Honeywell CEO, a Manchester native, takes on deficit, Social Security crisis
MANCHESTER - As a young executive, David Cote, now chairman and CEO of Honeywell, was discussing the federal deficit with college students when he predicted that because of his income, he would not be collecting Social Security when he retired.
His income has grown considerably since then; the federal deficit looms larger than ever; but Cote will collect a monthly Social Security check when he retires, despite a multimillion-dollar nest egg.
At the time Cote made his prediction, New Hampshire Sen. Warren Rudman and other members of the Concord Coalition were warning that "means testing" for Social Security would be one of many steps necessary to save the program from insolvency as baby boomers retired in massive numbers.
After a speech before the same Concord Coalition on Monday at St. Anselm College, Cote recalled his prediction as a way of emphasizing how intractable the federal deficit has become.
A Manchester native and 1976 graduate of the University of New Hampshire, Cote has become one of the most prominent advocates for deficit and debt reduction. He was appointed by President Obama to serve as the CEO representative on the National Commission on Fiscal Responsibility and Reform, often called Simpson-Bowles from the names of co-chairs Alan Simpson and Erskine Bowles, and is now active with the Fix the Debt organization.
Cote stands behind the Simpson-Bowles recommendations, which combined spending cuts with tax increases and entitlement reforms, but did not muster enough political support to become law. With Simpson-Bowles on the shelf, Cote turned his energies toward Fix the Debt.
"Once I knew the size of the problem and how big an issue it was, I continued to stay very vocal about it," he said in an interview with the New Hampshire Union Leader editorial board. "How do you walk away from this kind of issue when the stakes are so high?"
Cote called Fix the Debt a successor to Simpson-Bowles. While Simpson-Bowles was specific in its recommendations, Fix the Debt is not offering solutions, just encouraging political compromise on taxes, spending and entitlement reform.
If politicians can't come to some agreement on long-term deficit and debt reduction, he said, they should allow automatic cuts to take place - the so-called sequester - which would indiscriminately cut $50 billion each from both defense and domestic spending every year for the next 10 years.
The deadlock in Washington has to be broken, he said, before the bond rating agencies downgrade U.S. debt and investors flock to alternatives, pushing interest rates up and creating the conditions for inflation and recession at the same time.
"We can address this thoughtfully and pro-actively, or we can wait for the bond market to do it," he said. "You can't predict when the herd will turn against you, and when it happens, at that point, it's too late."
Although the automatic cuts of sequestration would result in job losses, the alternative would be even more damaging to the economy, he said. "The short-term pain from sequestration is more than offset by benefits in 2014, 15 and 16."
The main goal of Fix the Debt is to mobilize voters to demand both spending cuts and entitlement reform from politicians. Cote said the reluctance of politicians to compromise is due at least in part to the message they are getting from voters, and that message has to change.
"If you have people saying, 'Don't raise my taxes, but don't cut my benefits,' it makes it really difficult to get anything done," he said. "Washington is ruled by fear of voters ... and the three 'h's' prevail - hysteria, histrionics and hyperbole."
Cote experienced some of that hyperbole himself when a young protester at Monday's forum shouted out, "Don't take away my Social Security."
"Actually, I'm trying to save her Social Security," he said afterward, "because the way we are going, she isn't going to have any. The people who are going to get hurt the most if this debt keeps getting out of control are those most in need."