Arguments over the debt ceiling and the possibility of tax increases - or "revenue enhancements," in the current political doublespeak - have businesses concerned. And they should.
At issue is the $14.3 trillion federal debt ceiling. Congress either has to borrow more money to pay its bills, cut spending or raise taxes - the latter ploy supporters prefer to describe with the aforementioned euphemism little over a year before a national election.
Creighton University economist Ernie Goss, who monitors the economic pulse in Iowa, says the wrangling is fraught with danger.
The ceiling will go up, Goss said. In fact, he describes the increase as a "nonevent" for the average taxpaying citizen. Not increasing the ceiling, on the other hand, will shake up the economy in a number of ways, including the president making good on his threats to hold up Social Security checks.
Goss said the U.S. would not default on its debt obligations, but it would have to "prioritize" outlays that aren't related to the debt.
"This would mean that Social Security payments could be delayed or U.S. government vendors would not be paid until the situation is resolved," he said.
"Dramatically" higher interest rates could result, as in Greece and Portugal, as investors seek out safer bonds in countries like Switzerland.
Employing a codicil in the 14th Amendment in the Constitution to justify the president raising the debt ceiling unilaterally is a "risky strategy" that likely would end up in the courts, Goss said. Investors likely would flee U.S. bonds, and interest rates would rise in the interim.
The historical average for federal spending is 20.3 percent of gross domestic product, but, on its current course, spending will reach 24.7 percent by the end of this year and continue to climb from there. That means 24.7 percent of the nation's output is made up of government spending.
The result? Economic growth slows, wages and benefits wither and interest rates rise.
Businesses pay the price, as higher interest rates discourage business investment, Goss noted.
Goss was asked how he would resolve the situation.
"I would put a six-month patch in place until a tax-reform package could be passed," he said, adding that "repatriating" corporate earnings from abroad would be part of that. He pointed out U.S. firms currently have more than $1 trillion in earnings tucked away in other countries.
Lowering the corporate tax rate on such earnings from 35 to 10 percent would add $100 billion to corporate tax collections and another $42 billion in dividend taxes from investors, Goss said.
Net revenues would generate more than $800 billion in corporate investment, and $32 billion in investor spending would produce U.S. jobs while fattening federal and state tax revenues, Goss said.
"Absent this action, corporations will continue to invest these funds outside the U.S., creating non-U.S. jobs," Goss said.