Honeywell CEO on U.S. sequester: "We need the reduction"

The United States might be better off allowing the across-the-board spending cuts of the sequester to take effect as a first step in cutting its debt, even if doing so slows the economy, Honeywell International Inc Chief Executive Dave Cote said on Wednesday.

The cuts would reduce the U.S. federal budget by about $85 billion per year and curtail spending on defense systems, including some made by Honeywell. But the head of the diversified U.S. manufacturer, who also been outspoken on the need for the United States to cut its debt burden, said the trade-off may be necessary.

"We need the reduction," Cote said. "You could argue that the reduction would make more sense if we did it thoughtfully and spent a lot of time on it. I'm not sure that's a real option, though. The options seem to be let it happen or take it away."

Cote remains a leading voice in the corporate "Fix the Debt" group, which spent months last year lobbying the Democratic White House and Republican lawmakers to reach a deal to reduce the national debt and avoid a year-end "fiscal cliff." of spending cuts and tax increases.

Having seen that deadline quickly replaced by the March 1 sequester deadline, Cote said that allowing the cuts previously agreed to take place may be the most practical way to start trimming the debt.

"While there could be some economic impact, to me it looks like $100 billion on a $3.5 trillion government spend," Cote told reporters after addressing the Boston College Chief Executives' Club.

"So, yeah, there's some impact but at some point we have to start working to get our debt under control and if this is the only rational step they could seem to take to do it, then they ought to do it."

Worries about the fiscal cliff standoff hit confidence and corporate spending in the final weeks of 2012, contributing to an unexpected 0.1 percent decline in U.S. gross domestic product in the fourth quarter.

The Fix the Debt group had aimed to prevent a year-end standoff on the budget and instead to convince policymakers to reach a long-term deal to start reducing the nation's debt. It fell short of those goals, though Cote said he believed results would have been worse without the efforts of the more than 100 U.S. CEOs, including the heads Nasdaq OMX Group Inc , Boeing Co and Cisco Systems Inc .

Cote did not say whether he was speaking for the group or expressing an individual opinion.

"Given where this was going, there was a good chance we were going off the fiscal cliff, which would have been a huge economic problem," he said.

(Editing by Bernard Orr and Nick Zieminski)