CEOs: Fiscal Cliff Uncertainty Eroding Confidence, Dampening Growth

Wednesday, 26 Dec 2012 09:08 AM

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The economy will suffer as long as lawmakers and the White House argue over ways to steer the country away from the fiscal cliff, as delays sap confidence and dampen spending among businesses and consumers, top executives say.

Christmas came and went without a deal, and more and more American households and businesses worry policymakers will fail to agree on a way to avoid the fiscal cliff, a recessionary combination of tax hikes and spending cuts due to take effect at the end of this year.

The White House and Congressional Republicans have centered the debate on income taxes, with the Obama administration calling for tax hikes on those with incomes over $400,000 a year, and House Speaker John Boehner, R-Ohio, countering with a proposed hike on those with incomes of over $1 million a year, a proposal dubbed as Plan B that quickly found opposition among his own ranks.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

“Delaying this doesn’t do any good to anybody,” General Electric CEO Jeffrey Immelt said, according to The Wall Street Journal.

“We’ve been dealing with this amount of uncertainty … for almost two years now. We think it’s time to really drive some conclusion and some action.”

Other top executives agree that not only does a deal need to happen now, but lawmakers need to push through a deal with teeth — one that seriously addresses the nation’s fiscal woes and doesn’t merely punt tough decisions down the road.

“We’re all sitting on the sidelines right now wondering what’s going to happen to us,” said John Odland, chief financial officer of MacMillan-Piper, a freight-transport firm in Seattle, The Journal added.

“A lot of my contemporaries are feeling the same way, saying, ‘Let’s just wait and see what these knuckleheads do.’ “

Meanwhile, the U.S. government will likely hit its $16.4 trillion federal debt ceiling by early March, and partisan debate over raising it similar to when the government approached its spending limit in 2011 could fray nerves and cool recovery as well.

“It’s pretty clear the economy slowed in the face of that uncertainty,” Joel Prakken, chairman of forecasting firm Macroeconomic Advisers, told The Journal.

Hopes for a grand bargain becoming a reality are wearing thin.

“At this point, all they’re looking for is a fig leaf,” said Stan Collender, a former staff member of the House Ways and Means Committee and the House and Senate Budget committees who is now at Qorvis Communications in Washington, according to Bloomberg.

“There’s no grand bargain. There never was.”

Meanwhile other market participants foresee the same steering currents guiding markets and economies in the coming year.

“2013 will mainly be guided by political news, budget discussions, statements from central banks and economic surprises,” William De Vijlder, chief investment officer of Strategy and Partners at BNP Paribas Investment Partners in Brussels, Belgium, wrote in a December strategy note, Bloomberg added.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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