A pair of U.S. senators likely to play a key role in the drama surrounding the fiscal cliff paid a visit to Wall Street on Tuesday to share their views on the upcoming election and the budget negotiations. The message Senators Saxby Chambliss, R-Ga., and Mark Warner, D-Va., delivered to the audience gathered at the Annual Meeting of the Securities Industry and Financial Markets Association was clear and concise: the fiscal cliff is serious and Wall Street can play a role in avoiding it.
Chambliss and Warner are two of the original members of the Gang of 6, a bi-partisan group of senators that has played a pivotal role in previous fiscal dramas on Capitol Hill. While that group has since grown to become the Gang of 8, Chambliss noted the Gang wields even wider influence as a total of 23 Republican and 23 Democratic senators have vowed to support any compromise proposal that receives the backing of the Gang.
Both senators struck a tone of measured confidence that a deal would eventually be reached to avoid the sequestration that observers say would wreak havoc on the U.S. economy. However, Chambliss stressed such a deal is likely to hurt. “In the end, if you like the package we come up with to avoid the fiscal cliff, then we haven’t done our job,” explained Chambliss, adding that everyone will have to sacrifice if a given deal is to be effective.
Chambliss urged the financial services industry to play an active role in the debate. “I don’t want you to underestimate your influence or underestimate the fact that we need you involved in the process,” Chambliss said.
Warner noted that all sides have to compromise because simply raising taxes wouldn’t be effective without accompanying spending cuts. The first-term Virginia senator exemplified his point by explaining that changes in the tax treatment for capital gains, dividends, charitable deductions and the mortgage interest deduction wouldn’t be enough to remedy the budget woes.
Economists weigh in
Warner and Chambliss were followed on the stage by a panel that featured distinguished economists commenting on the impact the U.S. election would have on the economy and economic policy.
Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School, questioned the wisdom of a Wall Street that appears to be pulling for Governor Mitt Romney to win the presidency. “Look at the history. The market goes up the day after a Republican is elected. Then it goes down for the next 4 years.”
Siegel also said that whoever wins, he expects post-election Washington to move past its recent rancor and come together to address not just the fiscal cliff, but also issues like entitlements, tax reform, housing reform.
That sentiment was echoed by Brian Gardner, a senior vice president at Keefe Bruyette & Woods. “2013 is a consequential year. The partisan divide that has gripped Washington, will not go away, but it will subside and make room for a grand bargain.”