Chamber to Washington: Don’t blow it

The business lobby joined the Congressional Budget Office and Federal Reserve Chairman Ben Bernanke in warning that Congress and the White House have to strike a deal before the ball drops in Times Square to avert an economic downturn.

"I don't think we're headed for a recession — short of Congress and the administration driving us there," said Regalia.

A slew of fiscal policy changes are set to take effect in January unless policymakers act, including the expiration of the Bush-era tax rates and the beginning of automatic spending cuts from the sequester. Many experts predict the mixture of heavy spending cuts and tax increases would thrust the nation into recession.

Lawmakers in both parties say they want to strike a deal to avert the fiscal cliff, or at least reach a compromise to temporarily freeze the policy changes and buy more time.

But the Chamber is gulping hard at some of the rhetoric they are hearing from members. Sens. Patty Murray (D-Wash.) and Jim DeMint (R-S.C.) have both suggested they would be willing to let all the Bush-era tax rates expire for the specific purposes of dealing with them retroactively at the start of the next Congress.

Regalia said the mere discussion of doing nothing is worrisome.

"Going off the cliff is not the preferred strategy. Going off the cliff will not make the world better for people going out there and trying to get jobs," he said.

"If we don't figure out to kick this can down the road, at least in the relatively short term, we will almost certainly be in a recession by the time we meet again at the end of next summer.”

Regalia also threw cold water on the notion that the Federal Reserve could step in and help alleviate pressure on Congress to strike a deal. Friday's disappointing jobs report has reignited speculation that the central bank is readying a third round of massive bond-buying stimulus in an effort to boost the economy, and many expect officials to unveil such an effort on Thursday.

But Regalia said the nation's fiscal challenges couldn’t be solved by monetary policy.

"I don't think it's going to have much impact on the real economy," he said. "I don't think we're going to see the Fed bail us out again."

Beyond the threat posed by the fiscal cliff, the Chamber sees continued challenges in the "absolutely abysmal" labor market, which saw the addition of only 96,000 jobs in August — roughly the amount needed to keep up with new entrants in the workforce.

And while the unemployment rate fell to 8.1 percent in August, that was due to potential workers dropping out of the labor force, not through gains in hiring.

But Regalia noted that the housing market, long the biggest anchor on the economy, might finally be showing some signs of life.

Assuming Congress can avert an economic catastrophe, the winner of the 2012 presidential election could find himself in a more favorable economic climate.

"Politically, it's going to be interesting to watch because whoever the next president is ... I think they'll have a better underlying economy to play with," Regalia said.