Dear Mr. President:
Congress and the White House must begin now to resolve fundamental fiscal and tax issues confronting America. The current political paralysis hindering principled compromise has fueled needless economic uncertainty that impedes a more robust economic recovery. Without effective action soon, this uncertainty will spawn a dangerous crisis, threatening our economy, businesses and workers.
We are seeing already the negative effects from this situation. Business Roundtable (BRT) released its quarterly CEO Economic Outlook Survey, which for the second straight quarter showed lower CEO expectations for sales, capital spending and U.S. hiring over the next six months. The responses of the 164 CEOs underlined our message: Washington inaction is generating uncertainty that is dampening U.S. economic growth and job creation.
A number of significant tax provisions are set to expire on December 31, 2012. Absent Congressional action, individuals and businesses alike will face major tax increases, either through the expiration of tax incentives or an increase in tax rates. The Congressional Budget Office (CBO) and the Joint Committee on Taxation estimate that the components of the “fiscal cliff” include approximately $5.7 trillion in tax increases beginning January 2013.
Importantly, CBO projects that the expiration of these provisions, combined with automatic spending cuts prescribed by the Budget Control Act, will send the country back into recession in the first half of 2013.
Business Roundtable urges you to extend these expiring and expired tax provisions through 2013 as a stopgap measure until comprehensive tax reform can be enacted. This is a critical time for our economy, and comprehensive tax reform, which includes a meaningful reduction in the statutory corporate tax rate and a competitive territorial system, should be a priority for our government.
In addition, Congress must decide how it will replace the $1.2 trillion in automatic spending cuts, known as sequestration. In the absence of an agreement, $109 billion in immediate spending cuts are set to take effect next year, which equates to an additional $60 billion in cuts to the Department of Defense and nearly an additional 8 percent from certain domestic discretionary spending programs.
Thoughtful reforms to the nation’s entitlement programs must be a part of the equation. Congress cannot afford to delay these much-needed reforms any longer. According to CBO, our growing debt is driven primarily by the entitlement programs – Social Security, Medicare, and Medicaid. In fact, the CBO estimates that Government spending on entitlements and interest on the national debt will consume 100 percent of total revenues by 2025.
BRT CEOs, who represent $6 trillion in revenues and more than 14 million employees, are unified in believing that just the threat of America toppling over the “fiscal cliff” is having a harmful economic impact. Further delays in addressing the relevant issues will only increase the economy-chilling uncertainty. And relying on a post-election session of Congress to cope with a condensed schedule and the results of the election is far from a safe bet.
The end of June brought encouraging progress when Congress worked together on a bipartisan basis to approve important legislation on highway funding, student loan rates, corporate pension funds and Food and Drug Administration drug reviews. Now it is time to act on the even more critical issues of tax reform, sequestration, and entitlement reform. The Business Roundtable and its members stand ready to work with you to achieve these goals.
W. James McNerney, Jr.
Chairman, President and CEO
The Boeing Company