“At the end of this year, we face a series of major decisions about how to pay our deficit down,” said President Barack Obama when he delivered a statement on the economy and the fiscal cliff on Friday afternoon.
Recent economic indicators suggest a slow and stuttering recovery in home prices and employment, but progress has been to no one’s satisfaction. The seasonally adjusted unemployment rate in the United States for October was 7.9 percent, the Producer Price Index increase by 1.1 percent in September, while real earnings fell by 0.3 percent.
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Speaking from the East Room of the White House, Obama said that “our focus has to be on jobs and growth.” Real gross domestic product increased at an annual rate of 2 percent in the third quarter, after 1.3 percent growth in the second quarter, primarily due to personal consumption and federal government spending.
Looming in every investor’s mind is the fiscal cliff, which would see the expiration of at least $400 billion in Bush-era tax cuts, and $64 billion in spending cuts. Many investors and analysts have been operating under the assumption that the grid lock between the House and Senate would ease enough to get something done about the fiscal cliff, but as the countdown continues concerns rally.
Doing nothing “makes no sense,” said the President. The resulting tax hikes and spending cuts would devastate America’s already tenuous position.
Reiterating that he was reelected to take action, Obama will be speaking with leaders from both parties, including House Speaker John Boehner, next week in order to address the mounting problems. An overriding issue preventing progress has been disagreement between Republicans and Democrats over taxes affecting Americans making over $250,000 per year.
“We can’t just cut our way to prosperity,” said the President, “we have to combine spending cuts with revenue.” Obama emphasized that the balanced approach he has been pushing for years has been analyzed by independent economists and judged to be the right way to grow the economy.
“Let’s extend the middle-class tax cuts right now,” said Obama. “That one step will give 98 percent of Americans and 97 percent of small business the certainty they need going into the new year.” That uncertainty has caused employers both large and small to sit on their hands, slowing efforts to spur growth.
The President seems more determined than ever to reach across the isle and work to put a solution in place before America trips over the cliff. Lingering opposition regarding the tax rate for incomes over $250,000 and facets of spending cuts will certainly slow progress. While it may difficult to imagine a Congress too stubborn act on behalf of America at large, crazier things have happened. The political climate in Washington has rarely been tenser. Right now, the ball is in the House of Representative’s court.
“Let me be clear, I’m not wedded to every detail of my plan,” said the President. “I’m open to compromise.” However, he added, “but, I refuse to accept any approach that isn’t balanced.” That is, revenues must rise.
The U.S. equity markets posted substantial losses over the past two days, but the S&P 500, Nasdaq, and Dow found their way into green territory on Friday afternoon.