ja_mageia

Financial Regulatory Reform

Tagline

By Administrator

New Rules of the Road for the Financial Sector  

More...
Global Engagement

Tagline

By Administrator

America's economic prosperity depends on active engagement with the global economy.

More...
Competitive Tax Rates

Tagline

By Administrator

Competitive tax rates fuel economic growth and job creation.

More...
Engagement with China

Tagline

By Administrator

The U.S.-China economic relationship is the most important bilateral relationship in the world today.  

More...
Economic Value of Large Financial Institutions

Tagline

By Administrator

Large financial institutions provide significant value to the U.S. economy and American investors, business owners, and savers.

More...
Frontpage Slideshow | Copyright © 2006-2012 JoomlaWorks Ltd.
  • Narrow screen resolution
  • Wide screen resolution
  • Decrease font size
  • Default font size
  • Increase font size

Warnings associated with going over the fiscal cliff

With Congress in the middle of the “lame duck” session, negotiations on addressing fiscal cliff and debt ceiling have picked up steam as the January deadline looms for automatic tax increases and spending cuts.  President Obama and Congressional leadership expressed confidence in reaching a deal on the fiscal cliff after a November 16th meeting at the White House.  Talks are expected to continue, though uncertainty remains as is evidenced by the financial markets and weak consumer spending and business investment.  A handful of members in each party have expressed interest and willingness to go over the fiscal cliff to either boost their hand in the bargaining process or achieve significant spending cuts.  The financial sector views this as a backward and irresponsible approach that could have devastating effects on the markets and the economy in general.  The Forum is hopeful that lawmakers will continue to work together constructively to come to an agreement to prevent going over the fiscal cliff and put our nation on a long-term path to fiscal solvency and economic growth.

Here are some words of warning regarding the financial market impacts of going over the fiscal cliff:

From the Federal Reserve: Federal Reserve Board Chairman Ben Bernanke delivered a speech at the Economic Club of New York on November 20th and said “uncertainty about how the fiscal cliff, the raising of the debt limit, and the longer-term budget situation will be addressed appears already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy. Continuing to push off difficult policy choices will only prolong and intensify these uncertainties.”   Chairman Bernanke went on to say, “Moreover, while the details of whatever agreement is reached to resolve the fiscal cliff are important, the economic confidence of both market participants and the general public likely will also be influenced by the extent to which our political system proves able to deliver a reasonable solution with a minimum of uncertainty and delay. Finding long-term solutions that can win sufficient political support to be enacted may take some time, but meaningful progress toward this end can be achieved now if policymakers are willing to think creatively and work together constructively.”

Federal Reserve Bank of New York President William Dudley discussed his concerns about how a failure to reach a deal would impact American competitiveness during a November 29th speech in New York: “If a credible bipartisan agreement is reached, it will strengthen global confidence in the U.S. and underscore to the world that our country remains a great place to do business and invest in.  Failure would suggest a degree of political dysfunction that could undermine U.S. economic leadership and could encourage global corporations and investors to invest elsewhere.”

From the Treasury Department: Treasury Secretary Timothy Geithner commented on the fiscal cliff during a CEO Council event on November 13th and pushed back against delaying a deal with a short-term solution.  “I know the cliff is unattractive, it would cause a lot of damage and it’s not that complicated to solve. But be careful about those who would extend it; it would leave all the uncertainty on the table.”

From the White House - A November 26th report from the National Economic Council and Council of Economic Advisers said economic growth of real GDP could drop 1.4 percentage points if tax rates on the middle class return next year to their pre-Bush-era levels.  CEA additionally estimated that consumers could spend nearly $200 billion less than they would have in 2013 due to higher taxes.

At the Economic Club of Washington, White House Council of Economic Advisers Chairman Alan Krueger described the fiscal cliff as a “solvable problem,” but cautioned that he is concerned with the psychological effects of falling off of the cliff.  “[Falling off the cliff] would mean to many people that the government is not there to solve the problems it was meant to solve. That’s obviously not very good for confidence.”  Krueger further said that going over the cliff would renew economic uncertainty and impact business and household behavior.

From House Speaker John Boehner: In his November 29th weekly press conference, Speaker Boehner voiced his concerns on avoiding going over the fiscal cliff: “Listen, this is not a game.  Jobs are on the line.  The American economy is on the line, and this is a moment for adult leadership…I’m going to do everything I can to avoid putting the American people through the fiasco of going over the fiscal cliff,” Boehner said.

 

 

Company logos

The Financial Services Forum is a non-partisan financial and economic policy organization comprising the CEOs of 18 of the largest and most diversified financial services institutions doing business in the United States.

The purpose of the Forum is to pursue policies that encourage savings and investment, promote an open and competitive global marketplace, and ensure the opportunity of people everywhere to participate fully and productively in the 21st-century global economy.

Welcome to ForumBlog. This is where our policy team analyzes the latest proposals, ideas, and news surrounding financial sector regulatory reform, trade, and the economy. Our goal is to provide thoughtful insights on the issues impacting the intersection of Wall Street and Washington, as we pursue policies that encourage savings and investment, promote an open and competitive global marketplace, and ensure the opportunity of people everywhere to participate fully and productively in the 21st-century global economy.