* Markets pricing in more uncertainty -Honeywell, NYSE CEOs
* NYSE, Honeywell would look to invest more outside of U.S.
if no deal reached
* Both say deal must include tax increases, spending cuts,
By John McCrank
NEW YORK, Nov 13 U.S. politicians face a stark
choice over the next six weeks: come together on a deal to avoid
the fiscal cliff, or prepare for a recession as companies seek
other places to invest, said the CEOs of NYSE Euronext
and Honeywell International Inc.
President Barack Obama and congressional Republicans have
sounded conciliatory notes on the fiscal cliff since last week's
election, but there is still plenty of scepticism in the
business community on the chances of a deal, NYSE's Duncan
Niederauer and Honeywell's David Cote told Reuters on Tuesday.
In August 2011, Congress did not agree on raising the U.S.
debt ceiling until the last possible minute, leading to massive
volatility in equity markets and a downgrade of America's debt
"If the debt ceiling was playing with fire, this is
nitroglycerine," said Cote. "If they go off the cliff, I think
it would spark a recession that's a lot bigger than economists
think. Some think it would just be a small fire. I think it
could turn into a conflagration."
Since the election, markets have been focused on the fiscal
cliff of steep government spending cuts and tax rises due to be
implemented under existing law in early 2013 and the uncertainty
surrounding it, along with more long-term fears about the size
of the U.S. debt, Big Board boss Niederauer said.
"The next 60 days are critical," he said.
He said the market seemed to be pricing in more uncertainty
in the months ahead, and that there could be an upside surprise
in store if real progress is made in the lame-duck session of
Congress, which would set the table for a credible solution to
conquering the debt burden in the following months.
CAPITAL IS A COWARD
Niederauer said that uncertainty - including around simple
things like what the corporate tax rate will be in 2013 - makes
it difficult for companies to make plans to invest and hire
workers in the United States, further stifling economic growth.
While the economy has struggled since the recession,
corporations are sitting on stockpiles of cash and are waiting
for a signal as to where to invest, said Niederauer.
If politicians are not able to create some certainty in the
markets by putting aside partisan ideas, and making real
progress in the next 60 days on fiscal issues, money will go
elsewhere, both Niederauer and Cote said.
"We simply won't be investing in the United States. We will
be investing elsewhere, where we have more certainty of the
outcome," Niederauer said.
"Capital is a coward," said Cote of Honeywell, a diversified
manufacturer. "You don't go to places that are excessively risky
or have more risk in them than you are willing to take."
He said that with many of the world's big democracies -
Japan, India, the EU, the U.S. - in gridlock because of debt,
somebody needs to exercise some leadership.
"There is a real opportunity for presidential leadership.
That is the one guy in the entire country who could make this
argument to the American public and give it to them holistic
instead of in pieces," Cote said.
Both Cote and Niederauer said they were optimistic a deal
will be reached in time.
WHAT A PLAN MIGHT LOOK LIKE
Democrats and Republicans generally agree on the need to
avoid about $600 billion in deficit reduction measures set to
start in 2013. But they are at odds how to get over the
immediate crisis, divided over whether to extend tax cuts for
everyone, as Republicans want, or just for those earning below
$250,000, as the president wants.
Solving the problem requires "both an increase in taxes and
significant entitlement reform, along with discretionary
spending cuts if this is going to work, and we need this to
work," Cote said.
Both Cote and Niederauer are part of an ad hoc lobby group
called Fix the Debt, made up of CEOs pushing for long-term
deficit reduction, and Cote is one of several CEOs meeting with
President Obama on Wednesday to discuss fiscal issues.
"He (Obama) fully understands the significance of not just
the fiscal cliff, but long-term debt, to our economy and what
that's doing to hold us back and wants to do something that's
going to really make a difference here long-term," he said.
Cote said it was not reasonable to expect Congress to come
up with the bigger $4 trillion answer by the end of the year. It
could, however, put a mechanism in place to develop a simplified
tax system that collects more, simplified Medicare/Medicaid that
spends considerably less, and discretionary spending cuts, by a
specified date such as July 4, he said.
Of the $4 trillion in deficit reduction, which would be
phased in over 10 years, Cote said a plan might include $1
dollar in tax increases for every $3 of spending cuts.
There would also need to be a backup - like a
Simpson-Bowles, a Domenici-Rivlin, or another $4 trillion debt
reduction plan - that would automatically kick in if the plan is
not ready by the target date.
Cote, whose name has been brought up by pundits as a
potential replacement for Timothy Geithner as Treasury
Secretary, said he has not given that role much thought.
"It's nice to be thought about, but I like what I am doing,"
he said when asked if he would consider the job if offered.
Top executives scheduled to meet with the president on
Wednesday include the CEOs of General Electric Co,
Wal-Mart, Ford Motor Co, Procter and Gamble Co
, American Express, Chevron Corp,
International Business Machines, PepsiCo Inc,
Xerox Corp, and Aetna Inc.
(Reporting by John McCrank; Editing by Phil Berlowitz)