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Obama: Budget Deal Will Unleash the Economy

Obama: Budget Deal Will Unleash the Economy

By Alexis Simendinger - December 5, 2012

“I think America is poised to take off,” President Obama said Tuesday, dangling what many business leaders and economists agree is the real prize tucked inside any credible deficit pact enacted in Washington by year’s end.

The negotiators may be struggling on paper to achieve a $4 trillion deficit reduction deal spread out over a decade, but an agreement -- almost any agreement -- could help untether enough economic expansion to make all factions in the nation’s capital feel virtuous.

“In conversations I've had with CEOs, what they tell me is, ‘We are ready to invest and we're ready to hire, but we want a little bit of certainty out there,’ ” the president said during an interview with Bloomberg Television. “I think businesses are going to be ready to hire. We're seeing pretty strong consumer confidence, despite weaknesses in Europe and even in Asia.”

With statutory deadlines as pressure, an Oval Office megaphone working overtime, polls that buttress advocacy for “the middle class,” and House Republican leaders staring at dreaded tax hikes scheduled to kick in automatically, the White House reminded key players that a more robust private sector can make everyone look smart.

Obama repeated what corporate leaders -- including some who voted for Mitt Romney -- told him again last week when he invited them to the White House: Compromise and confidence resulting from action in Washington can unleash America’s potential for growth and hiring.

Marriott CEO Arne Sorenson said after meeting with the president Nov. 28 that he was more interested in a credible blend of higher revenues and lower discretionary and entitlement spending than the particulars of each policy choice -- even when it comes to higher tax rates for the wealthy.

“It’s less important precisely which details are used than it is that action take place now, and action take place on revenue and costs now, and that it be truly substantive,” he told reporters. “The fiscal cliff was set in place a year and a half ago as something that was supposed to show that we did something real. And in fact, what we dealt with was something that merely deferred, or extended, the uncertainty longer. And we can’t do the same thing now or it will impact the economy.”

After the same meeting, AT&T CEO Randall Stephenson said he thought Obama “recognize[ed] what an opportunity this is to find a solution that would be balanced, and at the same time [one that could] try to unleash a lot of investment and spending for next year, and the whole country would feel quite good in a few weeks.”

Obama plans to address the Business Roundtable in Washington on Wednesday, and will take questions afterward.

Many economists have evaluated the delicately expanding U.S. economy and argue that a credible deficit reduction agreement worth at least $4 trillion, and which curbs spending and adds new sources of revenue, could keep America more firmly on a growth trajectory. Robust growth naturally returns higher revenues to the Treasury, which combined with lower spending can reduce debt levels, which are at 73 percent of GDP, the highest ratio since 1950.

Although $4 trillion in commitments to deficit reduction would not by itself resolve the country’s long-term fiscal challenges and debt obligations, economists predict that a credible compromise to tackle all the sensitive “third rails” of the federal budget at once could deliver what amounts to a behavioral stimulus among businesses and consumers.

“Though it's hard to tell, the economy has righted a lot of the wrongs that got us into this mess,” Moody’s Analytics economist Mark Zandi wrote Nov. 26 in an analysis of options facing Washington. “We are one piece of legislation away from much stronger growth and employment.”

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Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com. Follow her on Twitter @ASimendinger.

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