They may be late to the party, but more than one hundred of the nation’s business leaders have finally spoken up.
The “Campaign to Fix the Debt” represents the employers of over six million people, 300,000 voters — and it is growing by the second.
The CEOs of the companies agreed in the statement that any fiscal plan “that can succeed both financially and politically” has to limit the growth of health-care spending, make Social Security solvent and “include comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.”
So far, absolutely no progress has been made on any of those fronts.
The budget is a jigsaw puzzle of issues, and no one is willing to fit them together one by one from the edges.
The CEO group even has the backing of Republican Alan Simpson and Democrat Erskine Bowles who, in 2010, headed the bipartisan commission that informally bears their names.
Obama created the commission and then ignored its findings.
Republicans dismissed the report because it supported higher tax revenue; democrats scowled at the proposed spending cuts.
The Simpson-Bowles compromise went nowhere, and the partisan impasse brought the federal government to the edge of default in the summer of 2011.
The inaction in Congress fueled an investor and business pullback.
The incoming sequestration that will cut 4% of GDP will be far worse…
The same group of analysts Bloomberg brought together for a joint report on the fiscal cliff containing the above chart cited two insightful quotes.
The first, from Bernanke, confirms there is absolutely no way the Fed can be the only organization attempting to affect the economy:
If the fiscal cliff isn’t addressed, as I’ve said, I don’t think our tools are strong enough to offset the effects of a major fiscal shock, so we’d have to think about what to do in that contingency.
Perhaps with the Chairman of the Fed lamenting how he cannot do enough alone and the hands that feed Congressmen calling for bipartisan action, the only people empowered to do the obvious will have to act…
Of course, that assumes they are even capable of mustering any effort at all.
We all know compromise is strictly forbidden in the zero-sum game inside the Beltway… but are we naive to hope a good browbeating by the corporate paymasters will have some effect?
Corporations have spent over $300 million on this election cycle, a price tag that doesn’t even account for unlimited corporate contributions to the $500 million in Super PAC spending we’ve seen as well.
We also know Congress has become accustomed to obscenely low standards…
We had a bastardized version of a budget through an omnibus spending measure in April of 2009, but we haven’t had a real federal budget that was signed into law since 1997.
Congress has languished in single-digit approval ratings, based largely on the economy and inaction and partisan strife.
Corporations, meanwhile, are in no position to punish the politicians they support; the two-party system forces them to choose the lesser of two evils.
With past performance looking so bad, it’s no wonder the second quote from the Bloomberg report is so dismal:
We expect S&P 500 will fall sharply following the election when investors finally recognize the serious possibility that the ‘fiscal cliff’ problem will not be solved in a smooth fashion. Goldman Sachs assigns a one-in-three likelihood Congress does not address the situation before Jan 1st.
In contrast, our conversations suggest the vast majority of clients expects the ‘fiscal cliff’ issue will be addressed during the lame duck session of Congress.
— Goldman Sachs Global Economics,
Commodities and Strategy Research Team
Businesses have already been shaken to the core and confidence has faltered. The fear that political paralysis will keep the government on a borrow-and-spend track — and possibly to default — discouraged investment that would create jobs and strengthen the economic recovery…
Congress can no longer muster token efforts, and one of the world’s premier investment research operations gives it a 33% chance to utterly fail (generous, in my opinion).
That leaves us with a continuously sliding economy and market for the foreseeable future.
Over the last two weeks, the S&P 500 and Dow Jones Industrial Average are down about 3%.
It’s likely this downtrend will continue through the end of the year.
Ultimately, the coalition of CEOs, businesses, and voters is wise to call on Congress to do something to avoid responsibility for tanking the nation.
Unfortunately, it’s too little too late.
Corporations may wield a disproportionate influence on politics, but that doesn’t mean they wield enough influence to push Congress out of gridlock.
This leaves all of us in the tough position of doing whatever we can to limit our losses and protect our wealth from inept politicians.
Our editors have been positioning themselves for the upcoming failure of Congress for some time now…
Wealth Daily‘s own Christian DeHaemer has been telling readers about three brand-new gold plays for the new economic paradigm.
It isn’t too late to capitalize on his research and insight — and invest in a safe haven asset.
For Your Prosperity,
Adam English
for Wealth Daily
