Ahh the fiscal cliff, the result of last summer's debt-ceiling debacle. Rather than try to work
together and solve our nation’s debt problem, our fearless leaders in Congress
kicked the can down the road once again. Democrats and Republicans in Congress decided our debt
crisis could not be solved until after the election. Unfortunately for the American people, the
Tea Party needed to be sure we “solved” this issue before they allowed the US
Government to raise the debt ceiling and pay off the bills we already incurred
(which has no affect on future spending).
The
solution Congress came up with was automatic tax hikes and spending cuts that
take effect on January 1st, 2013.
To make matters worse, these sequestrations happen across the board without
rhyme or reason. The general consensus
among economists is that if the fiscal cliff is not lifted the US will head
into another recession. If you paid
attention to the presidential campaigns, watched the debates, or followed the
numerous Congressional elections you might not have any idea about the fiscal
cliff or how to solve it. As I stated
before, we had 3 presidential debates and not once was there a serious
discussion about the fiscal cliff.
We are
concerned about the anemic growth in the post-financial crisis economy. Many Republicans point to the slow growth
in 2012 as why Obama should not be re-elected.
It is important to understand the detrimental effects the fiscal cliff
has on our economy. This summer, for the
first time ever, Standard & Poor’s downgraded the credit rating of the
United States. Other agencies plan on
doing the same if we do not solve the fiscal cliff or our debt issues. With the national debt at $16 trillion, another
downgrade could lead to higher interest rates, which would equate to billions of
dollars a year in payments.
Unfortunately for us, there is another, more complicated, effect of
the fiscal cliff.
The stock market is up, the housing
marketing is rebounding, and consumer confidence is rising. So where are the jobs? Uncertainty is a huge obstacle to corporations large and small. Uncertainty prevents many CEOs from making decisions about the future. The failure to deal with the fiscal cliff has
sown the seeds of uncertainty in CEOs throughout our nation and the world. I’ve read reports from SPDR funds, Envestnet,
and numerous big banks and investment firms urging Congress to do something, anything that will provide
them with some direction. The financial
sector just needs some direction from the government so they know where to
invest their money.
And it is
not just the financial industry.
American corporations hold about $1.7 trillion on the books and my guess
is that they are dying to spend some of that cash. Defense contractors, such as, Lockheed
Martin, Northtrop Grunman, and General Dynamic are sitting with cash on their
books to brace themselves for cuts in defense spending. The CFO of Siemens, the German industrial
giant, has admitted that they are delaying new investments and expenditures
until the fiscal cliff is resolved. The
CEO of Legrand, a global manufacturer, has stated that they are holding off on
hiring until we are in a more stable environment.
It is time
for Congress to stop holding back our recovery.
Consumer confidence and spending is bouncing back, and Congress needs to
provide businesses with a clear direction so they can begin to benefit from
this. Some may argue that Obama’s
policies have slowed down our recovery, but I believe the real culprit is the
uncertainty created by our horrible Congress.
Whoever wins the election will need to tackle the fiscal cliff in order
for America to truly recover and transition into economy of the future. So as I finish this post I will leave you
with this. The CEO of JP Morgan, Jamie
Dimon, said last week that many on Wall Street would be fine with a rise in
taxes as long as it was part of a concrete
plan to deal with the fiscal cliff and our debt issues.
