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Corporate America voices frustration on fiscal cliff deal

Source: Thomson Reuters Foundation - Wed, 2 Jan 2013 21:00 GMT
Author: Reuters
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* CEOs complain that deal does not solve debt problem

* Markets rally as 'fiscal cliff' worry lifted

* Fight on debt ceiling looms

By Scott Malone

BOSTON, Jan 2 (Reuters) - While Washington fiddles, corporate America fumes.

U.S. executives on Wednesday sharply criticized the political log-jams in Washington that delayed until Jan. 1 the deal to keep the U.S. economy from sliding over the "fiscal cliff" and into recession.

While chief executives expressed relief that lawmakers had managed to avert tax hikes and sharp spending cuts that would have come without an agreement, they said the deal did not do enough to stem the rise in the nation's ${esc.dollar}16 trillion debt.

"The compromise to avert the 'fiscal cliff' outlined by our leaders in Washington is a small step in the right direction, but overall it's a missed opportunity to revive our economy and show U.S. citizens, financial markets, the world and the business community that the U.S. can still govern effectively," said Honeywell International Inc CEO David Cote.

He is a driving force behind a lobbying group of more than 100 CEOs called the "Fix the Debt" group.

While the accord fell short of that group's hopes, U.S. stocks rallied on their first trading day of the year. Many economists, including the non-partisan Congressional Budget Office, had forecast that in the absence of a deal, the economy could fall back into recession.

The deal passed the House of Representatives on Tuesday despite heavy opposition from the majority Republicans and was seen as a victory for President Barack Obama, who had called for higher taxes on the wealthiest Americans.

Business leaders complained that the 13th-hour deal failed to solve the nation's long-term budget imbalances.

"This deal's a disaster," said Peter Huntsman, chief executive of chemical producer Huntsman Corp. "We're borrowing more and more money. This did absolutely nothing to address the fundamental issue of the debt."

'MORE HEAVY LIFTING REMAINS'

Executives blasted the political log-jam that prevented the deal being reached until Jan. 1, leading to months of uncertainty that some contend hurt the economy by causing businesses and consumers to delay spending. They noted that a similar period of anxiety lies ahead as Congress next month will need to determine whether to raise the nation's borrowing limit.

The last stand-off on the debt ceiling, in the summer of 2011, led Standard & Poor's to strip the United States of its top-notch "AAA" credit rating.

"Much more heavy lifting remains to ensure the country's economic well-being and security," said Joe Tucci, CEO of EMC Corp and a member of the Fix the Debt group. "Leadership on both sides must now set the party lines aside and lead the way to a comprehensive and bipartisan plan that's sufficient in size and scope to decrease the debt ... not a series of stop-gap measures agreed to on last-minute deadline."

Former Wells Fargo & Co CEO Dick Kovacevich said current executives should keep up their pressure on politicians to solve the debt issue.

"The political gridlock in Washington is a disaster. It appears to me that it's getting worse, not better," Kovacevich said. "If anything you should be even more vocal on this not solving anything and Washington, D.C., being dysfunctional."

LACK OF CLARITY

Executives complained that the ongoing, prolonged debates about taxes and government spending hurt their results, and in turn the economy, by making their business and commercial customers reluctant to commit to new purchases.

"All of this uncertainty leads to a lack of decision-making. They don't know what their budgets will be," said Robert Cresanti, vice president of government relations for SAP America Inc, a unit of SAP AG, the world's biggest maker of business management software.

Cresanti, who served as undersecretary for technology with the U.S. Department of Commerce during President George W. Bush's second term, said the ongoing uncertainty about the nation's long-term budget will cause government agencies at all levels to delay committing to new spending.

Tom Werner, CEO of SunPower Corp, a solar panel maker and project developer majority owned by France's Total SA agreed. But he said in the short term, having a deal was a positive development.

"Business people like visibility and stability," Werner said. "It sure would have been nice to get the debt ceiling figured out ... it's a huge step in the right direction."

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