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Correction to This Article
This article about a labor leader and a chief executive working together on a plan to reduce the federal budget deficit inaccurately represented, because of a punctuation error, one idea for bolstering Social Security. The article said the idea was "to have state employees, who currently do not contribute to Social Security, join into the program." It should have said that the idea was "to have state employees who currently do not contribute to Social Security join into the program." Many state employees already contribute.
Labor leader, chief executive team up to reduce the U.S. deficit

By Edmund L. Andrews and Eric Pianin
The Fiscal Times
Sunday, June 20, 2010; G01

Andrews and Pianin work for The Fiscal Times, an independent news organization that specializes in fiscal and economic matters. It is funded by Peter G. Peterson, who separately supports groups that advocate for long-term debt reduction.

Until two months ago, Andy Stern and David Cote seemed to embody the Beltway view that the bipartisan commission President Obama created to tackle the nation's budget deficit was doomed to fail.

They seemed an unlikely duo, after all: Stern was the firebrand labor leader who had channeled millions of dollars into Democratic election campaigns. Cote was a Fortune 500 chief executive, and a Republican, who made more than $12 million last year.

Today, though, they have teamed up and are working closely together toward what they hope will be a politically viable, long-term plan for reducing the deficit, which last year totaled $1.4 trillion. They talk and e-mail at least once a week, swapping ideas and information. They sit together at commission meetings and arranged a field trip for a tutorial with experts on the tax code. Cote tries to soften his peers on the Business Roundtable. Stern is pressing union officials about ways to tinker with Social Security.

Both men know the odds are long, given the pitched power struggles in Congress, the lack of consensus on ideas and even the premise that the deficit needs addressing now.

Twelve of the panel's 18 members are lawmakers, six from each party, and both parties are fixated on the upcoming midterm elections. But Stern and Cote insist that they have a chance, and both have a history of political bridge-building. In pushing for health-care reform, Stern formed alliances with business lobbying groups and even teamed up with Wal-Mart Stores -- a longtime foe of organized labor.

Now Stern argues that deficit reduction isn't simply a conservative issue. "What I keep saying to the progressive community is that when the crisis hits, it's students, workers and poor people who pay the price," said Stern, who recently stepped down as president of the Service Employees International Union, the nation's fastest-growing labor union.

Cote, chairman and chief executive of Honeywell International, a global technology company, is proselytizing among his own corporate fellow travelers. "Even in the business community," he says, "there is little understanding of the magnitude of the looming problem.''

In a bid to promote more trust among members, Cote and Stern even invited the others to an informal dinner last Tuesday at Honeywell's D.C. office. Erskine B. Bowles, the commission chairman and onetime aide to former President Bill Clinton, said it was hard to exaggerate the importance of such gestures.

"When you spend time with people, they can no longer be caricatures," Bowles said. "You talk about your personal lives, family stuff, and you build trust. When you form a bond like that, you seem to find ways of bridging differences, and I think that's what those two guys have done."

Cote and Stern describe themselves as pragmatists who grappled with hard choices while running large organizations.

"Running a company, you learn that the needs always exceed the resources," said Cote, a former top executive at General Electric. "There's only so much you can do, and you gotta pick the places you're going to work on."

Stern was quick to sympathize. "It's a very practical set of questions," he said. "You have a certain amount of income, and you have a certain amount of expenses."

But the murmurings of agreement can be deceptive. Cote emphasizes that economic growth is the key to fiscal stability, and Stern politely contends that it's unrealistic to bank on economic growth alone as the solution. "There are some people who say, 'Let's grow our way out of it,' " Stern said. "Okay. Tell me how much growth we're going to need? Has it ever happened before?"

The subtext of their exchange is clearly about the broader clash. Republicans warn that higher taxes will imperil economic growth and focus on the need for spending cuts. Democrats argue that some of the biggest GOP targets -- safety-net programs -- need to be protected and that deficits are too big to be closed without at least some tax increases.

A debate is raging in Congress and among economists about whether this is the right time to start reducing deficits. Many liberal groups worried about high unemployment argue that the economy is still so weak that the government should keep spending and deficits high to prevent a double-dip recession. But lawmakers in both parties are balking at new stimulus spending, and some economists argue that the deficit needs to be reined in sooner rather than later.

The panel itself was proposed by a bipartisan odd couple: Sen. Kent Conrad (D-N.D.) and Sen. Judd Gregg (R-N.H.). Both are members of the commission. Gregg recently teamed with a prominent Democrat, Sen. Ron Wyden (Ore.), on a proposal to overhaul the tax code.

