[Vision2020] Unlikely Backers in a Battle Over Taxes

[Art Deco]

 [image: The New York Times] <http://www.nytimes.com/>

------------------------------
December 11, 2012
Unlikely Backers in a Battle Over Taxes By NELSON D.
SCHWARTZ<http://topics.nytimes.com/top/reference/timestopics/people/s/nelson_d_schwartz/index.html>and
JONATHAN
WEISMAN<http://topics.nytimes.com/top/reference/timestopics/people/w/jonathan_weisman/index.html>

A broad swath of the nation’s leading chief executives dropped its
opposition to tax increases on the wealthiest Americans on Tuesday, while
the White House quietly pressed Wall Street titans for their support as
well.

Before Tuesday’s about-face, the Business Roundtable had insisted that the
White House extend Bush-era tax
cuts<http://topics.nytimes.com/top/reference/timestopics/subjects/t/taxation/bush_tax_cuts/index.html?inline=nyt-classifier>to
taxpayers of all income brackets, but the executives’ resistance
crumbled as pressure builds to find a compromise for the fiscal impasse in
Washington before the end of the year.

“We recognize that part of the solution has to be tax increases,” David M.
Cote, chief executive of Honeywell, said on a conference call with
reporters. “That’s the only thing that allows a reasonable compromise to be
reached.”

Even as the Fortune 500 leaders announced their shift, the White House
continued to work behind the scenes to woo some of Wall Street’s most
powerful financiers — a group that had largely abandoned President Obama in
his bid for a second term after supporting him in 2008.

After seeking out corporate leaders from industrial companies last month,
the White House has intensified outreach to Wall Street in December.

On Wednesday, several hedge fund managers, including Daniel Och, the
billionaire founder of Och-Ziff Capital Management, will meet with Valerie
Jarrett, a top adviser to the president, and members of the White House
economic team.

Last Monday, White House officials sat down with a more than half a dozen
top bankers and financiers, including Gary D. Cohn, president of Goldman
Sachs, and Greg Fleming, head of wealth management at Morgan Stanley.

The differing strategies — highly public meetings with corporate America
and private arm-twisting with Wall Street — both appear to be aimed at
winning popular support for higher taxes on the wealthy. The trade-offs
being roundly fought over in Washington, like what government programs may
be cut and which entitlements may be spared, are less important in this
effort to muster highly compensated chieftains whose support for tax
increases will provide cover for Congressional Republicans wary of being
seen as too quick to compromise on higher tax rates.

What’s more, the political symbolism of some of the wealthiest Americans’
saying they support higher taxes on the rich takes a bit of the sting out
of the idea of raising rates, for both Democrats and Republicans. Indeed,
by appealing to both camps and enlisting their support, President Obama
hopes to neutralize potential critics, according to allies of the president
on Wall Street.

President Obama’s supporters cited the example of Frederick W. Smith, the
chief executive of FedEx. Last week, Mr. Smith signaled he was not angered
by higher tax rates for the wealthiest individuals, a centerpiece of
President Obama’s plan to reduce the deficit and a key sticking point for
Republicans in Congress.

“If people who didn’t support the president believe the president is acting
reasonably, they’re going to put pressure on the other side,” said Marc
Lasry, a longtime supporter of the president who runs Avenue Capital. “You
need both sides to be reasonable.”

For example, Mr. Lasry invited the real estate tycoon Barry Sternlicht, a
onetime Obama supporter who raised money for Mitt Romney in the last
election cycle, to the White House last week. Mr. Lasry, who has $13
billion under management, including $1.3 billion of his own money, is among
a small group of Wall Street figures who stuck with the president before
the election, even as those like Mr. Sternlicht deserted him.

This core group met with President Obama on Nov. 16, and included Tony
James, president of the Blackstone Group, as well as Roger Altman, a
Democratic stalwart who is executive chairman of Evercore Partners, and
Robert Wolf, a longtime UBS executive who recently began his own firm, 32
Advisors.

Also in attendance were Blair W. Effron, co-founder of Centerview Partners,
and Mark T. Gallogly, a Blackstone veteran who founded Centerbridge
Partners in 2005.

To be sure, most executives genuinely fear the consequences of the
automatic spending cuts and tax increases if a compromise is not found by
Jan. 1, but the efforts by big business to press politicians in Washington
could also pay large dividends in the future.

While most business leaders now say they are willing to support increases
in tax rates for individuals as well as cuts in entitlement spending, their
stance in favor of lower corporate tax rates could actually benefit their
bottom lines in the long run.

For now, however, the focus is on reaching a deal by end of the year rather
than a broad tax overhaul. At the White House, the outreach effort is being
led by Ms. Jarrett, and she has been joined in the meetings with executives
and bankers by Timothy F. Geithner, the secretary of the Treasury; Jeffrey
Zients, the head of the Office of Management and Budget; and Gene Sperling,
director of the National Economic Council.

The White House arranged calls on Dec. 3 and on Monday for chief executives
who attended the earlier sessions with the president, updating them on the
negotiations and reiterating the need for their support. Among the
participants were Lloyd C.
Blankfein<http://topics.nytimes.com/top/reference/timestopics/people/b/lloyd_c_blankfein/index.html?inline=nyt-per>,
the chief executive of Goldman Sachs; Randall Stephenson, the chief
executive of AT&T, and Marriott’s chief executive, Arne Sorenson.

Some chief executives, like Mr. Blankfein, who have been relatively
outspoken in recent weeks about the need for tax increases, are viewed as
relative liberals in the business community.

But others who reversed course Tuesday, like Doug Oberhelman of
Caterpillar, are seen as more conservative politically and suggest an
important shift in the political landscape in terms of tax policy.

Another more conservative executive who signed a letter to Congress and the
president from the Business Roundtable was Rex W.
Tillerson<http://topics.nytimes.com/top/reference/timestopics/people/t/rex_w_tillerson/index.html?inline=nyt-per>,
the chief executive of Exxon.

“Compromise will require Congress to agree on more revenue — whether by
increasing rates, eliminating deductions, or some combination thereof — and
the administration to agree to larger, meaningful structural and benefit
entitlement reforms and spending reductions that are a fiscally responsible
multiple of increased revenues,” said the letter, signed by more than 100
chief executives.

Besides Mr. Cote, several other prominent chiefs joined the call with
reporters organized by the Business Roundtable, including Andrew N.
Liveris<http://topics.nytimes.com/top/reference/timestopics/people/l/andrew_n_liveris/index.html?inline=nyt-per>of
Dow Chemical, Jeffrey
R. Immelt<http://topics.nytimes.com/top/reference/timestopics/people/i/jeffrey_r_immelt/index.html?inline=nyt-per>of
G.E. and Alexander Cutler of Eaton.

Small businesses also appear anxious about the fiscal impasse. On Tuesday,
the National Federation of Independent Business reported that its Small
Business Optimism Index had one of its steepest declines ever in November.

The net percentage of business owners who said they expected better
economic conditions in six months — that is, the share that expected
improvement minus the share that expected deterioration — was negative 35
percent. That is the worst outlook since the federation began collecting
this data on a monthly basis in 1986.

Bill Dunkelberg, the chief economist at the federation, attributed the
pessimism to the stalemate in Washington, higher health care costs and “the
endless onslaught of new regulations.”

Catherine Rampell contributed reporting.



-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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