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CEOs: Uncertainty Worsens with Shutdown, Debt Ceiling Impasse

Oct 1, 2013

CEOs are weighing in on the budget impasse, government shutdown and debt ceiling debate. A roundup...

Dave Cote, Honeywell, on BlooombergTV (video, article):

We don’t need our economy disrupted now .We’ve come off the worst recession in 80 years. We’re just starting to get better, and we’re at 2 percent growth, which is not enough to create jobs. This is going to put it backwards, not forward.

Uncertainty is a killer of economic growth.  Economic growth is what we need for jobs. To the extent if A=B [and] B=C, then doing this sort of thing that adds to economic uncertainty causes all of us to say, “Ah, let’s wait and see. There’s no sense in hiring. We don’t know what that guys are going to do.

And do not default, Cote stresses.

William McComb, Fifth and Pacific (formerly Liz Claiborne), in The Daily Beast, "Nevermind Obamacare. Worry About the Debt Ceiling":

The debt-ceiling authorization has historically been a perfunctory mechanism. Here’s why. While Congress must vote to authorize it, the vote has nothing to do with controlling spending. It’s a vote to honor our commitments, i.e., fund the checkbook that pays the bills we've already accrued. Is that something that deserves a House vote at all?

An honorable Congress knows in its bones that the full faith of the United States of America is at stake. The mere threat to withhold authorization, in fact, is as damaging to our credit rating as actually defaulting. Sure, it’s great political theater, but it does lasting damage to America’s reputation and credibility, and makes one wonder how

Klaus Kleinfeld, Alcoa, on Fox Business, "Alcoa CEO: Should focus on lifting debt ceiling in the short-term":

Well, I think that we should really work on not having it come to a shutdown and if at all necessary, then do it as quickly as possible. But let’s avoid it. And I’m more concerned about the secondary effects, I mean the things that you see today. I mean the question of how does that affect confidence in an economy that’s just recovering, you know, and I think what we should focus on.

I mean in the short-term, lift the debt ceiling, and, at the same time, work really, really hard on real fiscal reforms, you know. I think that’s what businesspeople want and that’s what businesspeople would do and would highly, highly recommend in this situation, because the last thing that we need in a time where the economy is just recovering is to send signs of lack of confidence, volatility out there. That’s what we should avoid.

Kleinfeld also discusses the state of the aluminum industry on the occasion of Alcoa's 125th anniversary.

Their comments reinforce Business Roundtable's recent CEO Economic Outlook Survey, which reported: "Fifty percent of responding CEOs indicated that the ongoing disagreement in Washington over the 2014 budget and the debt ceiling is having a negative impact on their plans for hiring additional employees over the next six months.

UPDATE (10:50 a.m.): BBC cites the CEO Economic Outlook Survey in this round-up, "What's the economic impact of a US government shutdown?" (Chart shows recent history of U.S. debt as well actual U.S. debt versus the current debt limit. Disturbing.)

Also, Wall Street Journal, "Will budget fight shut down the recovery?"

And from MetalMinder.com, "Government Shutdown Or Not, US Steel Industry Taking Big Hit":

The Wall Street Journal reported recently that consumers were already leery of behaving as well as they had been (the University of Michigan’s consumer confidence survey was down), and a Business Roundtable survey of large companies’ execs, including Boeing’s Jim McNerney, found that Congress’ canoodling was “crimping budget plans.”

Here’s the GDP concern Tom Gibson hit on, according to economists at Morgan Stanley, the WSJ reports, “every week of a shutdown would shave 0.15 percentage point from the quarterly pace of gross domestic product.”