-Financial Leaders Say Just Avoiding Fiscal Cliff ‘Is Not Enough’
-Bipartisan Policy Center Releases ‘Framework For A Grand Bargain’
-House Speaker Boehner Confirms No Active Talks With Administration

By John Shaw

WASHINGTON (MNI) – Three things can now be said with considerable
confidence about the U.S. fiscal cliff:

First, business leaders continue to press for a long-term deficit
reduction package that allows the U.S. to avert the fiscal cliff and
stabilize its fiscal position.

Second, think tanks and informal groupings of lawmakers continue to
propose possible packages that would avoid the fiscal cliff and cut
long-term deficits.

Finally, President Barack Obama and congressional leaders will spend the
next two weeks completely focused on the Nov. 6 elections and will begin
intense talks on steps to avert the fiscal cliff only after the elections.

Last week, the leaders of the top U.S. financial services
companies sent a letter to Obama and congressional leaders urging them
to negotiate a compromise that would avert the fiscal cliff and restore the
nation to a solid fiscal policy.

The letter implored the White House and Congress to “work together
to reach a bipartisan agreement to avoid the approaching ‘fiscal cliff’
and take concrete steps to restore the United States’s “long-term
fiscal footing.”

The letter was signed by Lloyd Blankfein of Goldman Sachs, Michael
Corbat of Citigroup, Jamie Dimon of JP Morgan Chase, Brady Dougan of
Credit Suise, James Gorman of Morgan Stanley, Brian Moynihan of Bank of
America and other private sector financial leaders.

But they warned, “merely avoiding the fiscal cliff is not enough. We
further urge you and your colleagues to enact legislation that truly restores
the nation’s long-term fiscal soundness.”

They argued that the consequences would be “very grave” if there is
no action to improve American fiscal policy with a major deficit
reduction package.

“We urge you to negotiate a bipartisan agreement as soon as
possible,” they said.

Leaders of other business groups have also urged the White House
and Congress to avoid the fiscal cliff and negotiate an ambitious
deficit reduction package.

The fiscal cliff refers to the convergence of several significant
events: the expiration of the Bush era tax cuts and dozens of other tax
provisions at the end of this year; the first round of across-the-board
spending cuts that are scheduled to begin in January; and the need to
increase the statutory debt ceiling in the coming months.

The Bipartisan Policy Center continues to work on what it calls a
“framework for a Grand Bargain” on fiscal policy. The think tank, has been
working on its proposal for months and released its newest version late last
week.

The plan calls for delaying key fiscal cliff deadlines for six months by
passing a law in the post election session of Congress that includes a deficit
reduction framework with “real cuts in spending and increases in taxes as a down
payment.”

The BPC would require the next Congress to pass a $4 trillion deficit
reduction plan in early 2013. If Congress fails to approve that follow-up plan,
a “backstop” would automatically become law that would secure that deficit cut
goals are met.

The proposal’s “backstop” would consist of automatic spending cuts and tax
increases.

The think tank proposal says Congress should not eliminate the sequester —
the across-the-board spending cuts called for in the last attempt at a budget
deal — and extend current tax policy.

“Fully abrogating the sequester and simply extending current tax policy
will call into question America’s ability to establish a sustainable fiscal
path,” the think tank said.

But it added that it’s imperative to “avoid ham-handed, across-the-
board cuts and drastic tax increases,” saying these steps would “hammer
the nation’s taxpayers and potentially throw the U.S. economy back into
a recession.”

Various informal groups of lawmakers continue to develop fiscal ideas that
could be offered in the post-election, lame duck session of Congress.

Last week, House Speaker John Boehner told his House Republican
colleagues in a conference call that he and President Obama have not
discussed fiscal cliff issues since July.

While this report took some by surprise, it has been apparent for
months that no meaningful talks on the fiscal cliff would occur until
after the elections.

Boehner and other senior congressional Republicans met with
Treasury Secretary Tim Geithner in late September to review economic
topics, including, presumably, the fiscal cliff.

Congressional staffers are also developing a menu of options on how
to deal with the fiscal cliff for the White House and Congress to review
after the Nov. 6 elections.

The Gang of Eight, a bipartisan group of senators, continues to draft a
deficit reduction package of about $4 trillion over a decade, the outlines of
which will be ready for Congress to consider by November.

Another bipartisan group of senators, led by Senate Armed Services
Committee Chairman Carl Levin and Sen. John McCain, the ranking Republican on
the panel, has been urging action to replace the coming across-the-board
spending cuts with a different package.

The letter emphasizes the need to balance deficit reduction “with
the need to safeguard important priorities, particularly protecting our
national security, vital domestic programs and our economic recovery.”

** MNI Washington Bureau: (202) 371-2121 **

–email: jshaw@mni-news.com

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