US Congress comes back to con­front fis­cal cliff

The Pak Banker - - Front Page -


Amid a global fright over Wash­ing­ton’s po­lit­i­cal brinkman­ship, law­mak­ers re­turn to the cap­i­tal on Tues­day with a seven-week dead­line to reach agree­ment on sched­uled tax hikes and bud­get cuts that threaten to trig­ger an­other re­ces­sion.

The post-elec­tion bat­tle over the so­called fis­cal cliff is shap­ing up as an ex­ten­sion of the po­lit­i­cal cam­paign with Democrats try­ing to rally sup­port for rais­ing taxes on the wealthy as part of any deal, and Republicans coun­ter­ing that such an ap­proach would dev­as­tate “job creators” across the coun­try.

Pres­i­dent Barack Obama has sched­uled high-pro­file White House meet­ings with busi­ness, civic and la­bor lead­ers in ad­vance of a sum­mit set for Fri­day of top Republicans and Democrats in Congress.

Repub­li­can lead­ers, among them for­mer vice pres­i­den­tial nom­i­nee Paul Ryan, have planned their own round of tele­vi­sion ap­pear­ances and news con­fer­ences to make their case.

Both sides gen­er­ally agree on the need to avoid the jolt of $600 bil­lion in dra­co­nian deficit- re­duc­tion mea­sures they all agreed to in Au­gust 2011. They also agree on a need for long-term deficit re­duc­tion and re­vi­sions of the tax code.

They are at odds, as they were dur­ing the elec­tion cam­paign, over how to get over the im­me­di­ate cri­sis, with the main dis­agree­ment fo­cus­ing on whether to ex­tend tax cuts for ev­ery­one, as Republicans want, or just for those earn­ing be­low $250,000, as the pres­i­dent wants.

The pres­i­dent and con­gres­sional Republicans have sounded con­cil­ia­tory notes since the elec­tion on reach­ing a deal. But it was clear on Tues­day that the two sides were still far apart, set­ting up pro­longed de­bate that could keep in­vestors on edge for the rest of the year.

Obama won re-elec­tion last week but Congress re­mains di­vided, with Democrats con­trol­ling the Se­nate and Republicans run­ning the House of Rep­re­sen­ta­tives.

In a com­men­tary that raised eye­brows in Wash­ing­ton, econ­o­mist Glenn Hub­bard, who was the chief eco­nomic ad­viser to Repub­li­can pres­i­den­tial can­di­date Mitt Rom­ney, urged Republicans to ac­cept an in­crease in av­er­age tax rates, though not in mar­ginal tax rates as ad­vo­cated by Pres­i­dent Obama, as part of a long-term deficit so­lu­tion.

Tues­day, a group of 350 economists, or­ga­nized by a largely lib­eral group called “Cam­paign for Amer­ica’s Fu­ture,” will is­sue a state­ment urg­ing both sides to cease their “ob­ses­sive con­cern with cut­ting deficits” amid a “frag­ile” eco­nomic re­cov­ery.

The wide­spread sen­ti­ment of mar­ket an­a­lysts was re­flected in a memo by PNC strate­gists not­ing that while the elec­tions “brought some clar­ity” to the cliff sit­u­a­tion, “sig­nif­i­cant un­cer­tainty re­mains in the out­look re­gard­ing tim­ing and com­po­si­tion of a fis­cal cliff deal.

“The longer it takes the pres­i­dent and Congress to ne­go­ti­ate a deal, the higher the odds that the U.S. fis­cal sit­u­a­tion will un­hinge the progress made dur­ing the past three years of eco­nomic re­cov­ery.”

The pres­i­dent’s staff did not re­lease a list of busi­ness lead­ers expected Wed­nes­day at the White House, fol­low­ing Tues­day’s event with la­bor lead­ers, in­clud­ing AFL-CIO pres­i­dent Richard Trumka.

Gen­eral Elec­tric Co CEO Jeff Im­melt was plan­ning on at­tend­ing, ac­cord­ing to a GE spokes­woman, as was Amer­i­can Ex­press Co Chair­man and CEO Ken­neth Chenault.

Both are in­volved in an ad hoc lobby group called “Fix the Debt,” which is launch­ing an ad­ver­tis­ing cam­paign this week on be­half of bal­anced, long-term deficit re­duc­tion. The CEOs of 17 big U.S. com­pa­nies in­volved with “Fix the Debt” have writ­ten law­mak­ers urg­ing speedy res­o­lu­tion of the fis­cal cliff. Their let­ter will be de­liv­ered on Tues­day, when Congress re­con­venes.

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