CNBC anchor Maria Bartiromo

The CNBC business anchor looks at the negotiations over the “fiscal cliff” issue that the U.S. is now facing.

One of the most influential voices on Wall Street, Maria Bartiromo is CNBC's business news anchor. She hosts the network's Closing Bell and the nationally-syndicated Wall Street Journal Report, for which she is also managing editor. She's a writer for several business magazines and author of three books, including The Weekend That Changed Wall Street. A two-time Emmy winner, Bartiromo was the first journalist to report live on a daily basis from the floor of the New York Stock Exchange and the first to be inducted into the Cable Hall of Fame. She was previously a producer, writer and assignment editor with CNN Business News.

TRANSCRIPT

Tavis: Always pleased to welcome Maria Bartiromo to this program. In addition to her column in “USA Today” and the syndicated series “Wall Street Journal Report,” she is, of course, host of “Closing Bell with Maria Bartiromo” on CNBC and joins us tonight from where else – New York City. Maria, good to have you back on the program.

Maria Bartiromo: Hi there, Tavis, good to be with you.

Tavis: So amidst all this fiscal cliff conversation and drama, what happened at the closing bell today?

Bartiromo: Well, today we actually saw a pretty good rally in stocks. There was some rhetoric over the weekend that seemed that the two sides, the Republicans and the Democrats, along with the president, have the will to come together on these very important issues surrounding the fiscal cliff.

But as you know, Tavis, it’s been very much a rocky situation as investors wait and anticipate any outgoing talks or any resulting talks from this conversation over the fiscal cliff, so we’re not there yet at all. The market’s still down 5 percent since the reelection of the president because of these uncertainties about compromise.

Tavis: To your point, I was watching your “Wall Street Journal” program this weekend, as I do every weekend when I’m in town. So you had this conversation this weekend, I wake up this morning and look at all the major newspapers, “New York Times” headline, “Investors Rush to Beat Threat of Higher Taxes,” “Wall Street Journal” headline, “Investments Fall Off a Cliff.”

Tell me more about what investors are doing or not doing, as it were, until they can figure out where we’re going.

Bartiromo: Well, the so-called fiscal cliff is, of course, when the Bush tax cuts will expire at year end. That will mean the largest tax increase in all incomes, virtually 90 percent of incomes, coinciding with the elimination of spending programs to the tune of $600 billion.

The fear is that we are going to see the weight of the higher expense on folks because of higher taxes coincide with these spending programs – as you know, the federal government is a big customer for corporate America, and the federal government pays defense companies, construction companies, infrastructure companies, for certain work to be completed.

At the end of the year, those federal dollars will go away as an automatic occurrence. So everyone is trying to figure out what the impact of that will be. Most economists will tell you if we do go over the fiscal cliff and nothing is done about those tax rates and those spending programs going away, we will go into a recession in 2013. That’s one concern.

Put that concern on the sidelines for a moment. The other concern right now is I think the investment community recognizes taxes are going higher. So whether you’re talking about your ordinary income or your dividends or your capital gains, if you sell stocks now and you make money on those stocks, clearly you will pay a lower tax than you will in 2013.

So I think the uncertainty of where tax rates will be next year is really the biggest issue for corporate America sitting on cash. There’s $3.5 trillion of cash on balance sheets right now. Companies are not spending it. You could imagine – I understand why they’re sitting on it, because they’re just not sure what their economic story will look like in 2013.

They don’t know where their tax rates are going to be, and they don’t know if we are going to see those spending programs cut, which will lead to layoffs. Many of those companies will look at their situations and say, okay, the federal money is going away. I will not need this set of employees anymore. I will have to lay off.

So both of these concerns as they relate to the fiscal cliff and the automatic issues that are going to happen, as well as the fact that we are seeing higher taxes in 2013, that’s pushing investors to sell today and think about it later.

