History lesson. There is a growing hope that Congress and the White House will be able to come to an agreement that keeps the nation from heading over the fiscal cliff. But according to Tignanelli and Joel Naroff, president of Naroff Economic Advisors in suburban Philadelphia, the 2011 fight over the debt ceiling gives business leaders little confidence that the fiscal cliff can be resolved.
The debt-ceiling debacle has striking resemblances to the ongoing fight over the fiscal cliff. Lawmakers were aware of the dire consequences of not increasing the country's debt limit for months prior to the showdown. An agreement to increase the limit was supposedly in place in the weeks before the credit extension deadline. However, at the last minute, Tea Party Republicans in the House of Representatives backed out.
The country's credit limit was eventually extended. But the partisan politics that nearly made the United States unable to pay its bills prompted ratings agency Standard & Poor's to downgrade U.S. credit for the first time in history—leading to the most volatile week in world markets since the 2008 financial crisis.
Naroff and Tignanelli say they fear a similar scenario could play out as fiscal cliff negotiations proceed. "If I'm a business [owner] thinking of hiring or investing, my reaction would be, 'If they drive the national vehicle off the cliff, then we're in trouble,'" Naroff says. "'If I don't have to hire right now, I won't.'"
Politicians "have surprised me with their stupidity," adds Tignanelli. "Nothing they do would surprise me right now."