Some Frustrated After Congress Kicks The Can On Debt Ceiling, Spending Cuts
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The stock markets kicked the year off with a rally today. The Dow Industrials gained 308 points, about 2.3 percent. You might call that a relief rally following the passage of legislation in Washington to avoid big tax hikes and spending cuts. But action on the debt ceiling and automatic spending cuts is postponed for two months, and business leaders who had pushed hard for a breakthrough are expressing some frustration about that today. Here's NPR's Yuki Noguchi.
YUKI NOGUCHI, BYLINE: In the last days of the year, and especially last night, John Engler remained tethered to his phone, fielding text messages from CEOs of major companies who were obsessing over hairpin turns and negotiations to resolve the fiscal cliff.
JOHN ENGLER: They're just amazed. They really are aghast at the procedure and the late-night negotiations and the way in which this is done.
NOGUCHI: Engler, formerly governor of Michigan, is now president of the Business Roundtable, an organization that represents CEOs. Engler says defining tax levels was important, but represents only half of the equation businesses were looking for. He says by not addressing questions of where to cut spending and by how much, Congress missed an opportunity to allay businesses' concerns with a more comprehensive, longer term bargain.
ENGLER: The potential for a bigger deal always seemed to be there, but it was a little bit of Lucy holding the football for Charlie Brown, and different people took turns playing Lucy.
NOGUCHI: Prior to the deal, many executives put a hold on hiring and investment decisions while keeping a close eye on Washington. Today, business leaders say they are coming to grips with the fact that these kinds of fiscal negotiations are no longer acute periodic dramas but perhaps a more intractable part of business risk. Barry Habib is an executive with mortgage lender Residential Finance. He says his relief was short-lived.
BARRY HABIB: Overall, based on what happened last night, I don't think as a business leader you would be influenced in your decision-making process other than you'd feel better about that there's less uncertainty.
NOGUCHI: Habib says Congress's tax deal still leaves businesses like his looking ahead to the end of February to watch as the new Congress tries to tackle even more difficult issues of spending cuts and raising the debt ceiling again. And although yesterday's deal raised revenues by $650 billion over 10 years, that does very little to reduce the deficit.
HABIB: So when you break it down annually, it's roughly $60 billion a year. And in a hole that's 1.1 trillion, it's about 5 percent. It's not very large, and all of this circus to try and fix 5 percent of the problem. So my reaction is, is that it's disappointing.
NOGUCHI: Habib says for now his company plans to add to its base of a thousand employees. However, he says, yesterday's deal points to how unwilling elected officials are to make difficult choices and that that could mean investors in government bonds may eventually see the U.S. as an unsafe bet. That, Habib says, would force interest rates up, which would be bad for business.
HABIB: This is what everyone should be worried about. It's what we call the bang moment, and the bang moment comes when the bond market eventually says no.
NOGUCHI: He says the U.S. could be headed the same direction as Greece or Spain, and that is an anxiety that businesses will continue to have to cope with for at least another two months. Yuki Noguchi, NPR News, Washington.