A CEO manifesto on debt and deficit

Republican U.S. presidential candidate Mitt Romney speaks during a campaign rally as a national debt clock runs in the background on September 26, 2012 in Toledo, Ohio. CEOs from across the country are asking Congress to figure out how to decrease the deficit. But how pure are their intentions?

When was the last time a CEO had a manifesto anyway?

Felix Salmon, finance blogger at Reuters and regular guest on our Weekly Wrap segment, says that's a good question.

A whole host of CEOs from companies like Delta Air Lines, Time Warner Cable and Macy's have signed onto a campaign called "Fix the Deficit." It asks Congress to come up with a bi-partisan solution to reduce the federal deficit.

But Salmon says the U.S. federal deficit is high but not unmanageable. He says we're already moving in the right direction because debt in the United States -- both public debt of the government and private debt of consumers and businesses alike -- has dropped since the financial crisis. Salmon says one reason the debt is so high is because of the actions of businesses.

"The companies...they are borrowing less," he says. "What that means is there's less economic activity going on and the goverment is stepping in with its own borrowing to try and keep the economy moving...what [the corporate sector] should be doing is taking advantage of these low interest rates to borrow money and invest in the economy. And they're not doing that."

Salmon says the CEOs might have alterior motives -- they're hoping a bi-partisan approach to reducing the deficit could ultimately result in lower corporate taxes.

But Salmon doesn't just criticize CEOs. He says everyone -- both political parties, candidates, moderators and the public -- should be more concerned with bringing down unemployment than the deficit.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
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I'm trying to be kind, but I just can't. Felix Salmon is a moron. To puncture the Keynesian balloon that increasing debt is an indication of a healthy economy one need look no further than the subprime debacle here in the US --plenty of debt going on there!-- or Greece today. Clearly Mr. Salmon spends all of his time reading Krugman rants in the NYT, but it requires a truly dull intellect to not realize that the artificially low interest rates of today can and will turn into more normal 4% or 5% during the eventually recovery, which in turn will lead to annual US debt interest payments alone equaling $1T. What makes matters worse is that the US has a heavy burden to pay down with its existing $16T of debt but that pales in comparison to the unfunded future liabilities measuring in the tens to low hundreds of trillions of dollars.

This incredibly destructive "grasshopper" mentality of worshiping consumption and debt-fueled bubbles simply must stop. Either we choose to stop it and salvage a brighter future for this country or fiscal reality will stop it and there will be nothing left but tears.

As to Salmon's quip that broadening the tax base and lowering rates --an idea favored by the majority of economists-- is something to be dreaded because that means a larger fraction of the 47% will actually have to pay taxes, let me remind you of famous quote attributed to Benjamin Franklin, “When the people find they can vote themselves money, that will herald the end of the republic.” Put in simple terms: if you don't have skin in the game you won't make wise choices.

Please, Mr. Salmon, go back to your little digital hole and let the grownups talk.

Kai, clearly you can find someone more qualified than Felix Salmon to opine on your show. He clearly has never had a real GDP- contributing job in his life, never started a company, or hired an employee. While the CEO's were clearly grandstanding (that's what CEO's do), the basic point that the federal debt must be reigned in are just a fundamental truth that all reasonable GDP contributors agree on.

It is this type of drivel from Felix Salmon that sometime gives your show a bad rap.

Earl, your assertion ("the basic point that the federal debt must be reigned in are just a fundamental truth that all reasonable GDP contributors agree on") is just overbearing bluster, as is all propaganda. In addition, you are making a mistake in usage here that hints at your level of literacy. Here's a hint: the word starts with 'r'. In addition, in these same few words you have elementary subject and predicate disagreement. The point that Mr. Salmon made about the importance of spending to increase employment -- rather than immmediately beginning to bring down the deficit -- is absolutely right, and just common sense.

