November 7th, 2012
04:18 PM GMT
Editor's note: Todd Benjamin is CNN's former financial editor.
London (CNN) – Now that we know who's won the election, the real uneasiness can begin. There's only one issue that matters to financial markets, and that's if President Obama and Congress can cut a deal on the looming budget crisis, the so called fiscal cliff. It refers to the $600 billion of tax hikes and spending cuts that are suppose to take effect on January 1.
It's been dubbed the fiscal cliff because if those tax hikes and spending cuts happen, it would push down GDP by 4%, almost certainly sinking the U.S. economy back into recession. Fund management group BlackRock said the fiscal cliff is the most pressing issue for investors it polled in October. Those investors together manage almost $5 trillion in assets.
In an article in the Financial Times, the head of Blackrock Larry Fink estimated that U.S. companies hold $1.7 trillion in cash. He called it a "huge reservoir of money standing by to be put back into the economy," if confidence improved and if there was a solution seen as "tangible and credible."
Another CEO, Dave Cote of Honeywell, warned that unless Congress reached a deal on the issue, "we could have a recession in my view that is significantly greater than (anyone) is forecasting today, because it's an indictment of our ability to govern." Cote has likened footdragging on the fiscal cliff issue to playing with nitroglycerin.
Congress returns to Washington next and lawmakers will have just 49 days to reach a consensus on the fiscal cliff. President Obama has already said he would veto any legislation to avert the fiscal cliff that extends the Bush era tax cuts to the wealthy.
No one at this point no one knows whether the White House and Republicans, who control the House of Representatives in Congress, can find common ground. It will prove to be a litmus test, not only for this most pressing of issues, but whether the political paralysis and enmity which now dominates Washington can be overcome.
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