The nation’s financial services executives are urging President Obama and Congress to resolve the “fiscal cliff” challenge of automatic tax hikes and budget cuts right away, then deal with the federal deficit in early 2013.
In a letter to the leaders of Congress and the White House, The Financial Services Roundtable said the uncertainty over the fiscal cliff is hurting the economy and urged Washington to “avoid the economic damage that would result from imposing the automatic spending cuts and tax increases and to establish a firm, binding process to begin to reduce the fiscal deficit in a meaningful way in early 2013.”
The Financial Services Roundtable letter, while encouraging bipartisanship, offered no prescription for ending the current political stalemate.
In the letter, Tim Pawlenty, the financial group’s new president and CEO, Tim Pawlenty, urged Congress and the Administration to take a “two-pronged approach.” First, lawmakers should “bridge over the fiscal cliff as soon as possible” to minimize negative economic consequences. Second, they should address the federal budget deficit in a “comprehensive and bipartisan manner in early 2013 to put the U.S. on a path for sustained growth.”
The group said its members “unanimously” agree that the fiscal cliff is “imposing a negative drag on business lending, hiring, spending, and investment right now, despite the actual ‘cliff’ being over two months away.”
The group’s members include some of the largest banking and insurance firms. Its chairman is Thomas Wilson, CEO of Allstate, and board members include executives from The Hartford, Fidelity, Swiss Re, Wells Fargo, BB&T, State Farm and New York Life.
According to Pawlenty, other industry groups, academics, and economists have also reached the conclusion that the fiscal cliff uncertainty is hurting the economy, including 87 percent of economists surveyed by the National Association for Business Economist.
Also, Pawlenty wrote, the Congressional Budget Office said that if Congress and the Administration fail to address the fiscal cliff by the end of the year, the economy will go into a recession.
“We urge you to bridge over the fiscal cliff and to do so as soon as possible. The economy needs stability, predictability, and certainty. Short-term economic output would be greater and unemployment lower in 2013 if the fiscal cliff is addressed,” Pawlenty wrote, again citing the Congressional Budget Office.
The group said its call for focusing on the fiscal cliff now is not to meant to minimize the importance of dealing with the nation’s budget deficit, which is $16.2 trillion.
The National Commission on Fiscal Responsibility and Reform said that unless the deficit is addressed, interest on the debt could rise to nearly $1 trillion by 2020 and the debt held by the public will grow to as much as 185 percent of gross domestic product (GDP) by 2035.
“The U.S. needs real fiscal reform. The federal debt needs to be addressed in a comprehensive and bipartisan manner that supports, not undermines, economic growth. We need spending reform, including entitlement reform. We also need tax reform that encourages growth and investment. It will not be easy. But it needs to get done,” Pawlenty wrote.