Tavis: Okay, so however this turns out, it’s pretty clear to me as I’m sure it is to you and everybody else in Wall Street, there will be some spending cuts in this country. The president, last week, when he talked to the media, used that wonderful phrase “entitlement reform” that everybody wants to use, which, as you know, is just a fancy term for “cuts.”

So something, vis-à-vis entitlement spending, is going to get cut. How are those cuts going to impact big cities and small towns, and do folk on Wall Street care about that?

Bartiromo: Well, absolutely, and we know that state and city governments have already been pulling in their horns. They’ve already been cutting, knowing what is to come. That will likely continue. But the truth is the demographics of this country have changed tremendously.

We are living longer, for example. A lot of people talking folks living to 100, generations of today living much longer than we ever dreamed. I always laugh when someone says oh, gosh, we’re living longer, we can’t afford Social Security, it will not pay out. This is a crisis.

I always say wait a minute, listen to what you just said. We are living longer. This is hardly a crisis. This is an opportunity. But the fact is we are living longer, and the entitlement programs, that is Medicare, Social Security, these programs haven’t changed at all.

So you can understand that at some point we need to resize the government programs to the reality of the world and the United States; in particular, the fact that we’re living longer and people are working longer. So I think most people buy into that. They recognize that we are going to see cuts in Medicare, Medicaid, as well as Social Security. Unfortunately, the politicians and the leadership of our country, nobody wants to have their name on that.

Nobody wants to be the guy who cut off the care for our grandmother and our senior citizens. So that’s really the sticking point. Earlier in the week last week I was under the impression that both sides were digging in. The president said, on tax cuts he said, “Look, I will not extend any tax cuts for anyone making more than $250,000.”

But at the same time, the Republicans say we can get rid of the loopholes and all of the exemptions that exist in our tax code and still raise a fair amount of money. I’m told that if we eliminate the loopholes and the exemptions, right there is a trillion dollars.

But it seemed last week that the president wanted both – the loopholes and the exemptions gone as well as raising the rates for top earners, the highest earners out there, and he’s looking for $1.6 trillion. Now, whether or not that’s just negotiating first (unintelligible) it could be, it could be. But if that’s the case, we are going to have to see spending cuts to the tune of the kind of tax increases that we’ll see, and that’s where we get push-back from the Democrats.

So we still have this position where everyone is digging in, holding on to their so-called sacred cows, what’s important to them, and without some compromise on both of these issues, it’s very difficult to see us not going over the fiscal cliff.

Tavis: I’ve said many times on this program and elsewhere that budgets are moral documents. You can say what you say, but you are what you are, and we know what you are when you put your budget on the table, because budgets are moral documents.

So that if there is going to be a need for some entitlement reform, cuts to programs that matter to seniors and to the poor and to children and to disabled veterans, if we’re going to have to make some of those cuts and people are talking about shared sacrifice, is Wall Street of the opinion at this point that they are going to have to do their part. They’re going to have to take it on the chin like everybody else.

Bartiromo: I think so. I think most people, particularly the investment community, the business community, they do realize that this is a compromise on both sides of the ledger – that is raising revenue as well as cutting spending programs.

Look, the fact is that we have a debt of this country of $16 trillion, and we have had annual deficits more than $1 trillion every year. It’s just not sustainable. Anybody and everybody knows on an individual basis, just the way it’s on a corporate basis or on a country basis, you just cannot consistently spend more than you take in. So we are going to have to cut in a big way.

Now, it’s not just Medicare, Medicaid and Social Security, but of course you’re right – those are the biggies. That’s where you’re actually going to move the needle. It’s also defense cutting, defense spending. So that will also be part of it.

I think if we can just get to a compromise of cutting spending in defense, cutting Medicare, Medicaid and Social Security, you probably do get to a place where cutting back there and raising revenue, whether it’s just extending those tax cuts for the people making under $250,000, or eliminating the loopholes, you’re still talking about raising about $1 trillion in revenue. Hopefully that’s going to be enough for both sides.

