The resurrected auto industry is cruising along, racking up big sales, and seemingly oblivious to the fears of many economists and business executives that economic uncertainty will dampen consumer spending. In September, the auto industry enjoyed its highest volume of sales of cars, trucks and SUVs in the past four years, The New York Times’ Bill Vlasic reports.
The monthly sales rate equaled about 14.9 million vehicles on an annualized basis. While auto executives are thrilled and optimistic, Detroit Free Press’ John Gallagher reports that some industry officials and experts are hesitant to break out the champagne just yet. They warn that unless Congress and the Obama administration reach a deal to avert the fiscal cliff during a post-election session of Congress, the industry’s remarkable recovery could be stunted.
On Tuesday, Robert Dye, chief economist for Comerica Bank, told clients that the failure of Congress and the president to begin controlling the $6 trillion national debt would be enough to cause a new recession in 2013. “The failure to resolve key public fiscal challenges threatens to drag down the U.S. economy…and soften the recovery,” he said.
FISCAL CLIFF HYPERBOLE BAD FOR NATIONAL SECURITY
While words like “devastating” and “drastic” are being used to describe automatic cuts to the military, American audiences aren’t the only ones listening to the dramatic hyperbole, and international leaders are taking note. Time Magazine’s Peter Singer writes that with lawmakers, administration officials and special interest groups utilizing dramatic hyperbole to warn against sequestration, “We may be doing a different kind of disservice to U.S. security.”
“We hear these statements and have deep, deep concern about what it means for us,” a senior Korean leader said at a Brookings Institution engagement in Washington earlier this year. “One can reasonably conclude that if you don’t want to ‘invite aggression’ then the best tactic is not to go about screaming to the world that you expect to be weak and ‘toothless.’” Read more at Time
PUNTING ON SEQUESTRATION
With members of Congress busy campaigning back home and no serious ongoing budget and tax talks, some experts predict Congress will make short-term fixes during the lame duck session. They will likely try to buy time to either postpone or blunt the effects of deep automatic cuts in defense and domestic programs set to take place in early January. The National Journal’s Sarah Sorcher reports that 79 percent of National Journal’s National Security Insiders believe Congress will punt sequestration for several months. “Punting seems to be the favorite sport of congressmen these days,” one Insider said. “The best Congress will be able to do is to move the goal posts and leave any solution to the next Congress and administration.” Read more at The National Journal
DOCTOR DOOM: SOLUTION OR NOT, IT’S GOING TO BE BAD
New York University professor and economist Nouriel Roubini, nicknamed Dr. Doom for accurately predicting the financial crisis of 2008, continues to live up to his nickname. He told Bloomberg’s Liz Capo McCormick and Tom Keene that even if Congress reaches a solution to avert the fiscal cliff, the U.S. economy will remain vulnerable to fiscal turmoil. “An accord by lawmakers that avoids the worst of the potential headwinds will probably still leave the economy open to disruption,” Roubini said. Read more at BusinessWeek.com
Things could be much worse on Wall Street if Congress simply kicks the can of sequestration down the road. The problem, according to Washington Update’s Andy Friedman, is that delaying the deadline with short-term fixes will cause heightened fears among investors of another recession which could be very damaging and cause the markets to go “ballistic with uncertainty,” Friedman told the Wall Street Journal’s Tom Lauricella. Read more at The Wall Street Journal
THE NOT-SO-SECRET MEETING OF THE ‘GANG OF EIGHT’
The“Gang of Six” senators who pledged last week in a letter that they will find a solution to avert a year-end financial crisis has added two more members. Politico’s John Bresnahan and Jake Shermin report that the new “Gang of Eight” Democrats and Republicans is planning a “secret” meeting next week to start assembling a deficit bargain before the end-of-year deadline. Read more at Politico
CANDIDATES IGNORE FISCAL CLIFF REALITY FOR VETS
While both President Obama and Mitt Romney rarely miss an opportunity to shout out to veterans and military families on the campaign trail, neither candidate has offered many details on how he might support military families in the event of a fiscal catastrophe in January. Ron Astor, professor at the University of Southern California Los Angeles, told CNN that the dearth of proposals for military families is a “violation of our nation's promise and its social contract with the millions of brave warriors and their families.” Read more at CNN
COULD BE BAD NEWS FOR THE DOLLAR
The Wall Street Journal’s Deborah Levine reported that currency analysts from European banking giant Societe General surveyed their clients and found that 55 percent of respondents said it would be very bad for the dollar if the U.S. government takes the country over the fiscal cliff. “One respondent said letting U.S. tax and spending measures expire would sap too much growth in the near-term, outweighing the benefits of debt reduction and making it harder to pay down debt for some time.” Read more at The Wall Street Journal