No Christmas miracle for fiscal cliff

With political leaders on holiday break, talks to avert automatic tax increases and government spending cuts are at a standstill.

By Jonathan Berr Dec 24, 2012 11:53AM

People putting political symbols in box Comstock Images, Getty Images'Twas the day before Christmas and all through the House of Representatives, not a creature was stirring -- since House Speaker John Boehner told members to go home for the holidays last week without a deal on the fiscal cliff. Members of the Senate are also with their families, and President Barack Obama is in Hawaii for a vacation. The once unfathomable prospect of about $600 billion in tax hikes and government spending cuts coming into effect at the end of the year is becoming frighteningly real.

Not surprisingly, stocks were lower in Monday's holiday-shortened trading day. Declines will likely continue until a deal emerges. So much for the Santa Claus rally.

 

"There's a lot of uncertainty,"said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris, in an interview with Bloomberg News. "We’re at a political dead end. Everything has cooled off. The market has become cautious."

 

Make no mistake, everyone loses if the economy falls off the cliff. People with limited means are especially vulnerable. According to The Wall Street Journal, the overall tax burdens for households earning $10,000 to $20,000 would rise from an average of $68 to $605. The more well-to-do would feel the pinch as well.

Consumers are already cutting back on spending. A recent Bankrate survey found that a third of Americans are spending less because of worries about the fiscal cliff. So far, the worries have not been reflected in the economic data, according to Reuters, but it's still early days. Retailers are expecting holiday sales to be less robust than last year.

As the cliff grows closer, the caution could morph into panic.  Even if politicians come to their senses at 12:01 am January 1, the damage to the credibility of the the U.S. government will be lasting. Remember, it was Congress' plan to create the fiscal cliff so it would have little choice but to take action to avoid it.

Eventually, this problem will be solved. But then Congress will then have to take up the equally contentious issue of raising the debt ceiling. Unless the Treasury's ability to borrow is expanded, the government would be forced to close and its credit rating may face further downgrades. The debt ceiling was expanded as a matter of routine until recently. 

 

For investors, it looks like political turmoil will mean tough sledding into January.


Tags: Economy
180Comments
Dec 24, 2012 2:06PM
avatar
Apparently the fiscal cliff ISN'T that important, all our legislators have left  D.C., our president is vacationing in Hawaii, and Americas future looks scary and apparently they don't give a damn.  Christmas vacation is more important than the solvency of our country.
Dec 24, 2012 1:36PM
avatar
Not surprised at all.  A DC ploy to have us think they might do something now with the ultimate goal to have taxes go up, only to have both parties falling all over themselves Jan 2nd proposing savior plans and each claiming they are the saviors. Can we spell "TERM LIMITS"????
Dec 24, 2012 2:17PM
avatar
We need to vote them All out. Both parties.
Dec 24, 2012 1:46PM
avatar
All 3 House's are filled with scum-bags....All are 1%er's...how about that.
Dec 24, 2012 2:05PM
avatar
If I worked for a company facing financial ruin such as our country is, I'd be expected to stay until  it had been solved. As would the president of the company and all his minions. Why should we as the politicians employers expect less?
avatar

If they want to prove they have our best interests at heart then they should curtail, take away some of THEIR OWN benefits first. COURSE YOU WILL NEVER see that. Had enough lip service its time FOR ALL OF THEM to be fired!! If any of us worked in a company that couldn't get its finances straight we would be out of a job in a damn hurry, why should we let all these ingrats get a pass?

 

WE THE PEOPLE voted them in, WE THE PEOPLE can vote them out.

Dec 24, 2012 2:30PM
avatar
A true leader would have gone in front of congress and said "I am not going home for the holidays and I do not expect any of the rest of you to leave until a budget deal is made". I, as many other Americans, have worked through many Holidays, because we simply had to. I would think think this "budget deal" was important enough to warrant the effort. This lack of effort is just another example of what is the real problem in America. People simply do not want to work any harder than they absolutely have to. It is truly pathetic.
avatar

This is another reason why we need term limits, the president is bound by one, congress and senate need to be too. WE THE PEOPLE need to vote ALL THIS DEAD WEIGHT out of office from BOTH parties. Neither party has any vested interest in what happens to us as they all fall under different programs and inaction won't hurt them. People when are we going to wake up and realize DC starting with the president on down doesn't give a rats azz about us. Its all about votes. We had our chance to make changes in November and you the majority decided Nobama was the man, and look where we are now, same ole same ole.

