Tags: Altman | fiscal | cliff | deal

Roger Altman: Growth Could Exceed Hopes on Fiscal Cliff Deal

Tuesday, 27 Nov 2012 01:08 PM

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U.S. economic growth could exceed expectations next year if Congress and the White House find common ground and steer the economy away from the fiscal cliff, said Roger Altman, chairman at Evercore Partners and former Deputy Treasury Secretary.

Republicans and Democrats have said they are optimistic they can avoid the cliff — a combination of tax hikes and spending cuts set to go into effect at the same time with the close of this year.

Failure to do so could send the country into a recession next year, though if successful, lawmakers could steer the economy to pastures even greener than hoped.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

“I think the outlook for growth if we solve this fiscal cliff, and I think the chances of us solving it are good and solving it in a reasonably balanced way, then the chances for growth which surprises on the upside are better than people think,” Altman told CNBC.

The U.S. economy is showing signs of a recovery, marked by improvement in the housing sector, consumer confidence figures and even in the labor market.

Many businesses, however, have put off expanding and hiring since they don’t know what they will be paying in taxes next year, which is hampering recovery.

Should policymakers clear up such fiscal uncertainties during negotiations to avoid the fiscal cliff, the economy will see blue skies again in 2013.

“This solution can inject confidence in the system,” Altman told the network.

“The cheapest form of stimulus is more confidence, and I think that between housing, oil and gas, manufacturing and the confidence surrounding this solution we can actually surprise on the upside in the United States in the next two to three years.”

Conditions are ripe for politicians to strike a deal, as elections just took place, which makes it easier for all involved to tackle politically sensitive tax and spending issues.

That means both the White House and Congress should make tough decisions now.

“If you kick the can down the road the opportunity for change diminishes, it doesn’t increase. So this is the time to do it,” Altman said.

The entire world is waiting to see if U.S. policymakers avoid disaster and a preventable recession.

The Paris-based Organization for Economic Cooperation and Development (OECD), a 34-member international economic organization, reported earlier that the global economy could contract if the United States drives over the fiscal cliff.

“If the fiscal cliff is not avoided, a large negative shock could bring the U.S. and the global economy into recession,” the OECD said in its Economic Outlook report, according to Bloomberg.

“Reducing the large federal budget deficit is necessary to restore fiscal sustainability, but this should be done gradually and in the context of a well-identified medium-term consolidation plan,” the report added.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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