In an impassioned speech early Wednesday morning following his reelection, President Barack Obama called for members of both parties to reach across the aisle and work together to solve the key challenges that lie ahead. The President and Congress have their work cut out for them.
In the Onsite Survey at the 2012 AFP Annual Conference, treasury and finance professionals emphasized the urgency of resolving the pending “fiscal cliff” issue, which would see massive tax hikes and spending cuts kick in at the end of the year. Additionally, the U.S. will reach a new debt limit in the spring. If these issues are not addressed, a second recession is all but guaranteed.
Such a deal is not likely to come quickly or easily, given the partisan divide that remains in Congress. Republicans retained control of the House of Representatives, and the Democrats still lead the Senate, so the gridlock could continue. But as we saw the debt ceiling debate in 2011, as the 11th hour approaches, both sides should realize that obstructing a deal would be bad for all involved.
Another pending issue that corporates have an eye on, the January 1 expiration of the FDIC’s temporary deposit insurance, could ultimately be included as part of a fiscal cliff deal. The insurance will revert to $250,000 per account if there is no resolution on this issue.
"One of the most impactful considerations for treasury and financial professionals as we attend to our financial risk management duties is the element of uncertainty," said Michael Connolly, CTP, vice president & treasurer with Tiffany & Co. and past AFP Chairman. "It is embedded in our job descriptions, as well as within our personal DNA, to take prudent and rational decisions in the face of the less-than-rational volatility that prolonged uncertainty brings. And this election season has done its part to exacerbate that uncertainty, globally. Now that the elections are behind us, the administrations, legislators and regulators in the United States and around the world need to act to remove the questions marks so that we, as financial professionals, can get back to the business of business."
Jeff Cappelletti, CTP, corporate treasurer and risk manager at G4S Secure Solutions USA and an AFP board member, noted that it is important for treasury and finance professionals to leave political leanings at the door and really look at the facts when determining what the election results could mean for businesses. “For example—what does four more years of an Obama administration mean for bonds and treasuries? Healthcare costs to businesses? Energy costs?” he said. “I think we are going to see increased volatility from now until the fiscal cliff debate is decided; and who knows if it will be decided or if Washington will just kick the can down the road again!”