The panel's co-chairmen, meanwhile, are battle-scarred veterans of previous bipartisan budget deals. Alan K. Simpson, the former Republican senator from Wyoming, voted for the 1990 budget agreement between Democrats in Congress and President George H.W. Bush. Bowles, a former chief of staff under Clinton, was a key negotiator on the 1997 budget agreement with Newt Gingrich, then the Republican House Speaker.

Two of a kind, after all

In their first joint interview -- Stern and Cote insisted on being interviewed together -- it would have been easy to mix up the two.

Both men wore blue, pin-striped suits and bantered about their common experience running big organizations. Stern, with his coifed white hair and his pink silk tie, could have passed for a business mogul and often sounded like one as he talked of the need for "targets" and "reaching the numbers." Cote was if anything the more rumpled of the two and spoke in plain terms about the sheer magnitude of a trillion-dollar deficit.

Stern had reached out first, sending an e-mail and inviting Cote for a visit just before the panel's first public meeting in late April. Cote said he had initially been nervous, given Stern's reputation as a combative and powerful labor leader, but he showed up at the union's headquarters April 28 and immediately felt at ease with him.

"Andy reached out," Cote said. "I thought, 'Okay, this guy's got more guts than I do.' "

Although he has almost always voted Republican, Cote said he considers himself a pragmatist and supported Obama for president. Within days of Obama's inauguration, Cote led a team of top corporate executives to the White House and spoke out strongly in support of the president's economic stimulus plan.

Stern, for his part, had a long history of teaming up with unlikely bedfellows.

In 2007, he and his union created a furor by partnering with Wal-Mart -- a bitter enemy of organized labor -- in support of health-care reform. The collaboration, which followed secret negotiations, sparked complaints from other unions that Stern was grandstanding. "Why is he so cozy with corporations?" asked the Nation, a liberal weekly magazine.

Stern was also an architect of "Divided We Fail," a collaboration between his union, the Business Roundtable, the National Federation of Business and AARP, the senior citizens' lobbying group.

The four groups disagreed about the particulars of health-care reform, but they financed a heavy television and newspaper ad campaign about the urgent need to pass ambitious legislation.

"We were probably the most odd-fellows group you could put together," said John Castellani, president of the Business Roundtable, a highly influential advocacy group of the nation's top chief executives. "The premise was, we may disagree on what health care should look like in its final form, but we all agree it needs to be addressed."

Past party lines

On the fiscal commission, Stern is already looking for ways to break through the ideological camps on deficit-reduction. He has met privately with all six Republican lawmakers on the panel, and he has publicly praised ideas from conservatives such as Sen. Tom Coburn (R-Okla.). He has yet to meet one-on-one with any of the commission's Democrats, suggesting it would be like preaching to the choir.

"This isn't a question of whether Jan Schakowsky and I agree,'' he says, referring to the liberal House Democrat from Illinois.

Cote has quietly nudged the panel, too. When Democrats and Republicans started to trade barbs last month over the president's stimulus program, Cote warned that the group was getting bogged down in politics. The other panel members backed down, earning a heartfelt thanks from Simpson, the Republican co-chair.

Simpson and Bowles have labored mightily to squelch the party feuding. But unless Republican and Democratic political leaders in Congress show more willingness to compromise, analysts doubt the commission members will agree on broad proposals by their Dec. 1 deadline.

Recommendations will require the support of at least 14 of the 18 members, a high bar to clear. Supporters say that even if a supermajority of the panel fails to reach agreement, the deliberations could help nurture a consensus in Congress next year, especially if the members named by Obama -- four Democrats and two Republicans -- can agree on a set of recommendations.

Unwilling to wait and see how the broader politics play out, Cote and Stern are hunting for unnoticed areas of common ground. They recently arranged a private field trip to the Business Roundtable, where they spent several hours talking about international corporate taxation. Why? The two suspect that deficit-reduction measures could include tax reforms that reduce the competitive disadvantages of the U.S. tax system.

Similarly, Stern has begun probing top union officials about ways to bolster Social Security. One idea: to have state employees, who currently do not contribute to Social Security, join into the program.

It's anybody's guess whether those efforts will lead to a breakthrough on the commission, much less in Congress.

"We're still at the trust-building stage," Cote said, referring to the deficit panel as a whole. "Andy's done the best of everyone in reaching out, including to me."

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