NEW YORK -- After the election, the titans of finance are showing up to play in Washington -- ready to fight for a grand bargain even if it means raising taxes.
For Wall Street, the aim is simple: Get a big budget deal that provides stability for investors by eliminating the threats of government shutdowns, credit-rating downgrades, debt ceiling disasters and wide fluctuations in spending and tax policy.
But to get there, some on Wall Street -- who ordinarily would share the conservative aversion to higher taxes -- believe the circumstances are so dire they are ready to pressure Republicans to abandon orthodoxy for a more important goal: to prove that Washington won't hold the economy hostage to its own partisan dysfunction.
"Imagine what kind of stimulus it would be if politicians just reached some kind of long-term budget agreement to eliminate all this uncertainty?" Goldman Sachs chief Lloyd Blankfein told POLITICO in an interview. "It's not that it's easy to do. It will require some political sacrifice on both sides. But the solutions are so clearly within our means."
Added Jamie Dimon, chief executive of JP Morgan Chase: "Either a President Obama or Romney will have to deal with this and reach some kind of agreement that will take this threat off the back of the economy both now and in the longer term."
It's unusual for some of the most well-known CEOs to come out so publicly on a political issue, a sign that Wall Street believes the business of Washington has bled into the business of America -- dragging down the economy to the point where they need to weigh in personally.
Dimon, Blankfein and others have signed onto a multimillion dollar ad campaign to build public support for a deal. And CEOs are also lobbying senior lawmakers and their aides to find a solution.
But even these efforts might not be enough. CEOs pushed for a big deal during the debt ceiling debate, but were disappointed when Congress punted. The two parties are still deeply entrenched -- and will be regardless of who takes the White House in November. Plus, bankers don't carry the same clout as they once did, since their more recent trips to Washington were to testify on major failures that have left them wildly unpopular amid the economic downturn.
Even the executives believe the best they can do is offer Republicans cover from backlash from tea party supporters and anti-tax advocates if they sign on to anything that includes increased revenue.
"There is certainly a tea party caucus that still has a strong aversion to anything involving taxes, but what CEOs are saying is they are ready to get behind a comprehensive solution in which everything is in play," said John Engler, the former Republican governor of Michigan and head of the Business Roundtable, which represents CEOs of U.S. companies with $7.3 trillion in annual revenues."It has to be a real solution, not a faux fix with promises to do things later. If it's real, then executives will get behind it."
The executives say they're willing to consider ponying up more money in tax revenue to the government, a move they hope will give cover to Republicans that want to sign onto a grand bargain. And those who support a deficit deal believe both presidential candidates have given strong signals that they will work for one once the election is over.
Both Romney and Obama are widely viewed in corporate America as likely to support a deal roughly along the lines of the Bowles-Simpson commission recommendations that will include trims to Social Security and Medicare and new revenues beyond just increased taxes for the wealthy. Corporate America would also like to see such a deal include a lower overall corporate rate and changes to the taxation of overseas profits. But those things are not viewed as prerequisites for widespread corporate support of a deficit reduction deal. The executives also want a mechanism put in place in the lame-duck session to extend current tax policy and delay the $1 trillion in sequester spending cuts scheduled to go into effect in January while forcing action on a sweeping plan next year.
"Based on conversations with both campaigns I'm very reassured they are both committed to getting a deal done and want to lead on making it happen," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. MacGuineas is leading an effort to corral CEOs to support the Fix the Debt campaign, which has so far raised $30 million to support a "grand bargain" deal on taxes and spending and hopes to raise $100 million. "You can't implement any kind of agenda without getting this done first."
While many on the Hill are skeptical that even the clout of the Wall Street could force a deal, optimists believe that the outside help would pressure lawmakers to sign onto a deal, or at least to give them political cover if they do. The logic: If business says a deal will help jump-start the economy, how could Congress and the president be against it?
"I just think that if we're going to end up in a place where we're actually going to be able to compromise, move off their positions and get to a comprehensive deal, we're going to need external forces that are helping us do that," said Sen. Michael Bennet (D-Colo.), one of the so-called Gang of 8 senators who have been working for more than a year to fashion a deficit-reduction compromise. "The business community is one of those groups that we've got to get involved, and there are lots of other groups as well."
But he stopped short of predicting New York money would make a difference. "Hope so," he said.
The problem is a fundamental philosophical impasse. Most Democrats want to raise taxes as part of a deficit-reduction package, while most in the GOP want to focus on cutting spending. A handful of Republicans, including Sens. John McCain (R-Ariz.), Lindsey Graham (R-S.C.) and Kelly Ayotte (R-N.H.) have said they are open to a "balanced" approach -- the same language that the president uses -- but most in the GOP, including Ayotte, oppose increasing rates. Both sides say they want to reform the corporate tax code in a way that brings down rates while eliminating some breaks but they differ on the important detail of whether such changes should be designed to bring more revenue in to the government's coffers.
But the majority of Republicans on the Hill say the campaign should be aimed at President Barack Obama, who they accuse of being absent from the deficit debate for months. They note that the GOP-led House has passed a series of bills that would freeze tax rates and forestall planned cuts to the Pentagon.
"If they want to spend a bunch of money to get Democrats off their position, that's great," said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.). Another Senate GOP leadership aide said it's helpful for the business community to detail the economic pain of doing nothing -- letting taxes rise and Pentagon cuts take effect -- but that it doesn't "see that this is going to have a huge impact."
If a deal is made, these executives say, the largest single roadblock to a stronger U.S. recovery -- widespread and damaging corporate uncertainty on taxes and the ability of the U.S. government to execute basic functions -- would be lifted, unleashing a much stronger recovery that would benefit whoever is in the Oval Office and members of Congress who supported such an agreement.
"Where else in the world are the problems so clearly solvable as they are here?" Blankfein said.
These corporate efforts are not going to magically make conservative opposition to significant new revenues disappear. House Speaker John Boehner has said he is opposed to any overall in increase in taxes. And zealous opponents of new revenues are not planning to stand down.
"The Paul Ryan plan brings the budget into balance, is not a net tax increase and reduces spending as a part of GDP and pays off the national debt as you go out the door," Americans for Tax Reform's Grover Norquist said. "This idea that you have to trade entitlement reform for a tax increase is put forward by Democrats who when they had power didn't do entitlement reform and don't want to do entitlement reform. Democrats just want GOP fingerprints on a tax increase."
Citigroup CEO Vikram Pandit was in D.C. last month for meetings with top leadership on both sides. Citigroup has also been circulating a research report produced by its analysts arguing that going off the fiscal cliff would result in a drag on the economy of $800 billion, or 5 percent of gross domestic product, in 2013 and produce an unemployment rate above 8 percent in three years. Alternatively, the Citi analysts argue that a "grand bargain" that avoids the cliff and forces action next year on tax and entitlement reform could lead to a 3 to 4 percent growth rate and 6 percent unemployment rate in three years.
Juana Summers contributed to this report.
This article first appeared on POLITICO Pro at 7:27 p.m. on October 8, 2012.
The Gazette now offers Facebook Comments on its stories. You must be logged into your Facebook account to add comments. If you do not want your comment to post to your personal page, uncheck the box below the comment. Comments deemed offensive by the moderators will be removed, and commenters who persist may be banned from commenting on the site.