Good CEOs plan ahead

Here is the President speaking today in Cincinnati:

THE PRESIDENT:  We already cut a trillion dollars in spending. 

[My plan] makes an additional hundreds of billions of dollars in cuts in spending, but it also asks the wealthiest Americans and the biggest corporations to pay their fair share of taxes.

Now, that should not be too much to ask.  And by the way, it wouldn’t kick in until 2013.  So when you hear folks say, oh, we shouldn’t be raising taxes right now — nobody is talking about raising taxes right now.  We’re talking about cutting taxes right now.  But it does mean that there’s a long-term plan, and part of it involves everybody doing their fair share.

The problem with the President’s argument is that good CEOs plan ahead.  When they think about whether to hire a new worker, buy a new piece of equipment, or build a new factory, they plan over a horizon that’s longer than just the next 15 months.  A tax increase enacted into law now, to take effect in 2013, is only slightly less discouraging to economic growth than a tax increase that takes effect immediately.  A CEO who knows her firm’s taxes will increase in 2013 will be discouraged from hiring, investing, and building now.

The President is right when he says that “there’s a long-term plan.” Unfortunately, that long-term plan involves higher taxes, and firm managers know that.  Their horizon is not limited to the next election.

(photo credit: Thommy Browne)