As the lame duck session of Congress begins this week, leaders of some of the country’s largest corporations and advocacy groups are joining the tax battle, pouring millions of dollars into ad campaigns aimed at pressuring Congress and the White House to cut a deal to avoid sending the economy over the fiscal cliff.
Two separate advertising campaigns will gear up on Tuesday. One is the “Campaign to Fix the Debt,” which has a $40 million budget and is backed by The Committee for a Responsible Federal Budget and the Peter G. Peterson Foundation, and includes Erskine Bowles, the former co-chairman of President Obama’s deficit reduction commission, Jeffrey Immelt of General Electric, and David Cote of Honeywell. The other group is The Business Roundtable’s “Fix the Debt” campaign, which has a budget of roughly half a million dollars and is also backed by Bowles and Alan Simpson, the other co-chairman of the deficit commission.
Backers of both campaigns have supported a deficit reduction plan similar to the Simpson-Bowles plan, which suggested closing loopholes and eliminating many deductions as a way to fix the deficit. Critics say that wouldn’t bring in enough revenue to pay for reducing taxes on corporations.
Though President Obama rejected the Simpson-Bowles proposal in 2010, he’s recently expressed confidence in reaching a similar grand bargain, which would match $2.50 worth of spending cuts for every $1 of new revenue. - Read more at The New York Times
OPPORTUNITY KNOCKS A compromise between Congress and the White House could turn the fiscal cliff from a threat to an opportunity. David Reilly of The Wall Street Journal says that even a modest deal could boost confidence and lead to a virtuous economic cycle where companies and individuals spend and invest more. Reilly emphasizes that the challenge is finding a balance. “Going off the cliff will produce great pain in 2013 but lead to a more stable fiscal situation a decade on, while averting it will forestall recession now but hamstring growth later.” - Read more at The Wall Street Journal
COMPROMISE OR CONFLICT? The Sunday talk shows featured Republicans and Democrats saying compromise on deficit reduction is in the works. Retiring Budget Committee Chairman Sen. Kent Conrad, D-ND, said on Fox News Sunday that he believes the groundwork for a compromise is in place. Republican Sen. Bob Corker, who also appeared on the program, said he is open to tax increases on the nation’s top earners, a position the GOP has staunchly opposed.
“Look at the yin and yang of this – we know there has to be revenues. And I think – look, I haven't met a wealthy Republican or Democrat in Tennessee that's not willing to contribute more as long as they know we solve the problem. So, the yin of revenue, we understand and I think there's a good, pro-growth way of putting that into place so you are getting revenues from people like me and other folks that make above X dollars."
Sen. Kent Conrad, D-ND, meanwhile, said he believes the groundwork for a compromise is in place. - Read more at CNN
ECONOMISTS WARN ‘CLIFF’ FIGHT WILL HARM ECONOMY Even if Congress and the White House are able to set aside their differences and steer the economy away from the fiscal cliff, a brutal, partisan battle over taxes and spending is likely to harm the economy, according to a Reuters’ survey of economists taken last week. Forty-two out of 50 economists said there is a “high” risk that embattled budget talks will harm investor and consumer confidence, while the remaining eight were “neutral.”
“You've seen signs of that in capital goods spending – orders and shipments – and it’s very possible we’ll see hiring hit towards the end of the year, or early next year, depending on how the negotiations turn out,” said Michael Hanson, senior U.S. economist at Bank of America-Merrill Lynch. - Read more at Reuters
IS FEAR OF THE ‘CLIFF’ OVERBLOWN? Money managers overseeing accounts worth more than $8 trillion said concerns that the economy will slow because concerns over the fiscal cliff are overblown. The managers point to a recovering housing market and a boost in consumer confidence as a sign that the economy is strengthening, rather than slowing. “It’s astonishing that now the market is turning so quickly and we don’t understand that,” said Bettina Mueller, a money manager in Frankfurt at Deutsche Bank AG’s DWS Investments unit, which oversees about $350 billion. “Our expectation regarding the fiscal cliff is that both sides will come to a compromise.” - Read more at Bloomberg
INVESTORS TURN TO D.C. Wall Street investors are keeping a close eye on Congress this week as fiscal cliff talks begin. Last week, stocks sold off sharply due to uncertainty over the looming automatic spending cuts and tax hikes that are scheduled to trigger on Jan. 2. if Washington fails to cut a deal on deficit reduction before the end of the year, which the CBO says will throw the economy into a recession. - Read more at CNN
WHITE HOUSE BEGINS TALKS Throughout the week President Obama will meet with business and labor leaders from around the country as he begins his post-election attempt to cut a deal with Congress to avoid plunging the economy over the fiscal cliff. On the list: Majority Leader Harry Reid, D-NV, Minority Leader Mitch McConnell, R-KY, House Speaker John Boehner, R-OH, and House Minority Leader Nancy Pelosi, D-Ca. - Read more at Politico’s Morning Money
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