White House Concerns of Economic Damage|
The White House is understandably worried about long-lasting damage to the
economy if more than $500 billion in tax increases and federal spending cuts
take place as scheduled after January 1, resulting in the "fiscal cliff".
President Barack Obama on Wednesday added more pressure on House Republicans to
block scheduled tax increases on the middle class, an issue at hand for the
looming "fiscal cliff". At a White House event with middle-class Americans, the
President urged the select group to contact Congress directly and call for
action. Middle-class tax hikes would come about as the Bush-era tax cuts are
scheduled to expire January 1, 2013. The U.S. Senate passed legislation to put a
stop to the tax hikes however; the House has not acted as of yet. Obama said the
House Republicans should pass the bill while he and congressional leaders hammer
out an overall agreement to get the deficit under control. The President
expressed optimism that an outline of a deficit-reduction deal could be reached.
"I believe that both parties can agree on a framework ... in the coming weeks.
In fact, my hope is to get this done before Christmas," Obama said.
Early Wednesday morning Speaker John Boehner said he was “optimistic that we can
continue to work together to avert this crisis, and sooner rather than later.”
“Our ultimate goal is an agreement that gets our long-term deficit under control
in a way that is fair and balanced,” Obama said. “And I believe that both
parties can agree on a framework that does that in the coming weeks.” The U.S.
Treasury said that Secretary Tim Geithner will hold separate talks on Thursday
with Senate Democratic Leader Harry Reid, Senate Republican Leader Mitch
McConnell, Speaker John Boehner, House Democratic Leader Nancy Pelosi and White
House legislative director Rob Nabors. A U.S. Treasury statement said that
Geithner will “continue discussing the actions we need to take to keep our
economy growing and find a balance approach to reduce our deficit.” Key point at
hand among fiscal cliff talks: how to deal with competing positions on raising
taxes on the wealthiest Americans. On Wednesday, President Obama urged Congress
to pass a bill extending tax breaks for all but the wealthiest 2% of Americans
while Republicans insist that lower rates continue for all earners. Senior House
Republican, Tom Cole of Oklahoma on Tuesday, reportedly advised colleagues to
pass an extension of expiring tax breaks for the middle class and fight the
president over higher tax rates for the rich at a later date. Liberals are
reportedly saying the White House should hold firm on its demand for higher
taxes on the rich even if it forces the economy to go off the “fiscal cliff.”
They believe they have the public on their side and that Republicans will be
forced to surrender if the budget standoff damages the U.S. economy.
Former Clinton White House chief of staff Erskine Bowles said Wednesday that
Democrats need to move on reforming entitlements to get a year-end budget deal
after talks between House Republicans leaders and chief executives of big U.S.
companies. Bowles told reporters after a Capitol Hill meeting held in House
Majority Whip Kevin McCarthy’s office, “I feel like we made some progress.” He
added that Republicans were clear that there’s need for revenue and entitlement
reforms and added that it is up to Democrats to move in that direction. The
White House and Senate Majority Leader Harry Reid indicated that they will not
consider cuts to Social Security as part of a deal. Senate Majority Whip Dick
Durbin who is close to President Obama said on Tuesday that a cliff deal should
not touch Medicare, Medicaid or Social Security. Bowles seemed to recognize the
difficulty of getting fellow Democrats to take his entitlement-reform idea. “Am
I an optimist? No, but I am hopeful,” Bowles said. One of the CEOs who
participated in the meeting, Goldman Sachs Group Inc. (GS) Chief Executive Lloyd
Blankfein, told reporters afterwards there will be “a lot of very, very negative
consequences if we don’t sort this out.” Blankfein said, “There has to be a
compromise. People have to yield on things that they’re quite convicted about.”
Fed Beige Book report on current economic conditions released on Wednesday
showed that a majority of the Federal Reserve's 12 districts reported either
slowing or contracting manufacturing, as concerns about the fiscal cliff clouded
the outlook for factory owners. Overall activity expanded at a measured pace,
per the report. Labor market conditions improved only modestly. Hurricane Sandy
led to weaker conditions in New York but there were expectations of a rebound
due to rebuilding.
On Wednesday, Moody's Investor Service lowered long-term credit rating for
Hewlett-Packard (HPQ) to Baa1 from A3, with a negative outlook. In a statement,
Moody's senior vice president Richard Lane said, "Although H-P will maintain
strong to leading positions in a number of product areas, the company's credit
profile will remain weaker than previously expected over the intermediate term."
The negative rating outlook is based on concerns of execution challenges and
competitive pressures, Moody's reported.
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Nov 28, 2012