May 21, 2013

No Need for Vacation When You Can Fight Over the Fiscal Cliff


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Republicans are not willing to let Democrats go over the fiscal cliff and take all of us with them – at least, not without a good fight.

Just the sound of it – going off the cliff – echoes disaster. But that is where we’re heading if Congress doesn’t act to extend the Bush tax cuts or avoid the automatic spending cuts that will go into effect Jan. 1.

Little can be expected to be resolved over the next month as Congress takes off for its annual five-week August recess.

However, House Speaker John Boehner (R-Ohio) vowed Wednesday to call the House back into session to cement approval if Senate takes action to prevent fiscal cliff. The GOP has made its commitment to averting the fiscal cliff crystal clear and is encouraging the Democrats to work out some kind of agreement.

“If the Senate follows the House in passing legislation to stop the entire tax hike-including the small business tax hike-in a manner that requires House approval before it can be sent to the president, it is our commitment that the House will reconvene immediately to ensure the measure is enacted at the earliest opportunity. But, in order to avert the threat to our economy, the Senate must join the House in acting to stop the entire tax increase,” Boehner and three other House GOP leaders wrote in a letter to Senate Majority Leader Harry Reid (D-NV).

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Expect QE3 After Geithner’s Warnings


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In testimony yesterday (Wednesday) before the House Financial Services Committee, U.S. Secretary of the Treasury Timothy Geithner may have inched us closer to QE3 when he warned that the U.S. economy will be slammed by two major factors: the immediate danger from the Eurozone debt crisis and fiscal cliff 2013 that is fast approaching.

“The economic recession in Europe is hurting economic growth around the world, and the ongoing financial stress is causing a general tightening of financial conditions, exacerbating the global slowdown,” Geithner said in his testimony.

As much of the revenue for major U.S. corporations such as Ford Motor Co. (NYSE: F), DuPont (NYSE: DD) and Cisco Systems Inc. (Nasdaq: CSCO) comes from Europe, the damage is already being felt by both employees and shareholders. Cisco, down 20.52% for the quarter, recently announced the layoffs of 1,300 workers, about 2% of its global labor force.

Geithner cited other factors harming the U.S. economy, including the rise in oil prices earlier this year, cuts to government spending and slow rates of income growth.

Possible adverse developments in the future, particularly the fiscal cliff, led Geithner to warn that, “These potential threats underscore the need for continued progress in repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run.”


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Read the original article at Money Morning