Harper warns of unforeseen consequences if U.S. fails to avoid fiscal cliff

OTTAWA – Prime Minister Stephen Harper says if President Barack Obama and U.S. lawmakers can’t find a solution to the looming fiscal cliff it could spark other unforeseen economic woes.

Harper told a Canada-United States business forum in Ottawa on Monday that he hopes “reasonable people” can come to a solution now that the election south of the border is over.

“To the extent I hear some people talking about a bungee cord, I think that kind of talk is foolish,” Harper said.

“If you go over a cliff, you can’t be sure what will happen next. Like we saw with the collapse of Lehman Brothers, how a single major event can trigger a series of events that’s very hard to pull back from.”

The fiscal cliff refers to the combination of imminent spending cuts and tax increases due to take effect Jan. 1 that could push the fragile U.S. economy back into recession, dragging Canada’s along with it.

Harper also lauded American entrepreneurship, saying it would be the driving force that would one day allow the world’s largest economy to overcome its current economic problems.

But not, he added, without some government support.

“This is still at its heart, the most entrepreneurial, dynamic, developed economy in the world,” Harper said.

“My sense is that if it could be given any kind of stability, not just for the next two months, but for the next few years that the energy of the business community in the United States is just looking for the opportunity to get growth going again.”

Harper said he doesn’t think the U.S. economy can reach the heights of a decade ago, but it can improve over the situation of the last few years of the economic downturn.

Harper’s optimism was reflected in the North American stock markets, which rallied Monday amid hope that divided U.S. politicians can come together and agree on a budget deal.

Concerns began to ease Friday after Obama met with congressional leaders. Republicans and Democrats emerged striking a noticeably more conciliatory tone.

“I am confident we can get our fiscal situation dealt with,” Obama added Sunday.

Added Harper: “I know most of these people. They should be able to come to some kind of agreement of what to do about Jan. 1.”

Harper was speaking in a question-and-answer session in front of an audience of hundreds of business leaders from both countries. His questioner was Scotty Greenwood, a senior adviser with the organization hosting the event, the Canadian-American Business Council.

Greenwood offhandedly asked Harper what his biggest complaint is about the U.S.

Harper’s response echoed that of virtually every country that does business in Washington: the U.S. doesn’t pay enough attention to Canada.

Harper made clear that he understands the U.S. has obligations that extend across the globe.