CEO confidence grows as Obama looks to reset relations with business leaders

Business leaders are feeling more optimistic about the U.S. economy as President Obama tries to reset the White House’s relationship with corporate America.

A survey released Tuesday shows corporate CEOs expect their sales to increase in the next six months along with their employment and expenditures.

The Business Roundtable’s quarterly survey found that 80 percent of those surveyed expect sales to increase, and 59 percent expect their companies to increase capital expenditures. CEOs expect the economy to grow at a 2.5 percent rate in 2011.

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“Demand is returning, as evidenced by anticipated sales increases, and that is good news. When demand increases, capital expenditures and employment follow — which is what we expect to see in the next six months,” said Ivan Seidenberg, the Business Roundtable chairman and CEO of Verizon Communications. 

The survey’s release comes on the eve of a meeting at the White House between Obama and the CEOs of some of the country’s largest corporations. The meeting is part of an effort by Obama to improve his administration’s ties to business. CEOs from IBM, Dow Chemical, Google, American Express and PepsiCo are among the leaders invited to attend the meeting.

Obama is also expected to try to coax business leaders at the meeting to put their money into the economy. The Federal Reserve has estimated that U.S. businesses are sitting on $2 trillion in cash reserves. 

The White House desperately needs the unemployment rate to fall ahead of the 2012 election. It rose in November to 9.8 percent, and the jobless rate played a major factor in the devastating losses suffered by Democrats in the midterm elections.

It’s possible that the work by congressional Republicans and the White House on a tax deal has spurred some confidence in the economy. 

While the Business Roundtable survey was taken before President Obama announced his agreement on an $858 billion tax package with Republicans, business leaders were polled as it was becoming clearer that Congress would not let any of the tax cuts signed by President George W. Bush in 2001 and 2003 expire. 

The administration and business believe the package could serve as a second stimulus to the economy. It extends all of the Bush-era tax cuts for two years, extends unemployment benefits for 13 months and introduces a payroll tax reduction for all workers over the next year. 

Seidenberg and other corporate leaders have hailed the package. The Verizon CEO last week cited the tax bill and a free-trade deal with South Korea that the White House is pushing as examples of “extraordinary” steps that show Obama “has a willingness to learn.”

In an overwhelming vote, the Senate on Monday agreed to move the package forward. Only 15 senators voted against the motion to proceed. 

The Senate is expected to give final approval to the package on Wednesday, but it faces an uncertain path in the House, where liberals in the Democratic Caucus are upset over an extension of tax cuts for wealthy taxpayers and an estate tax provision they see as too generous. Democrats are demanding changes to the package, but the administration has presented its agreement with Senate Republicans as a take-it-or-leave-it proposal.

House Democrats will discuss the deal at a closed-door meeting of their caucus on Tuesday.

Business leaders, who fought with the White House over the healthcare and financial regulatory overhauls, say uncertainty about tax rates and regulatory actions by the administration are a major reason why they are not spending cash to invest in their companies and hire more workers. Another factor, say economists, is uncertainty over the U.S. economic recovery.

According to the Business Roundtable survey, CEOs are more pessimistic about their hiring than they are about increasing sales. Only 45 percent expect their companies will increase hiring in the next six months, compared to 38 percent who expect no change in hiring. Eighteen percent think their hiring will fall.