Homeward Bound, can we please put the Keynesian pipe down and let our heads clear? Deficit fueled job creation isn't common sense; it's a fallacy and illusory. The government borrows money, i.e. removes capital from the economy or prints money leading to eventual inflation; hires some people inefficiently and temporarily; and then is left with the debt hangover and few sustained jobs once the money dries up. We tried stimulus. Those green shoots sure wilted in a hurry, didn't they? Oh, and please don't quote the counterfactual that the stimulus just wasn't big enough or that the models which assume specific impacts of stimulus "prove" that stimulus was successful (the obviously circular logic of that argument is left as an exercise to the reader). That's a puny fig leaf to hide behind.

Oh, and there's nothing immediate about reducing the deficit. We've been running up our common credit card for decades. Unfortunately that reckoning is pretty much at hand.

Skippy, does referring to Keynes so often make you feel smart? First of all, it is insulting and mean-spirited to call anyone a "moron" and say "go back in your little digital hole." Can't you disagree with an idea without attacking the messenger? I'd hate to read what you say when you're NOT "trying to be kind"! You are introducing a lot of assumptions about what Felix was saying. Very few sane people advocate conspicuous consumption or debt-fueled bubbles, nor did Keynes. You assume that the government has to hire the people for infrastructure repair, yet that is not essential. You also assume that temporary jobs have little value, yet that experience can lead to a permanent job in the private sector where the federal source of money is no longer required, so it wouldn't matter if it "dried up". Also, you assert "broadening the tax base and lowering rates" as an idea favored by the majority of economists," but that is not simply not true. Even if it were, the majority is often wrong. Besides, history has shown that the rates don't stay low for long because the revenues are not sufficient. By the way, did you dislike the financial sector and auto bailouts as much as you did the stimulus?

I'm not sure this "Fix the Debt" group is concerned with the deficit as much as they are putting more of the 'higher tax load' on the middle class. Most of them are finance and industrial CEOs, whose revenue constituency is not middle-class consumers so why should they worry.
I am surprised to see those CEOs that cater to the "consumer" signing that manifest. They do have something to lose if the consumer has less to spend. My guess is they aren't paying attention.

If you NEVER invite Felix Salmon back to Marketplace, it'd be too gd soon. I listened to the interview this afternoon with him, and was screaming at my radio because this moron has no idea where jobs come from.

Capitalism. There's a few hints within the words itself. Capital. Jobs come from capital, and capital is created through savings and successful investment (usually in production and in the creation of new products, which are then sold for a profit, DUH). Artificially-low interest rates offer cheap money rates, sure, but that's not a good thing. These CEOs may recognize that the Fed is trying to feed them cheap money and that they are at risk of making poor investments (and suffering the consequences) as a result.

My god. I have never been more pissed off listening to some jackass "economist" who shouldn't be paid for his work, go on-and-on about how debt has no impact on job creation. What an IDIOT.

wewt3r, thanks for the illuminating lecture; it's good to know there's someone there who knows it all. Mr. Salmon was only saying that it should be a much higher priority to increase employment if we want to rev up the economy. He's saying that business, in general, is doing very little in the way of expansion -- because of the low demand for good and services that always comes with lower employment levels. Therefore, he is suggesting that the federal government should be spending for job creation rather than bringing on the austerity measures that would reduce debt, but which would also bring on another recession. The timing would be perfect for getting people paid to work on repairing infrastructure (for electricity, water, and transportation) which is essential for continued success as a society. Senator Bernie Sanders was looking at water pipes in Vermont and was told that they were built after the war and needed replacing. Sanders asked, "Which war?" The answer he got was "the Civil War". By the way, when you find yourself screaming at your radio over such benign communication, it should make you ask, "Do I need therapy?"

These CEOs aren't "job creators", they're "wealth creators", for themselves and their stockholders. They don't care an iota about their employees or the American economy. Any jobs they create are as likely to be in China or India as here in the USA.

Middle-class spending supports our economy, it represents 70% of our economy and yet these "wealth creators" want to take spendable income away from consumers so they can increase their own income. They want to lower their taxes and they want the middle-class to pay for that too.

The only tax plan that will help our economy is to offset those falling middle-class incomes with lower taxes so they can keep the economy going. We sure as hell can't expect the "wealth creators" to increase the income of their workers.


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