NEW YORK CITY-After weeks of post-election posturing, it seems that politicos on opposite sides of the aisle are at last coming together on a compromise over the so-called Fiscal Cliff. But while it solves the immediate fear, CRE experts we talked with exclusively say it simply is not enough. That the forces of the left (headed by President Barack Obama) and House Speaker John Boehner‘s crew on the right are approaching a middle ground, with both sides backing off (at least a bit) of their tax-the-wealthy positions, is a good thing. But if the promise of compromise seems hopeful, at the end of the day, the experts say, it’s simply a temporary fix.
That’s not to say a resolution of the Fiscal Cliff problem is not critical. GlobeSt.com’s most recent poll, which garnered more than 440 votes, asked how much of a problem the Fiscal Cliff will be, and the majority (54%) believe it “Will Hurt Us and “We’ll Have DC to Blame.” Another 29% responded that “It’s Another Political Football. Nothing More.” (Minority answers—in the single-digits, believe “It Won’t Impact Us.”)
According to CBRE global chief economist Ray Torto, the overarching problem of achieving fiscal stability will still remain, with “more decisions and detailed legislation necessary to implement a meaningful solution to the US government’s fiscal situation.” Time is too short now, he tells GlobeSt.com, “to do any consequential legal drafting of law, but there is time to articulate a significant set of principles from which negotiators can begin in 2013.”
That, he concludes, is the best we can hope for. Time is short, he notes, because “the Cliff has already revealed some impact on commercial real estate, with a slowdown in investment volume and increased occupier caution.”
Or as GlobeSt.com Blogger Dr. Sam Chandan puts it, “While commercial real estate fundamentals have come off their lows in many markets, the disappointing pace of the broader recovery has weighed on improvements. This is exactly where the fiscal tightening will hit hardest. The economy would likely contract in the early part of 2013, cutting into hiring and reversing the recent decline in the unemployment rate.”
Chandan is not optimistic. “Any resolution to the fiscal cliff will be temporary and presage a more divisive debate on entitlement and tax reform,” he says. “It should be absolutely clear that we must get our fiscal house in order. The structural deficit is unsustainable and is damaging the country’s long-term growth potential.”
The economist questions the wisdom of now being the time to “embark on austerity” and wonders “what exact form austerity should take.”
His solution? Let it ride. “If we can responsibly exercise our discretion over timing,” he says, “there’s a strong case that we should allow fiscal stimulus to persist until the frustratingly slow economic recovery builds independent momentum. But the appropriateness of kicking our fiscal problems down the road assumes our budget politics will grow up one day soon.”
And hopefully our elected leaders with them.