Industry May FinallyHit the Ceiling Over Debt

Default stalemate could affect investment, production
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jeggerton@nbmedia.com | @eggerton


Why This Matters
Not raising the debt ceiling would wreck investor confidence-bad news for the advertising-dependent TV industry.

The government shutdown has taken a toll on the Federal Communications Commission, with its website on pause and deadlines for comments and legislative mandates in limbo. A congressional failure to raise the debt limit, however, could take a giant toll on the industries the FCC regulates.

Industry players, communications or otherwise, are not given to public criticisms of legislators who can help get them out from under regulation or otherwise provide some wind to their sails. So it’s not especially surprising that broadcast and cable lobbies were not touching the issue of the impact that the nation’s potential default on its debt could have on the economy in general and the communications industry in particular.

According to analyst Brian Wieser, the government shutdown, which resulted from the failure to pass a bill to appropriate funds for continuing operations of the government, has not had much impact on TV ad spending, primarily because most of it is done in advance.

But the debt ceiling is a different matter if it hurts personal consumption or industrial production, which Wieser says is not a given but will likely be the result.

One of the bigger beefs Republicans have with government in general is that actions by legislators and regulators can keep investment on the sidelines. That, however, is a potential consequence of the debt ceiling impasse.

“Businesses are sitting there waiting to invest, if they just had some confidence in Washington,” said a media industry source (a Democrat) who asked not to be identified. “If they would get their act together, there is so much money sitting on the sidelines.”

A Big Weight

AT&T chairman Randall Stephenson, for one, did not want to find out whether that potential will become a reality, warning Washington to end the current game of debt limit chicken, or else. Or as President Obama put it last week: “Let’s not take default out for a spin and see how it rides.”

Backing that suggestion up is a new study from the Center for Audit Quality that found investor confidence in publicly traded companies would plummet to an all-time low of 39% as a result of a default.

“It is unthinkable that the United States could default on its financial commitments, and it would be the height of irresponsibility for any public official to consider such a course,” Stephenson said in a statement. “In fact, even the discussion of default poses great risk to our economy and to our country. It is imperative to our nation that the overwhelming majority of our public officials who recognize this reality unite their efforts, regardless of party, to bring a responsible solution forward.”

The aforementioned Democratic media industry source agreed. “The impact on the economy and advertising of not raising the debt ceiling could be devastating,” he said. “Put down the swords and do your jobs, is that too much to ask? There’s a template here [for compromise, created by] Tip O’Neill and Ronald Reagan.”

Rep. Gerry Connolly (D-Va.) pointed out last week that O’Neill and Reagan came together on debt issues via compromise. He said he commended their example of coming together for the sake of the country. (So does MSNBC Hardball anchor Chris Matthews, whose new book, Tip and the Gipper, espouses the cooperative example of these two political opponents. No doubt, that reference only raises the profile of Matthews’ book, though that may be the only media-side beneficiary of the shutdown.)

To date, that template for compromise has remained in the drawer. At press time, it looked like Congress might be striking a deal on the debt ceiling, but only an extension of the deadline for a few weeks that would delay, but not solve, the problem. The White House has said will will not accept a bill that traded political chits for avoiding default.

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