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Honeywell CEO Sees Recession Risk in Fiscal Showdown

The fiscal impasse that’s setting the stage for a partial shutdown of the U.S. government may plunge the world’s largest economy into recession, Honeywell International Inc. (HON) Chief Executive Officer David Cote said.

“Everyone will get more conservative and pull back on hiring and investing,” Cote, 61, said today in an interview with Bloomberg Television’s Trish Regan. It also would be a “horrible idea” to block a boost in the $16.7 trillion federal debt ceiling next month, as some lawmakers vow to do, Cote said.

Cote, who served on President Barack Obama’s deficit commission, spoke as a deadlocked Congress headed toward the first government shutdown in 17 years. With no funding for federal operations as the new fiscal year starts tomorrow, some workers would be furloughed and services ranging from tax audits to national parks would halt.

A shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from idled federal employees.

Cote said it was imperative that Congress act to extend the government’s borrowing authority by Oct. 17 to avert a default.

“You do not want to create an environment where for the first time in over 200 years you have creditors looking at it and going -- ‘Gee, maybe they are not good for the money,’” Cote said. “When you hear people starting to think that maybe we should default or not raise the debt ceiling and we will play chicken with it, are you actually serious?”

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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