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Leader Capital CEO John Lekas, Univ. of Maryland Economist Peter Morici and FTN Financial Economist Lindsey Piegza on the fiscal cliff negotiations.
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The house is kicked off the debate on speaker Boehner is planned be on the fiscal clip you're looking at a live shot of the house floor right now on the bill could be passed tonight.
We heard president Obama's proposal we've heard.
Beaters counter offer and then we -- planned -- -- the other one somewhere in there it's got B solution right in today's power panel is here to wait and on what they would do to resolve the fiscal.
Negotiation at Peter Marie C he's an economist and professor at University of Maryland and always a fabulous gas.
Lindsey.
FT and financial and John like yes is this CEO of -- capital.
Thanks all of you for joining us tonight Peter I'll let you go first you know -- watching this vote.
Got a million balls up in the air something's got -- land somewhere what would you deal.
Mean if I was voting I'd have to you about -- yes.
Getting this two bills -- to cut spending a 12 the tax provision which would extend the bush tax cuts for ten years except people over a million dollar that have to vote for.
Because there are spending cuts -- they're out in the future but that's the -- you're gonna -- on such short notice.
Lindsay what do you think would give up -- part plan B for both bills that are going through.
I certainly will because it what it does as it provides a solution so we get is this near term certainty.
And it prevents the US economy from going off the cliff if we look back to what Bernanke said last week he really warned Washington saying if we go over the cliff even the Fed.
Doesn't have the tools to offset the impact just.
The -- being too large and and certainly -- -- into negative territory so really the goal is to get some sort of solution and avoid that outcome.
John what do you think I mean is -- -- cave BM -- solution better than no solution -- caucus or some people that think we'd be better off going over the edge.
Well you know what I I think.
You know if I think it's gonna pass I think that's what's important and I think it's like Texas hold them you know what show me a card -- so far the Democrats have shown yet nothing.
And I don't know know why I -- forgot who works at the White House besides Obama he's ill -- ever speaks but I would tell you that I think that it's a good start.
And I think that it's unfortunate the Bernanke has not been more involved in this process because or really talking about -- you know trying to continue to stimulate the system.
Low taxes and raising the debt ceiling are both stimulus torrent and the both in line with the feds would think that that is the right posture in the correct thing to do.
Sir John if -- on the floor yes you would vote yes on May be up.
But -- peak of the -- -- everybody's saying this all day is that it's it's sort of an exercise in futility that they go ahead and and pass it but.
You've already heard from you know senate Democrats that it's -- on -- -- However there -- so what's the point.
Well I certainly if I was Vista beta would not caved to the president and increased taxes without really cutting spending -- -- serious way.
So if you -- plan -- at least isn't something deploying dozens of luck you know if we go over the cleft.
Look I I had a bill.
That I -- to the senate which would have -- -- tax cuts for everybody but folks by everybody that millionaires but the Democrats they wouldn't vote on it.
The president told them not to vote on it so it's their Turkey.
What price we -- -- I mean you've heard it would Bret -- was talking about earlier nobody is out there really talking about cutting spending.
What -- the problem even if it's the president's proposal -- plan B none of these really get to the underlying structural issues.
It's really a disingenuous conversation that they're having in Washington.
When we're talking about a hundred trillion in unfunded liabilities and were arguing over 800 billion in tax increases and just 2% of the population.
So it really doesn't -- -- the very difficult question the middle class saying.
Long term.
Do you want to take on a larger tax burden -- do you want to make a serious continent's social spending is right now neither of these plans really address that long term problem.
John it does seem like everyone in Washington has given out on the idea of trying to fix this problem I mean that's.
All the talk that we're hearing about is raising taxes when you're spending two dollars for every dollar you're bringing in.
There -- -- -- taxes in the world to solve that problem you've got to really reforms spending.
I just don't hear that -- conversations.
-- that the Democrats have put nothing on the table all they talk about what they want.
Is really -- -- it it's and we do hear anyone on either side really -- already do.
Serious reform to entitlements is the only way to -- this.
No -- need need neither side has done that because politically that nobody wants to hear it.
And nobody wants to hear about the real you know pickle the war -- You know the average how -- those -- 130000.
Bucks per household nobody wants to really talk about that.
And it's a very short -- -- conversation I can't disagree with that.
But but but but more importantly.
You know I think the question of are they -- passes vote is this gonna get done by the end of the year yeah and I would tell you that it is gonna get them by the end of the year I would give that a nine out of ten down and I think that and I think that's good for the equity markets and for investors I think you should be you know getting fully invested here and using this is an opportunity.
Peter is at Needham and we're talking to -- care about this you know and it it just in the last segment.
What does it mean that every house -- a 130000.
Dollars in -- those real numbers in what tangible way would be average family fueled the pain.
Of that debt.
Well they'll feel the pain once the -- gets large enough and were on our way there by the end of the decade.
That the government has to cut back spending significantly.
Simply to pay interest in the manner that Greece is so doing now.
And we are on -- way to becoming another Greek tragedy in -- we get the economy growing at say three or 4% a year.
The debt has -- out run us so just a matter of time before all these government programs that they think the Democrats -- -- any -- them and that's why they reelected President Obama are not going to be there.
-- Lindsay I mean at what point does it become painful for Americans because he's talking about when.
All the said we can't handle the -- right now -- issuing debt and buying it with the other hand in the country is it is really talk about how much China OOs are debt owns our debt.
We on a lot of our own debt -- and that's the problem were really at the precipice that this is the point where we have to make that tough decision for going to be on the next grace.
-- -- going to start reforming these programs and actually make.
A discernible dance.
Into the -- that we've already service that we have right now but it really doesn't seem like either side.
Is willing to make concession Obama is only going to concede if he can tell is.
If populace that he raise taxes on the rich Republicans are only going to concede -- they can say we actually made a dent in spending.
Neither side looks like they wanna get John I'll give you the last word are we -- tipping point here in the debt crisis in the sense that we are starting to borrow more that we can never -- back organist saddle our kids with this step because it doesn't seem like anyone in Washington thinks that's the case.
Well latte hot tea -- you're right we're at the three point putting a qualitatively.
You know in my view whenever the GDP is above the average interest rate your -- on your debt you're probably okay.
That but we have to the other way GDP of 1%.
Average industry opinion on -- -- two point 652 point seven.
That is a tipping point at that continues.
That's big trouble in unless GDP gets back up above that we -- big trouble and that by the way goes to banners point of look.
Give businesses more money to spend.
Let's invest more in the country let's not take -- away from them in the forma higher taxes because I think -- cause more problems so.
We -- that tipping point GDP lower at -- and what we're paying now.
That's it interesting metric power cannot be tapping thanks so much.
