members of the Partnership at a lunchtime event hosted by Mark Gallogly, managing principal of Centerbridge Capital Partners LLC and an Obama donor, according to people present, who asked for anonymity to discuss the closed meeting.
Among the roughly 30 people who attended the meeting were Donald Marron, chairman of Lightyear Capital LLC; Douglas Peterson, President of Standard & Poors; Mark Wagar, CEO of Empire Blue Cross & Blue Shield; and Glenn Hutchins, co-founder of Silver Lake Management LLC.
Zients came armed with a 40-minute Power Point presentation that laid out the issues and the math, according to the people. It also highlighted Obama’s economic agenda and how his policies have helped business.
The budget chief outlined the most discussed solutions: the president’s proposal; the recommendations from the co-chairmen of Obama’s deficit commission, former Republican Senator Alan Simpson and Erskine Bowles, onetime chief of staff to former President Bill Clinton; as well as the Republican budget crafted by Republican vice presidential nominee, Representative Paul Ryan and backed by Boehner, according to the people.
Lew and Geithner
Sperling in May attended a roundtable hosted by BlackRock Inc. CEO Laurence D. Fink and other executives at the asset management company’s New York headquarters. Lew, who has been a lead negotiator in deficit talks with Congress, held similar sessions earlier in the year.
Geithner has met with business leaders in Washington and in New York. Last month, he had dinner at the Treasury Department with John Paulson, the billionaire founder of hedge fund Paulson & Co.; Thomas Steyer, senior managing member of Farallon Capital Management LLC; as well as Marron and Hutchins.
The administration’s approach -- that any plan to cut the deficit must include more tax revenue as well as spending cuts - - is finding a receptive audience on Wall Street, as it did with voters on Nov. 6.
“No one is so unpatriotic that they wouldn’t pay a little bit more to resolve” the nation’s debt crisis, Goldman Sachs Group Inc. CEO Lloyd C. Blankfein said Oct. 11 in an interview on CNBC. He added that no one would be willing to pay higher taxes unless they were sure it was part of a comprehensive solution to the country’s budget woes.
Obama and Boehner laid down their markers last week. Obama on Nov. 9 reiterated his call for Congress to pass an immediate extension of existing tax rates for middle-income Americans and to let rates rise to 39.6 percent from 35 percent for individuals with income about $200,000 annually and married couples earning more than $250,000. That same day, Boehner, an Ohio Republican, cited public support for the re-elected House Republican majority and said tax rates must not go up.
Still, both left open the possibility of agreement on raising revenue from top earners by limiting tax breaks. Such an approach, which neither has explicitly proposed, would let Obama claim the higher tax payments he seeks from the wealthy and allow Boehner to avoid the higher rates he calls unacceptable. Both also supported simplifying the tax code.
Cote, who was a member of the Simpson-Bowles commission, said last week he was encouraged by signs that both sides are suggesting they’re open to negotiations.
“This is something that will get solved and will get solved with taxes going up and with spending being cut,” Cote said in an interview with Bloomberg News. “It’s all a question if we do it now thoughtfully and proactively or do we wait until markets force us to do it, in which case we’re in a much more dire situation.”
Cote is also on the CEO council of the Campaign to Fix the Debt, which was founded by Simpson and Bowles. The group has raised almost $40 million and is beginning an advertising campaign this week that plays off of well-known ads from Nike Inc. and McDonalds Corp. with the slogans “Just Fix It” and “I’m Fixin’ It.”
Other business leaders scheduled to attend tomorrow’s White House meeting include Aetna Inc. CEO Mark Bertolini; Xerox Corp. CEO Ursula Burns; Dow Chemical Co. CEO Andrew Liveris; Procter & Gamble Co. CEO Bob McDonald; PepsiCo Inc. CEO Indra Nooyi; International Business Machines Corp. CEO Ginni Rometty; Wal-Mart Stores Inc. CEO Mike Duke; and Chevron Corp. CEO John Watson.