 

We need term limits maybe then these so called whiny politicians will be more apt to pass reforms and laws that acually help us.

Dec 24, 2012 2:17PM
avatar

Every Representative, Senator, and the entire Obama Administration should have walking papers waiting for them upon their return from vacation. Who will replace them with? It would be hard to find any worse than these turkeys.

Dec 24, 2012 2:37PM
avatar
OK, let's stand back and regroup. We put these clowns into office. I don't see them cutting their benefits. They work for us. We need to do something (legally) to get them or most of them out of office. If we really are serious we need to act. Our congress is unamerican. They only think about themselves and large contributors. Lets start somethiung. Lets cause themheartaches. Lets get them out NOW!!!!.
Dec 24, 2012 2:32PM
avatar
guys like that **** Boehner. eric cantor, harry reid, and mitch mcconnel need to go.
avatar

If these so called elected officials really cared about any of us, they would have stayed until the job was done! Instead they are proving they don't give a care about john q public. OBAMA keeps saying how easy it would be to get this done, well?....................................................instead he goes to Hawaii. Actions speak louder then words, he, they, should have stayed in DC to prove they are serious about getting this done, but instead they all head home, and we the public are going to PAY for their inaction as usual.

 

VOTE THEM ALL OUT FROM BOTH PARTIES, THEY BOTH ARE GUILTY of Sabotaging America.

avatar
Maybe we the people should create a NEW party!
Dec 24, 2012 1:45PM
avatar
Obama did the right thing in getting out of town.  He has accomplished nothing since being in office except spend.  This fits into his tax and spend program perfectly.  And still blames others for his failure to lead.  God help us...
Dec 24, 2012 2:22PM
avatar

This lan did NOT come from congress.  It came straight out of the white house.  Congress just went along for the ride.  If obama really did not want this to happen he would not only insist that congress stay in DC and hammer out a plan, but he would be right there in the room with them.  Thats called LEADERSHIP! 

Dec 24, 2012 2:57PM
avatar
If you all cant do the job then get the ****. out. That is what happens in the real world.
Dec 24, 2012 1:49PM
Dec 24, 2012 1:04PM
avatar
Let this cliff come !!! Do not stop it !!! The market needs a huge correction !!!! Do NOT !!! Raise the debt limit.. To the FEDs stop spending 40 BILLION a month on QE3 ... QE 1-2 did nothing < What's the point ! I hope the market on wall street falls 3000 points.... Now that is a correction ! You all have been living on free money wall street! Time for you all to live on your OWN MONEY...
Dec 24, 2012 2:35PM
avatar

Wall street will not be affected much or for long period.Just look at DOW.

It has been playing between 13000 and 13350 since long .Investers investment is not

changing remarkably.Game is manuplated by big corporations,ceo's, financial institutions,

Banks and politicians

Dec 24, 2012 2:21PM
avatar
Its a sad state of union when we let those in washington make decisions for us (the people) without any of our input, they are all in it for them self's and how to protect their own assets......when all of us who pay their wages can manage to live on next to nothing, washington politicians should learn to do the Texas two step, I learned it the hard way, every time I think I am going forward the government pushes me back two steps.  How much Did it cost to fly that family to Hawaii for vacation, he is not serious about anything, since we flip the bill every time they go on vacation... wish I could just spend money and not have to worry about it.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The stock market has languished today, yet it's a stretch to say that sellers have been in total control of the proceedings.

The A/D line at the NYSE favors decliners by a slim 8-to-7 margin; meanwhile, advancers are actually ahead of decliners at the Nasdaq by nearly an 8-to-5 margin.

Those A/D lines pretty much sum things up in the sense that they convey some mixed trading action, which has persisted for most of the day.

Notably, the Russell 2000 is making a ... More

MSN MONEY'S