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CEOs: Increasing alarm over 'fiscal cliff' slowing economy

Jul 25, 2012
Carter Wood

CEOs continue to warn against the "fiscal cliff," and businesses -- that is to say, employers -- are increasingly alarmed.

Speaking in a conference call Tuesday to discuss UPS's second quarter earning, Scott Davis, chairman and CEO, offered his observations about the impact of expiring tax rates and automatic spending cuts set to hit at the start of 2013, as well as the general political climate in Washigton. From The Hill, On the Money blog, "Congress just mails it in, according to UPS":

[Davis] said UPS’s customers are increasingly nervous and uncertain because of the elections and the looming “fiscal cliff” of tax hikes and spending cuts set to begin on Jan. 1, 2013. Without action by Congress, all of the George W. Bush-era tax rates will rise in January, and $1.1 trillion in budget cuts to defense and non-defense discretionary spending will be implemented. 

Davis said uncertainty is constraining the ability of businesses to hire new employees, make capital investments and restock inventories. 
 
“As we get closer to the fiscal cliff, there’s just more uncertainty out there than ever,  and it’s hard for me to see how that’s going to turn around until we get some policymaking done in Washington,” Davis said during a conference call with analysts. 
 
“Customers are concerned. They’re not going to invest. They’re not going to hire people. They’re not going to stock inventory with all that uncertainty,” he said. 
A Fox News report also quotes Davis saying, "The lion's share of our customers are small businesses [and] they're very much concerned.
 
Sandy Cutler of Eaton Corp. raised similar concerns in a CNBC interview on Monday. 
 
As did Lloyd Blankfein, chairman and CEO of Goldman Sachs, in a recent discussion at the Economic Club of Washington. From CNBC, "Goldman CEO Warns on Fiscal Cliff, Urges Compromise":
 
"The fiscal cliff has a major uncertainty on the world," Blankfein said in a wide ranging interview conducted by the Carlyle Group's co-CEO and co-founder David Rubenstein. "(It) is responsible for a real burden and a real dimunition of value and wealth in the world just because uncertainty makes everything worth less."...
 
Blankfein suggested Washington could do its part to ease the uncertainty by engaging in something broadly absent in the city these days — compromise.
"Any kind of stability in our system can only be achieved if everyone throws in at least a little so that its stable," he said. "One of the things that I think is lunatic is the idea of backing yourself into a corner and saying I cannot compromise on this."
 
And here's the letter sent to Congress and the White House on the same topic by W. James McNerney, chairman of Business Roundtable and chairman, president and CEO of The Boeing Country.

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Senior Communications Advisor
Business Roundtable

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