Back to Work on Fiscal Cliff; Fiscal Cliff Countdown; Fiscal Fears
RICHARD QUEST, HOST: How to fall over a fiscal cliff and hit a debt ceiling. Tonight, the US faces the double whammy. The oracle and his office. We go behind the scenes with Warren Buffet. And for once, I got to be banker.</s>BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: It shows how quantitative easing doesn't work. You're giving me money, but I'm not doing anything with it.</s>QUEST: It's a case of Euro Monopoly. I'm Richard Quest, and yes, I mean business. Good evening. President Barack Obama is now back in Washington, and there are only days left to avoid that pernicious brew of tax rises and spending cuts. The president flew to Washington from Hawaii overnight after speaking to all four major congressional leaders on the phone. It came as the treasury secretary warned that the US would also hit the debt ceiling on Monday, and the US treasury is now starting to take "extraordinary measures," in their words, to avoid a default. Despite earlier reports, the president was planning to offer a scaled-back plan. We understand the president is not offering a new -- we understand the president will not offer a new deal today. The Senate is back at work while the House is still on holiday. The top Democrat in the Senate says his colleagues should return before it's too late.</s>SEN. HARRY REID (D), SENATE MAJORITY LEADER: If we go over the cliff, and it looks like that's where we headed, the president -- the House of Representatives, as we speak, with four days left after today before the first of the year, aren't here with the speaker having told him they'll have -- he'll give them 48 hours notice. I can't imagine their consciences. They're out wherever they are around the country, and we're here trying to get something done.</s>QUEST: Markets are open for business between Christmas and New Year.</s>QUEST: And, well -- that tells its own tale. All you need to know. Down 130 points, off 1 percent, but crucially, we've come under the 13,000 level, and that's what the markets and the economists will be worried about and, indeed, we should all be worried about: the confidence. We also had consumer confidence numbers, incidentally, which showed a sharp fall in the United States. That is further evidence that the drip drip drip effect of the fiscal cliff is taking its toll. Republican congressman will get 48 hours notice to return to Washington. They haven't heard anything yet. That's worrying. Five days to go. Lisa Desjardins is in Washington for us tonight. Lisa, now, we need to take this in a fair old tip. Are we expecting the president to put forward new proposals today? Clear up the confusion.</s>LISA DESJARDINS, CNN RADIO CAPITOL HILL CORRESPONDENT: All right, I will clear this up. We're not expecting a new bill, so we're not expecting formal language from the president, what they actually need to pass. But what we are expecting is that the president is going to clarify and perhaps give some new details to Republicans about exactly what he wants to happen. As you know, in the back-and-forth, lately Republicans have said, "We need to know exactly what you're proposing, President Obama, before we can tell you whether we can support it." So, the president says, "All right, I've outlined things before, I'm giving you more details." That's what we expect today.</s>QUEST: Now, Lisa, Harry Reid in the Senate said it's looking likely that we're going over the cliff. An unnamed Democrat quoted in the "Financial Times" says we're going over the cliff, there's no doubt about it. I'm guessing where you are in the capitol, there's pretty much an acceptance in some shape or form, you're going over the cliff.</s>DESJARDINS: I would say they're 90 percent of the way there. I feel like I'm looking over the cliff myself right now, standing near the capitol. But it's not all the way done yet, Richard. I think at the very least, a lot of us figure we will be here this weekend. We don't know that's going to be all for show, if Democrats and Republicans want to make it look like they're working until the last hour, or will they really be working until the last hour? As you know, Richard, a lot of effects from this fiscal cliff, and I think that Americans may start to take it seriously soon.</s>QUEST: Now, finally -- and just to prove that we're going to throw everything into the melting pot here -- we've got the fiscal cliff, and now, perhaps somewhat unhelpfully, Tim Geithner has thrown the debt ceiling into the mixture as well. Are they -- will a deal be done? Are there talks that you need to link the two deals? Deal with the immediacy of the cliff and the debt ceiling?</s>DESJARDINS: Well, originally President Obama did want to link both. He wanted the debt ceiling and the fiscal cliff to all be taken care of --</s>DESJARDINS: -- time. Republicans were more resistant to that. But now that it looks like they're just going for broke for a very basic sort of low-rent deal, the very minimum they could get, no, I think that the debt ceiling will have to be dealt with on its own. And Richard, you probably know, the debt ceiling for the US right now, $16.4 trillion, that's the limit on how much this country can borrow. Right now, they are at $16.3 trillion. So, really nudging up against that debt limit, and certainly within the next couple of months, the US would not be able to borrow any more unless Congress acted.</s>QUEST: Good to see you Lisa. I've a feeling you've got your duty and work cut out for you in the weekend ahead. Lisa Desjardins joining us from Washington, bringing it all together, the fiscal cliff and the debt ceiling. At the super screen, you'll see exactly what we're talking about. Let's start with the fiscal cliff, and then we'll -- these are the two storm clouds that are fundamentally now hovering over Washington by the US economy and, by definition, the global economy. The fiscal cliff. So, John Boehner, speaker of the House, says the Senate must go first. Harry Reid, the Senate majority leader, the to Democrat there, says the US is likely to go over the cliff, and consumer confidence is falling. No formal negotiations, the House isn't there, the Senate held a conference call, the president may have some proposals. That's the seriousness of where we stand on the fiscal cliff tonight. But if you add in what Lisa was talking about and the debt ceiling and this very idea that the US government -- oops, I keep pushing the button, you see? It will work eventually. If you talk about the debt ceiling, where the US is already up to roof -- Now look. Imagine Tim Geithner says he's now going to use "extraordinary measures" to try and create. Think of it this way, if this is the ceiling -- if this is the ceiling -- the US is now bumping up against it. So, what Geithner has to do -- he can't go above that. If he does, he's breaking the law. So, what Geithner has to do is create more room, which is effectively shifting spending. He literally brings the limit down -- or he shifts the money around. It's called creating head room within the debt ceiling, and that's what the US will be doing over the next two months, because they cannot hit $16.4 trillion. But eventually, they will, of course, if he doesn't get an increase in it. What a situation. Starbucks, the coffee company, is doing its bit to help the talks on this side of it. It's going to be writing on coffee cups -- the chain is asking employees to write "come together" on cups served to customers in the Washington area. It's a voluntary campaign for staff. It affects around 120 stores and is running today and tomorrow. The chief exec, Howard Schultz, says he hopes it will send, quote, "respectful but potent messages to those on Capitol Hill." He told earlier -- CNN earlier in the month, a seismic effect would take place if the US went over the fiscal cliff. Now, you might be wondering, with all this miscellany of mischief and mayhem in the world, fiscal cliff, debt ceilings in the United States, on the markets, very quiet reaction. Not so much -- they're holding their own. Shallow gains in the shadow of the cliff. Italy also held a relatively successful bond auction. In Spain, Bankia shares finished almost down 20 percent. A new audit showed the parent company has minus $13 billion. So, very small gains, extremely thin market. We would be foolish if we extrapolated anything out of what happened there. Coming up in just a moment on QUEST MEANS BUSINESS --</s>VANESSA ROSSI, INDEPENDENT GLOBAL ECONOMIC ADVISOR: Community Chest.</s>QUEST: Typical for France --</s>ROSSI: Oh!</s>QUEST: Get out of jail free.</s>ROSSI: Oh, yes!</s>QUEST: It's Monopoly, but not as you know it. We roll the dice on Europe's economy and forecast the fortunes of a continent in crisis. QUEST MEANS BUSINESS, good evening.