Tags: Fiscal Cliff | BofA | Fiscal | Cliff | Economy

BofA CEO Moynihan: Fiscal Cliff Fallout Could Hurt Economy Into 2014

Tuesday, 04 Dec 2012 08:19 AM

Fallout from the fiscal cliff will plague the U.S. economy through 2014 if lawmakers fail to avoid it, said Bank of America CEO Brian Moynihan.

Lawmakers and the White House are scrambling to steer the economy away from the fiscal cliff — a combination of tax hikes and deep spending cuts scheduled to kick in at the same time early next year — and failure to do so could push the economy into a recession next year, according to government estimates.

Even if a deal is struck and recession averted, uncertainty over how much the government will be spending and how much individuals and businesses will be paying in taxes has already prompted many firms of all sizes to throttle back on commerce these days and hold off on investing in 2013.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

Failure to quickly strike a deal to avoid the cliff could cool the economy not only next year but into 2014 as well if businesses remain uncertain.

"I'm more concerned about business behavior slowing down than I am about consumer behavior," Moynihan told CNBC.

"I think we're in danger if this thing strings out into 2013 that you could start to have problems of what 2014 would look like."

Congressional Republicans are at odds with the Democratically controlled White House over the role of tax reforms, with sticking points surrounding whether or not to allow the Bush-era tax cuts to expire for wealthier Americans, something President Barack Obama insists must happen.

Failure to put politics aside and find some compromise won't bode well for an economy picking up the pace of its recovery.

"[Stock market levels] are in decent shape and consumers and the economy (have) been growing. The question was will everything going on cause them to slow down?" Moynihan said.

Republicans recently proposed a $2.2 trillion solution to the fiscal cliff calling for hikes to the eligibility age for Medicare, reduced cost-of-living hikes for Social Security benefits and a plan to pump $800 billion in higher tax revenue without raising rates for the wealthy but through capping deductions and broadening the tax base.

The White House quickly dismissed the idea, branding the plan as lacking in detail when it comes to closing loopholes and insisting that any deal must involve tax hikes on the wealthy.

"Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won't be able to achieve a significant, balanced approach to reduce our deficit our nation needs," White House Communications Director Dan Pfeiffer said in a statement, according to the Associated Press.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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