Tavis: So Harry Reid, the majority leader, as you know, has said Social Security is of the table. He says this conversation, as far as he’s concerned, has nothing to do with SSI. He’s taking it off the table, so we’ll see where that conversation goes.

Let me ask you, though, two other questions before my time runs out. One, we’ve talked about how Wall Street is going to navigate the way forward. How are consumers going to navigate the way forward?

Bartiromo: Well, I think we’re all facing our own austerity program, frankly. You hear about a lot about these austerity programs in Europe. On an individual basis we all need to look at our own lives and say what does this mean for me, living paycheck to paycheck? What does this mean for my long-term savings?

I suspect the worry about recession in 2013 will cause a change in behavior. People will pull in their horns a bit. Look, we’re not out of the woods. We’re still talking about 8 percent unemployment, we’re still talking about an economy that is not growing that much, 2 percent growth on average.

I think the president has been very clear in terms of at some point shifting toward the priority of growth, growing the economy. That also derives revenue, because it increases tax rates and it broadens the base for folks to pay taxes.

So at some point we really do need to focus and make growth a priority, and when that happens I think that that will help consumer confidence, but right now, all this talk about higher taxes, about spending cuts, about austerity all around the world and the United States as well, governments on a city and state level pulling back. I think it dictates consumer behavior.

I think people look at the world and say you know what? I’d better save my money. It looks like things are going to get more expensive. And they are.

Tavis: How is this going to impact these challenges economically, going to impact corporate hiring? Are companies still going to be hiring people, or attempting to?

Bartiromo: Well, that’s the question, Tavis. Corporate America needs to feel like the environment has enough clarity that they could look out for a year and say, okay, here’s where I think my business is going to go. Here’s where my tax rates will be. Here’s what the demand picture looks like.

I think once companies have that kind of clarity they will spend the money, because the truth is we are looking at a very strong corporate America today. Ever since the 2008 financial crisis, companies in America have slimmed down. They’ve become lean and mean. They’re sitting on $3.6 trillion in cash. At some point, they will have a problem. They will have to spend that money. You can’t sit on that cash forever. They will allocate that capital.

They just need a catalyst to do so, and I think the clarity of knowing where tax rates will be in the next year will be one impetus for them to put that money to work. I’m confident on corporate America hiring once again. It takes time, and by all means, it takes clarity.

Tavis: So here’s the exit question. In the previous days, as you well know, Mr. Romney has made news again, even though he’s off the political stage. Ha made news again with this assessment on his part that he lost primarily because of the “gifts,” his word, as you know, not mine, the gifts that Mr. Obama gave to Black folk and to Hispanics and to youth.

A number of Republicans over the weekend on the major talk shows, the Sunday shows, who pushed back on that kind of assessment, and I’ve even seen a few Wall Street personalities who pushed back on that kind of language. What kind of sense do you get of how those comments, which people find damning, are being interpreted by those on Wall Street, many of whom gave him a fundraising edge in the race against Mr. Obama?

Bartiromo: Well, I don’t know, I think the corporate sector and the business community thought Romney could win, thought Romney had a shot to win, but he has made missteps in terms of his communicating to folks, and I think that there is a disappointment in terms of the way he communicates certain things.

I do believe that the business community thinks Governor Romney has the will and has the goods, if you will, to lead this country. They certainly backed him and they liked his economic ideas in terms of broadening the tax base and lowering the corporate rate so that the environment would be more favorable toward business so that they could hire.

But once again we keep hearing commentary from Governor Romney, and it’s coming out I guess not the way he intended. So what can you say? I’m sure there’s some criticism around it.

Tavis: Or maybe he did intend it, because it ain’t the first time he’s done it, and maybe it sounds like class warfare to some of us. But I digress on that point. Maria, as always, good to have you on. Thanks for sharing your insights. We’ll do it again.

Bartiromo: Thanks Tavis. Happy Thanksgiving.

Tavis: And to you as well.

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Last modified: November 22, 2012 at 2:24 pm