Foreign Exchange: The Fiscal Cliff

Theo Moore is a senior director in APCO Worldwide’s Brussels office. He specialises in corporate and issues-based communication, stakeholder management and media relations. Liza Olsen, senior director in APCO Worldwide’s New York office, focuses on financial communication, corporate communication, litigation and crisis communication, and issues management.

The following is the second in an occasional series of brief exchanges on the sometimes divergent North American and European perspectives on interesting financial sector topics within APCO’s global financial services practice. Click here to view their last post on the FTT.

Fiscal Cliff sounds like a character from a Monty Python-esque satire about business. He’s the spiv who randomly appears out of alleys to offer financial products that “fell off the back of a lorry”. Sadly, it seems real life has gone one step beyond satire; the US is preparing to fall off something more significant than a Peterbilt or a Mack.

To many Europeans this cliff has loomed out of the post-Obama-victory fog, just when we thought everything was right in the world (within certain definitions of ‘right’). We find the simile confusing (will you fall off it or will it fall on you?) but scary. We’ve all seen Thelma & Louise; some of us have even read King Lear. Cliffs seem to require people to go over them. The divided US political landscape caused the Super Committee’s failure in 2011, creating your current vertiginous predicament. Could those divisions lead you to walking off the cliff on principle? It’s true that we Europeans still can’t organise ourselves regarding banks, sovereign debt or currency but we can be pragmatic. Even right-wing leaders like David Cameron are hiking taxes, slashing budgets and telling the people to eat their spinach. Why can’t you?

Counter Point – Liza Olsen:

Just when we thought it was safe to watch the nightly news, we have the “Fiscal Cliff!”  Sometimes, I think our leaders purposefully make this stuff up for the late night talk shows.  I’ll see your Monty Python, and raise you a Jon Stewart…

While the situation is perfect fodder for political satire, in reality it’s Congress’ moment of truth.   If they fail to act, a series of Bush-era tax cuts will expire, and some across-the-board government spending cuts will become effective Dec. 31, 2012. Given the already shaky economy, this shift could spark a recession.

Do they have the wherewithal to reach a deal?   Or will dysfunction continue to rule as the norm?  A recent Gallup poll reveals a cynical America, finding that Members of Congress are considered the least trusted professionals by the American public, barely edging out car salespeople for the lowest spot.  That’s harsh.

But, I’m hopeful.  And I believe many Americans are ready to cast off their cynicism.  We heard a lot about “bipartisanship” during Obama’s victory speech.   A new Wall Street Journal/NBC poll shows that a majority of Americans want a compromise to avoid the Cliff.   Is this too Quixotic for you, Theo?

Reply:

Tilting at cliffs? It sounds like a plan, especially if what you call ‘bipartisanship’ is what we might call pragmatism. Anything to stop your economy impersonating a demented lemming wrapped in the Stars & Stripes. I had thought you might defend the situation, contrasting a vigorous and necessary clash of democratic ideas with European muddle and technocracy. Instead you lean on a failing Spanish knight, on a donkey. I’m touched but not immensely reassured your leaders won’t give the can (already battered) one more hoof. What chance Son of Fiscal Cliff, coming soon to a global economy near us all?

Last Word:

Three years of dealing with the Eurozone crisis has hardened you.   I think this will be solved American style, complete with a Hollywood ending.

Final Scene:

Fade In: The “Fiscal Cliff” is a ticking time bomb.

Action: Intense arguing.  Cut to the clock as time is running out.   10 seconds, 9, 8…

Obama:  “We have to solve this.  Lives are at stake.”

Boehner:  “Let’s do this…. for the children.”

Cut to the heroes as they compromise and cut the red and blue wires of the bomb, dismantling it.  Cheers erupt.  Music swells.   The two give each other a thumbs up.

Fade out.