Scott Malone Boston
CORPORATE America is raising the volume of its plea that the US government avert a year-end “financial cliff” that could send the nation back into recession, but chief executives are not pushing the panic button just yet.
Executives are calling on the White House and congressional leaders to head off a self-imposed deadline that could bring $600 billion (R5.29 trillion) in spending cuts and higher taxes early next year if they are unable to reach an agreement on cutting the federal budget deficit.
The Business Roundtable on Tuesday kicked off a print, radio and online advertising campaign on which it plans to spend hundreds of thousands of dollars featuring the chiefs of Honeywell International, Xerox and United Parcel Service calling on legislators to resolve the issue.
In an opinion piece on the Wall Street Journal’s website on Tuesday, Goldman Sachs chief executive Lloyd Blankfein urged the business community and President Barack Obama’s administration to compromise and reconcile so as not to derail the fragile recovery.
One of the more dramatic warnings of the consequences of allowing the US economy to go over the financial cliff came from Honeywell chief executive David Cote.
“If the last debt ceiling discussion was playing with fire, this time they’re playing with nitroglycerin,” Cote said. “If they go off the cliff, I think it would spark a recession that’s a lot bigger than economists think. Some think it would just be a small fire. I think it could turn into a conflagration.”
The non-partisan Congressional Budget Office estimates that the US economy would contract 0.5 percent next year if the government fails to stop the budget cuts and tax increases, far below the 2 percent growth economists forecast.
A failure in Washington to solve the crisis by the end of the year could prompt major companies to curtail investment plans, said Duncan Niederauer, the chief executive of NYSE Euronext, the operator of the New York Stock Exchange.
“We simply won’t be investing in the US. We will be investing elsewhere where we have more certainty of the outcome,” Niederauer said.
About a dozen top US chief executives, including General Electric’s Jeff Immelt, Aetna’s Mark Bertolini, American Express’s Ken Chenault and Dow Chemical’s Andrew Liveris were scheduled to meet with Obama yesterday to discuss the issue.
The four are members of “Fix the Debt”, an ad-hoc lobbying organisation that this week launched an advertising campaign that advocates long-term debt reduction.
Bank of America chief executive Brian Moynihan said on Tuesday that worries about the cliff had companies holding off on spending. Eaton chief executive Sandy Cutler shared his concern. – Reuters