Tags: El-Erian | Congress | recovery | letter

Pimco's El-Erian to Congress: Fate of Economic Recovery Is in Your Hands

Wednesday, 05 Sep 2012 09:35 AM

Congress is back in session and needs to address economic reforms immediately, particularly fiscal reforms, said Mohamed El-Erian, CEO of Pimco, manager of the world’s largest bond fund.

In a welcome-back letter to lawmakers published in Project Syndicate, El-Erian urged Congress to address fiscal and labor reforms, housing and credit issues as well as the country’s infrastructure needs and its waning leadership role in the global economy.

Politics must take a back seat to action, even in an election year.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

“No doubt you have … noticed that, with less than 10 weeks to go until the November presidential election, our country is in the grip of an increasingly ugly political campaign," El-Erian wrote in the Project Syndicate column. "So, with this combination of bad economics and bad politics, we look to you for direction and leadership. It is that simple, and that important,” he wrote.

“We need you to overcome a prolonged period of congressional paralysis and polarization in order to address the country’s malaise. We need you to pivot in your responses from the tactical to the strategic, from the cyclical to the secular, from the partial to the comprehensive and from sequential to simultaneous reforms.”

At the end of the year, the Bush-era tax cuts and other tax breaks are scheduled to expire, while automatic cuts to public spending kick in, a combination known as a fiscal cliff that could send the economy sliding into a recession if left unchecked by Congress.

Longer-term fiscal issues loom as well, and Congress must avoid the brinkmanship it displayed during the 2011 debt-ceiling debacle, which nearly threw the country into default.

The Federal Reserve has stimulated the economy to keep it afloat via monetary policy tools such as interest-rate cuts and liquidity injections into the financial system, but lasting improvement will only come with deep-rooted fiscal reforms.

“The choice Congress faces this term is simple: either address head on America’s challenges, or risk being remembered as the body whose dithering condemned future generations to being worse off than their parents,” El-Erian wrote.

An NBC News/Wall Street Journal poll conducted in August found that the approval rating for Congress tied an all-time low, while its disapproval rating tied an all-time high.

According to the poll of 1,000 registered voters, 12 percent approved of the legislative branch’s job — the only other time it was that low was in October 2008, NBC News reported.

On the flip side, 82 percent disapproved of Congress’ job — tying a record set in August 2011, when the debt-ceiling standoff was in full swing.

While faith in Congress may be waning, other polls show faith in the broader economy is crumbling as well.

The Gallup Economic Confidence Index hit minus-27 in August, tying January’s low, the worst of the year, Gallup reported.

The August reading comes in slightly worse than July’s reading of minus-26 and well below May’s four-year high of minus-17.

The figure does represent an improvement from August 2011, when the index hit minus-52 at the time of the debt-ceiling fiasco.

“Gallup has found waning public confidence in the economy since May, the last month the government reported any improvement — albeit slight, at 8.1 percent for April, down from 8.2 percent in March — in the nation’s jobless rate,” Gallup reported.

“Since then, the government’s unemployment reports have been disappointing, or mixed at best. The decline in confidence seen since May slowed in August, suggesting Americans may be growing accustomed to stagnant job growth.”

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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