Taxes Aren't The Only Snag In Budget Talks
RENEE MONTAGNE, HOST:
Now for this morning's business bottom line, we look at more of what's at stake and what's in play. David Wessel is economics editor of The Wall Street Journal and he's with us on the line. Good morning.
DAVID WESSEL: Good morning, Renee.
MONTAGNE: So David, okay, the spending cuts and tax increases of this famous or infamous fiscal cliff are exactly five weeks away, and as we just heard in Tamara's piece, it doesn't sound much like the two sides are making much progress.
WESSEL: Well, it's really hard to tell from the outside. We've had the public statements that Tamara quoted some of them. Each side asserts its principles but also tries very hard to look reasonable to the public, so if they ends badly, the other side gets the blame. We know that President Obama has talked to House Speaker John Boehner and Senate Majority Leader Harry Reid.
We know their staffs have been talking. We actually know very little about the substance of those conversations and that's the way these talks often go. The first thing they can agree to is to try and avoid leaks, including there's an effort underway to try and find some common ground without letting everybody know what's being discussed.
MONTAGNE: Well, what do all those lobbyists and interest groups and journalists like you do when the game is being played behind closed doors?
WESSEL: Well, the lobbyists and interest groups shout and the journalists listen. Thankfully, the campaign ads are gone, but there's now a slew of ads by those who want to protect their tax breaks or their favorite spending programs. There's one group of companies that pays dividends on their shares that's funded a group called Defend My Dividend. You have an older couple sitting around a kitchen table fretting around higher taxes.
The public employees union AFSCME is pressing for higher taxes on the rich. AARP is attacking some of the proposals that would save money on Social Security and Medicare. A whole bunch of CEOs are advertising a campaign called Fix The Debt that says that Congress just needs to do something. And at the same time the president is working to show that he's trying to listen.
So he's bringing in casts of characters to the White House with press releases announcing this - CEOs, labor groups, liberals. And then now the Republicans are doing the same thing. Some of the very same CEOs who met with the president are now meeting with the Republican leaders in the House.
MONTAGNE: And you know, David, with all the predictions that going over the fiscal cliff could push the country and its economy back into recession, is this having any effect on the economy now?
WESSEL: Yes. It could be. Consumers seem unfazed, but businesses seem to be very cautious. They've read all these predictions that unless we avoid the fiscal cliff we'll have another recession, and there's a real palpable decline in business investment that you hear from industrial companies. It took a real dive in the third quarter. A lot of companies have curtailed capital spending plans.
Of course it's not the only thing that's troubling businessmen, but this seems to be having an effect on the economy right now in anticipation of what might go wrong.
MONTAGNE: And of course we all want a happy ending. What do you think?
WESSEL: Well, if the members of Congress and the president can avoid the fiscal cliff and make some progress, however modest, on the long term deficit, it could lift a weight that seems to be hanging over the U.S. economy. It could remove this uncertainty that's getting so much attention. After all, housing's getting a little better, slowly. Mortgage rates are still low. The Federal Reserve is still pumping a lot of credit into the economy.
Consumers have paid down some of their debts. Europe seems to have avoided the worst of the catastrophic endings to their problems. So I don't think anybody expects a boom in 2013, but Fed Chairman Ben Bernanke said the other day that cooperation and creativity to deliver fiscal clarity could make the new year a very good one for the American economy.
MONTAGNE: David, good to have you with us.
WESSEL: You're welcome.
MONTAGNE: David Wessel is the economics editor of The Wall Street Journal.
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