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Citigroup Global Head of International Economics Nathan Sheets on the economic uncertainties created by the lack of progress to resolve the fiscal cli...
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I mean now Nathan sheets global head of international economics for Citigroup.
It is great to have you here be here but let's start with their seems to be little sense.
That.
That these guys these guys being the president nine states and congress -- the specifically the person John Boehner.
Actually wanted to do something about the fiscal -- -- did you get that read today.
I I think it's increasingly clear that they're realizing if they don't -- -- the implications for the economy are going to be truly first order.
With going over the cliff holding the rest of of a recession in 2013.
That's -- good for anybody's political future.
It's good for anyone's political future but I I'm getting increasingly.
Less interested in political -- -- on the part of these folks.
And a lot more interest in the futures -- 23 million people who still don't have jobs or underemployed absolutely million people who are working part time and want full time jobs.
I mean the list goes on five million people who've been out of work from six months -- longer.
I I guess what I'm saying here is.
What about their future and why in the world can't we come to a resolution here before we go to December January 1 and watch all of these triggers are go into effect.
The key economic questioned -- central economic question of the next year to.
Is what will it take to get the corporate sector to start hiring and investing again.
To put those millions of unemployed folks back to work -- start expanding the scale of production.
I think bottom line is that the corporates are waiting for resolution of uncertainty.
On what you -- what.
From one of those -- honorees ran it.
I don't care about corporates I don't care about those big payments because.
Sixty to 70% of the jobs -- being created by small business I wanna get those folks moving.
I wanna get small businessmen and women back on it and I wanna see them just create job after job.
Absolutely I think that that the argument for the small firm sector.
Is even more compelling that it is for the large firms.
They need to know what their taxes are going to -- going to be they need to know what the regulatory environment is going to be.
They need to have an element of confidence before they're gonna go out and start hiring again.
And right now with that -- the large -- sectors hunkered down.
The small firm sector is down fifteen or twenty feet weighing waiting for us and safety to come out again.
So it's it's really incumbent upon Washington to define the regulatory in the tax in the fiscal.
Landscape in a positive way.
-- order through some of your outlook if you're saying that if we if we go over the -- The tax on spending cuts will translate into that is sequestration.
And -- -- of the the bush tax cuts.
The tax hikes -- -- -- would translate into a reduction in economic growth of 4%.
That's automatic recession at at have absolutely so the fiscal cliff is a contraction.
In the government imports into the economy afford a 5% of GDP.
-- seen in the first quarter that's gonna hit and that's gonna reduce.
Economic growth from two ish percent -- minus one minus two very easily.
And -- and in your outlook on employment.
Unemployment dropping from certain dropping in my dreams right rising from seven point 9% to nine and a half percent we know real.
Unemployment right now is ten point 6%.
If we are inclusive and going through that the numbers I mean you're talking about devastation here we're talking in the that we got -- -- washing them and I mean they're acting like this is a walk in the.
-- -- -- -- absolutely I think fit.
The -- kids economists can't agree on anything but I think there is broad agreement.
In the economics community.
That going over the cliff and even pretending like we're going -- the cleft pallets cost the going over the cliff is on a monumental mistake.
Does your -- you heard senator Patty Murray of Washington say.
But she thinks moment we -- just go over that cliff and you're gonna sort things out I mean for the number of people.
I was shocked at her because she's otherwise or other sensible and intelligent person.
-- sheer unmitigated terror.
It's gonna take us to a very very painful place very very painful place I'm hopeful.
But they'll be able to come together and and reach an agreement to avoid it.
But going over is even if it's only temporary even if it's only the so called bungee jump.
The rolling over for a few months I think then you're looking still look the risk of recession.
-- Risk of recession is in your judgment.
Would it be helpful profoundly helpful for congress in those presenter agreed that they will.
Leave everything Staten -- other words creates a status quo ante for negotiations.
On a reform of the tax code.
That would take place over the course of six to nine months next year.
And hold an advance any changes here just simply stopped in for the first time in some time have our congress -- our president actually.
Being -- republic -- Ab -- absolutely.
Tax code reform on the one hand entitlement reform on the other.
If if if if congress and the president move in that direction and be a very very positive signal that the political process is actually function.
Rupert we're out of time Simpson Bowles was that a reasonable -- I think it absolutely is yes and -- thanks for being here my pleasure thank you.
Now.
